Robert Darrow, @properties

Archive for the ‘Buyers’ Category

Your guide is lucky enough to work with the most delightful clients in the known universe.  And a wonderful couple who I enjoyed working with purchased this listing in Logan Square.

Adam was kind enough to send along this testimonial:

Hi Bob,

I just realized I never sent you a testimonial, something you certainly earned after the five month buying/selling process.

Here goes:

Bob’s professionalism made what could have been a frustrating short-sale into a journey that concluded with my wife and I purchasing the home of our dreams.  What truly set Bob apart from other agents we have interacted with in the past was the depth of knowledge as well as the compassion he answered the countless questions and requests we asked of him during the buying process.  If a friend or family member asked me for recommendations on a real estate agent I wouldn’t just suggest that they speak to Bob, I’d insist on it.

I hope you have a great selling season this year!

Best,

Adam

PS: Not sure if I sent you a link to Nikko’s home-blog before, but check it out! http://www.littlechicagobungalow.com.  One note we didn’t mention on the blog was the total rat kill number in garage was 18!  I can’t believe I even stepped in there before we got rid of them!

I have quoted the entire note to draw your attention to my two favorite points…

1.  I hadn’t realized that they had been searching for a house for four-and-a-half years!  That’s an even better testimonial than the one above!  Thank you!

2.  I told them about the rats!  After being un-inhabited for about a year, I’m afraid the garage reverted back to the natives.

Part 1 on Corporate Relocations here

Part 2:  The Internet Empowered Consumer

More and more home buyers are starting their home searches on the Internet.  The convenience of looking at homes 24 hours a day, even in your underwear (see this article) is a powerful convenience.

Some statistics from N.A.R.

Homebuyers’ Use of the Internet

80% of home buyers used the Internet as a source.
81% of Internet home buyers also used a real estate agent.
63% of non-Internet buyers used a real estate agent.
74% of buyers who searched online drove by or looked at a home they first saw online.

To reach the Internet Empowered Consumer, you must answer the fundamental question that forms the basis for all decisions undertaken by this consumer:  What’s in it for me?

Since it stands to reason that these buyers are looking online because it is convenient, they are also going to look for the source of homes that offers the greatest convenience. 

These convenience seekers are unwilling to scour the Internet for multiple sources for homes.  They are going to Google search for “Real Estate ______” – and where the blank is located, they are going to plug in the name of the city they are interested in.

Here in Chicago, that means they are going to land on the web pages for the major brokerages, and the major real estate portals. 

Neither source caters to listings offered “By Owner.”

The number 1 source for homes on the Internet is www.realtor.com – the website that Realtors put all their listings on.  Every single Realtor who belongs to a local MLS or Realty Board sends their listings to www.realtor.com.

And by definition, none of those properties will be “By Owner.”

The source for all the real estate information on AOL’s real estate search portal is www.realtor.com.  Several others, too.

As a FSBO, you have access to several classified advertising web sites, and a handful of “By Owner” web sites.  But remember the credo of the Internet Empowered Consumer?  What’s in it for me?

The buyers that search for listings on the classified ad web sites are likely looking for something in particular:  to save a commission, too.

Buyers who search out FSBO properties often do so in order to do the same thing that the seller is trying to do.  So even if you have taken the commission savings into consideration with your list price, seekers of FSBO properties are going to try to negotiate even more off the list price of your property.  Perhaps another 2%, 3%, 5% or even 6% off since he thinks you’re trying to keep all that money for yourself!

In the immortal words of one of my esteemed competitors at another company “It ain’t all big hair and Cadillacs.”

A regular reader posted a question recently:

I am currently an attorney and confident that I can handle representing my own interests regarding the purchase of my home. I have disclosed in the offer that I will be representing myself and so they can save on commission, but they haven’t discounted very much for that fact. I can pretty easily take the sales agent exam in IL before closing. Can I then put my name as the broker on the contract and take the commission check at closing?

You may very well be excellently suited to represent yourself in your transaction.

And, in fact, here in Illinois, attorneys are allowed to act as Real Estate Brokers on behalf of themselves and their clients.  For example, if you were handling the estate and disposition of property on behalf of someone that inherited some property.

You would be permitted to act as a Real Estate Broker as their attorney and place advertising, negotiate a contract, and handle the closing.

Here’s where there seems to be a bit of confusion:  A seller’s Realtor (note that I am using the Trademarked term Realtor in this example) – for example: from Big Blue Brokerage – has negotiated a commission from his client, the seller.

And that Realtor has offered compensation to other Realtors through the use of the Multiple Listing Service of his/her service area.  Here in Illinois, it’s MRED.

And contractually – by joining this association, and by adding a listing to the computer database, and offering a commission in that database, a contract is created between the Listing Realtor and all the other Realtors in the service area who are working with buyers.

However there is no obligation whatsoever on the part of the Listing Realtor to offer any sort of commission reduction or rebate to a buyer who is not represented by another Realtor.  (again using the trademark Realtor here on purpose.)

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And even though you, as an attorney, may act as though you have a Real Estate License, your real estate license does not entitle you to COMPENSATION.  It only entitles you to REPRESENTATION (capitols only used for emphasis.)

The only way you would be entitled to compensation would be if you were a member of the Multiple Listing Service through which the offer of compensation has been made.

Notwithstanding my technical explanation above, many buyers certainly DO go out, and purposefully shop for property without the use of a Buyer’s Realtor in order to do just what you are seeking – namely the Buyer’s Realtor Co-op Commission.  But without the benefit of the contractual obligation of belonging to the local MLS, you are simply negotiating.

And in the case of negotiations, of course, everything is negotiable.  Obviously, as the practice is common enough that you are aware that the practice exists, it must happen on occasion.  But not always.  A Real Estate Agent with a desirable property that might sell without difficulty may be much less amenable to such tactics.  A motivated (i.e. hungry) Real Estate Agent may be totally willing to entertain your proposition.

But just because you ask, doesn’t mean you’re entitled.

In my course of business, I normally am hesitant to give away part of my commission.  The reasons are many:

* My offer of compensation to other Realtors is designed for us to cooperate together in making the process of helping our seller clients, and our buyer clients as hassle free and smooth as possible.  It aids us greatly to be able to take our buyers to properties that are listed with competing real estate agencies.  And vice-versa.  And I know that when a colleague from another company sells one of my listings, there is a chance that I will return the favor someday.  In your situation, it is likely that you will not be bringing other buyers to my listings nor will you be promoting listings that I would like to bring my buyers to someday.  Since it is unlikely that we are going to cooperate again someday, there is no incentive for me to give my commission to you.

* I might be willing to negotiate with a customer who could become a repeat customer someday.  But in your situation, as you have already indicated that it is your desire to represent your own interests in the purchase of your home, it is very likely you will wish to do the same when it comes time to sell your own home.  So I probably am not going to get repeat business from you.

* Most likely of all – you located my property for sale through one of the avenues that I spent money on.  Whether you find a property in the newspaper ads, or on the company website, or on a big National Website such as Realtor.com – that is an advertising outlet that I have spent a considerable amount of money on.  And if you located one of my listings through one of those advertising avenues, then it’s my desire to be compensated for procuring your interest through that avenue.

Certainly, I should recommend that you may very well benefit from a local expert on your marketplace and save even more money by using a Realtor that knows your neighborhood and the marketplace well.  Perhaps you should talk to one rather than focusing on that little percentage?

A reader wrote in about a week ago and asked a question:

Can a buyer have two real estate agents?

I wish I had more details to go on, but without more details, I’ll do my best.

The shortest answer:  With me, no.

Here are a few more verbose explanations.

There is no legal prohibition against having two real estate agents.  You could go out on Monday with one, and on Tuesday with another.

It is becoming increasingly common, however, for real estate agents to ask their buyers to sign an exclusive buyer representation agreement.  And if you have signed one, then no.  You shouldn’t have two real estate agents.

However, if you DO have two real estate agents, and you haven’t signed an exclusive buyer representation agreement, there is a chance that when one or the other finds out you have been two-timing him, he might drop you like a hot potato.

I know I would.

There is one scenario when I have worked with a buyer that has another real estate agent:  when a buyer is still deciding whether they would like to live in the City of Chicago – my area – or living in a Suburb of Chicago – out of my area of expertise.

In this instance, I will take out a buyer on an orientation tour, and show a few selected listings so the buyer can make an informed decision about where he or she might like to live.  And knowing that the buyer is doing the same thing with an agent in the Suburbs.

But I won’t keep going out on repeated tours.  After the orientation tour, the buyer has to make up his or her mind about where he wants to live.  I don’t want to be in a position where a buyer spends a season full of Saturdays with me, and a season full of Sundays with another agent.  In that instance, we have invested too much time and resources to only have a 50/50 shot at the customer’s business.

Last week we started a discussion on estimating property taxes on your new construction condo in Chicago.  Last week’s discussion focused on how much they might be.  This week, let’s dive into how to pay, and some pitfalls you can come across during the period of time after you move in, but before the Cook County Assessor gives your property its own PIN number.

The photo above depicts one of the most challenging properties I’ve come across in my career.  I think if I simply quote all the challenges we came across here, we should cover all the bases.

I write about these townhomes often.  It’s a community of 94 townhomes with 16 more single family home lots.  The community was built on an industrial parcel that had two PIN (or Tax Identification) numbers to begin with.

The row in the photo contains 8 townhomes.  The community has 14 rows of townhomes with between 8 and 14 townhomes each.  These townhomes are “Fee-Simple” which means that the owner, you, own the land underneath the homes.  This is different than condominiums, where you and all the neighbors share an undivided interest in the land and the parking lot, and other common parts of the building.

The first year that residents lived in the community, the developer paid the common tax bill.  It was a small bill on the two PIN numbers for what was the old factory.  All the owners put a little money in escrow at closing to cover what might be their share, and then the developer paid the bill when it came due.

Then the Cook County Tax Assessor did something weird.

Rather than splitting the properties into individual parcels, the office divided the property into rows.  Each row got a temporary PIN for a year.  To this day, the reason is a complete mystery.

In the photo above, two townhomes on the end are bigger than the other six. 

In the second year the residents lived here, a tax bill was sent to one owner, randomly, for the entire row.

Challenge 1

Disagreements arose between residents as to how to pay the tax bill.  The declarations for the community said that common expenses should be divided evenly among the owners.  But that didn’t make sense since some homes were bigger than others.  Some owners wanted to divide the bill by square footage.  And just for giggles, the one owner that received the bill in her name decided that she would divide the tax bill by sales price.

Challenge 2

Mortgage companies received copies of the owners’ tax bills.  And promptly paid them.

This sounds exactly like what is supposed to happen – right?  Not so much.

Several mortgage companies paid the tax bill for the whole row.  Sometimes, several companies paid in the same row paid the whole bill resulting in overpayments.

Challenge 3

Some residents didn’t have the money, or didn’t understand, that they had to pay their property taxes.  In rows where everyone was ready and able to pay their taxes, a resident who wouldn’t, or couldn’t, pay would cause the Cook County Treasurer to show a tax delinquency.  And delinquent taxes can go into collections, and even to a tax sale.

A common solution: Pay by Legal Description

Here in Cook County, we have a solution called “paying by legal description.”

To pay by Legal Description, you take the deed to your condo or townhouse, and the Settlement Statement (also known as your HUD1) down to the Cook County Treasurer’s Office.  That’s in City Hall on the First Floor – 121 N. LaSalle.

Unfortunately, you have to go in person.  But it’s a guaranteed fool-proof way to ensure that the tax bill on your property gets paid properly.  And it doesn’t matter what your neighbors do.  They can pay, or not pay, or pay the wrong amount, and you are protected.

Watch your escrow accounts

It’s really up to you to make sure that your bank doesn’t overpay your tax bill if you still live with a common PIN number.  Technically, the bank is supposed to know the difference, but I wouldn’t plan on it.

So keep your eye on when tax bills are printed and mailed.  They come out every February with a due date of March 1.  And then come out in August with a due date of October 1.  Sometimes a bit later.

Since this might be the first time you are expecting a tax bill, there is a very good chance that the bill is going to be sent to the wrong place.  Maybe to the developer’s office.  Maybe to a neighbor.  Maybe it won’t get sent at all.

Do you know the PIN number for the property?  If you do, skip ahead.  If you don’t, here’s how to find it:

Start at the Cook County Assessor’s website:  www.cookcountyassessor.com and search for your property by address.  Once you have your PIN number, then you switch to the Cook County Treasurer’s website to search for your bill.

Log onto the Cook County Treasurer’s office (www.cookcountytreasurer.com) to view your bill, and see what payments have been applied.

If there is a credit balance, then odds are a lender paid the whole bill.

A clue to whether it was YOUR lender:  your lender writes you a letter telling you that they want to increase the amount of money you pay each month because your escrow estimate is wrong. 

The process of getting refunded money from the Cook County Treasurer is cumbersome, and may involve personally visiting the Treasurer’s office.  But there’s no reason you can’t turn this back on your lender and insist that since the mistake was theirs, that they must correct it.  Be persistent as no one is going to want to tackle this job.  You are protected by law, however, against mistakes made with escrow account payments.  So if you cajole with a hint of lawsuit, you may be able to prevail against the bureaucracy in getting them to resolve this for you so you don’t have to tackle it yourself.

It’s been a while since I have been in a position to guide a buyer through the process of buying new construction.  But the question came up again recently, and your guide realized that we may have not covered this on the blog before.

When you buy a new construction house, townhouse or condo, or maybe in a new condominium conversion of an existing building, you will not know what the taxes are.  You will have to guess.

The reason we won’t know what the taxes will be is that the tax assessor has not divided your property yet.

If you are buying a new townhouse, then perhaps the building was constructed on vacant land.

If you are buying a condo in a conversion, then perhaps the building was an apartment building before.

Either way, the tax assessment has not been calculated for the new type of property that you just bought.

In popular north side neighborhoods, a very good rule of thumb will be:

For budgetary purposes – use 2% of purchase price for figuring out your budget, your loan, and your qualification for your mortgage.  Odds are, your bank is going to use the 2% figure to decide whether you can afford your new home.  And the bank is going to start using the 2% figure for your tax escrow.

For example:  If your new condo is $350,000, 2% of that is $7,000.  So you should plan on your annual tax bill being $7,000.  And if your bank is taking money from you each month for your tax escrow, then plan on paying $583 per month towards taxes.

In reality, your tax bills will most likely be lower.

In the Lakeview neighborhood, you can expect your taxes to come in at around 1.6% of purchase price.  In our $350,000 example above, the tax bill might be $5,600.

In the Lincoln Park neighborhood, you can expect your taxes to come in at around 1.75% of purchase price.  Or $6,125.

As in life, however, there are no guarantees.

In Lincoln Park, I have seen tax bills come out closer to the 2% figure than the 1.75% figure.  In Lakeview, a bit steadier.

Lincoln Park and Lakeview seem to be the dividing line between the higher and the lower figures.

In Lincoln Park, the tax bills invariably come in higher.  And as you move farther south, into Old Town, the Gold Coast, through downtown, and into the South Loop, your tax bill will be on the higher range.

In Lakeview, and to the north, the tax bills will come in at the lower end of the range.  But never falling much below the 1.6% of purchase price benchmark.  I have occasionally seen a 1.5% achieved, but not often, and not recently.

Next week, let’s dive into the payment of property taxes during the time between your move-in and when you get your first individual tax bill.  Have your Advil handy!

It seems to be all too common these days.  Perhaps it’s a result of our always-in internet fueled society.  Or that we’re all type A over-achievers.

At some point in a transaction, a buyer of a property requests an additional appointment to meet a contractor over at their soon-to-be new home.  Often times this is to meet a painter, a decorator, or some other renovation contractor.

Of course, in our desire to be as accommodating as possible, your agents will invariably try to make these requests possible. 

Now seems as good a time as any to bring up a few guidelines:

1.  You don’t own the house yet.  Of course, if it’s possible, everyone will try to be as accommodating as possible.  But if there is a reason, whether you think it’s justified or not, that the seller is not comfortable having the buyers come through the house, along with their Realtor, and their menagerie of contractors, then those wishes should be respected.

Remember, the seller has already had the home available for your showing, your second showing, your inspection, any follow up inspections, your appraisal, and sometimes another FHA inspection.  The contract calls for the seller to grant a final walk through right before closing, and sometimes that’s all the seller is willing to allow.

Rather than throwing a fit, and involving more calls to and from the lawyers, it should be understood that if your request can’t be held, even without good reason, that this is entirely normal and customary.

2.  Since you are asking for a favor, you should endeavor to minimize inconvenience to everyone.  In order to accommodate your visit, it is likely that the sellers’ agent, the buyers’ agent, and the buyers will all be present.  And the sellers will have to leave the house.

Simply asking for the times that work best for you is not considerate.  No one wants to sit with contractors for a couple hours on a Friday night.  Or on the weekend. 

Contractors that normally offer a window of a couple hours will have to be reigned in a bit tighter.  And interviewing the entire selection of contractors on Angie’s list in order to get the best price and terms is probably best left until after closing.  You’re going to bring one or two of your most trusted contractors, and get them in and out.  With a minimum of fuss and lag time.

Two easy guidelines that should keep everyone on the same track: to get you into your new home as quickly and hassle-free as possible. 

This might be my favorite question of all time!

A reader writes:

What features do you think are necessary in a home to keep you and your significant other happily in love?

A nice deck or balcony for the two of you to unwind? A big garage that doubles as a male retreat? Plenty of closet space perhaps?

Valentine’s day is coming up and we want to know what you think is needed for the two of you to co-habitate blissfully.

Yes, I already know that I am posting late.

My favorite feature of all time:  Separate bathrooms.

You have to spend in excess of $1.5-million, but as you crest that dollar figure, both single-family homes and condominiums in Chicago start adding “His ‘n’ Hers” bathrooms.

The first time I ever saw two bathrooms attached to the master bedroom was more than ten years ago when showing condos to clients inside Water Tower Place.  Water Tower Place is the high rise located above the Ritz Carlton Hotel and Water Tower Place mall on Michigan Avenue.

At the time, I thought the idea was BRILLIANT, and has stuck with me to this day.

My dear friends and neighbors in the lovely WP Townhomes approximate this style of living on the cheap.  Miss Lisa gets the master bathroom attached to the bedroom.  And poor Mister P uses the hallway bath.  They couldn’t be happier!

Other co-workers offer these tongue-in-cheek responses:

“Separate Bedrooms.”

“Water Bed.  Statistics show that as sales of water beds declined, the divorce rate increased.”

And of course:  “Lots of Closets.”

I have been working with a delightful couple looking for a new home in the Lakeview neighborhood.  We met each other over a year ago while hosting open houses in my listings at Wellington Park.  These folks returned time and again – viewing most of the units that came available during the past year.

As they are getting closer and closer to making a decision, one wish kept coming up:  a desire for more storage space.  Townhomes in Chicago tend to have wall closets rather than walk-ins, limited space for extra stuff in the garage, and very few spare closets for linens and random extra storage.  In Wellington Park, a lot of residents keep their second car outside as we have large driveways.  And then use the extra room inside the 2 car garage to store more stuff.

So my customers wondered if it was possible to locate something with more storage, and their minds wandered to properties that offer basements.  What immediately springs to mind are single family homes.

And we also realized that “Duplex” floor plans also offered some additional room space and/or storage.

Here’s where you have to think carefully about trade off’s in Chicago.  In and around West Lakeview, single family homes can be clustered into three types:

1.  Old homes that a family has remained in for a very long time.  These homes usually date to the 1930′s.  The floor plans are functionally obsolete as they only have one bathroom, very limited closets, and frequently no air conditioning.  Often times they have not been updated, so the decor and fits/finishes are 1970′s or older.

The homes of that era also feature shallow basements (not a lot of head room) and less than 1,800 square feet above ground.  Typically, each floor was 800 square feet.  And often, the second floor is smaller as the roof line cuts into the second floor space.

These are mostly tear-down’s.

As the price of these homes is primarily for land value, the prices escalated to a high of $550,000 in 2007.  They have since settled back to $450,000 with the real estate downturn, but townhomes in the neighborhood are mirroring these movements.

2.  Old homes like those above, but were renovated in the 1980′s or 1990′s.  It made financial sense in the 1980′s and 1990′s to buy these old homes and modernize them.  The land was worth less than $100,000 back then, and the house barely added another $25,000 to the cost.  You could renovate for $25,000 to $50,000 and get a nice house for well under $300,000 throughout those decades. 

These homes often have added a second bathroom (perhaps even a third in the basement.)  Most of the time, though, you still don’t get a master bath suite.  Though these homes technically are “modern” with central heat and air, kitchens with full appliances, and the additional baths, the decorating is often “dated.”  Think “Miami Vice” for the color palate and you won’t be too far off. 

The square footage is slightly improved because during the renovation, it was typical for a homeowner to “dormer” the second floor to add headroom to the smaller bedroom and the bathroom.

But these homes still are short on square footage compared to the modern townhomes that have sprung up in the same neighborhood.  A Wellington Park townhome features 2,000 square feet of living space (not counting the garage) and some models are significantly larger.

Prices for homes like this tend to fall mostly in the range $750,000 to $850,000 depending on whether the house is on a very desirable street or a less desirable (perhaps busy) road, and the quality and style of the renovation.

3.  Mansions. 

The modernization of the old small homes slowed or stopped during the 1990′s until now because land values crept up making it less desirable to buy one of these and fix it up instead of traveling to a neighborhood farther afield and getting a house with a more modern floor plan and more space for less money.

During the early 2000′s, the West Lakeview neighborhood exploded in popularity when an entire industrial corridor was removed and relocated.  The new land accommodated some sharp new developments; each a little more expensive than the last.  The newest included some single family homes sprinkled throughout.  Prices for the houses drifted up over $800,000, then over $900,000 and finally over $1-million. 

The “modest” mansions feature 4,000 square feet of living space, modern floor plans, and every comfort imaginable.  The “luxury” and “ultra” mansions feature even more space, and the very best materials money can buy.  Electronics packages, heated garages, green design features are all common as you approach the $2-million mark.

4.  Duplex floor plans.  Developers in recent years have expanded upon the traditional three-flat floor plan with a modern twist.  Newer three-flat style condominiums usually feature a first floor unit that duplexes down into the lower level affording an additional bedroom, an additional bath and often a family room.  Upstairs, the second and third floor units are two or three bedrooms.  Some of the top floor units are duplex-up style, but just as many are not.

These duplex floor plans usually offer more square footage than a townhome in a similar price range as the space for the home does not count the space occupied by parking.  Parking is behind the building – in a garage or outdoor spot. 

But because of the standard size of a Chicago lot – 25 feet wide – these condo’s typically offer only one parking space per condo.

Since the last chapter of this story has not been written yet, I am curious to see how it all turns out.  But to run through the circular conundrum again, I wonder which of these seemingly exclusive paradoxes will win out:

1.  The client likes townhouses.  But thought it might be nice to have some extra storage. Therefore…

2.  We explored houses.  They have extra storage in the basement.  But the floor plans are dysfunctional and the decorating is from another era.   Therefore…

3.  We explored duplex floor plans.  The offer an extra family room, modern floor plans, and some additional storage in a downstairs/basement.  But the thing that attracted us to townhomes in the first place is missing.  Namely – the two car garage.  Therefore…

Back to number one!

Stay tuned – I’ll keep you up to date!