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Chicago First Time Buyer's Guide

The process of buying a home can be stressful and confusing. Both the financial and emotional investment of home ownership is considerable. In fact, moving is considered the third most stressful experience in a person’s life, right behind divorce and death. The antidote for any homebuyer is a clear understanding of the process. How it works. What happens when? What to expect next…

So, what’s first? Looking at homes? Talking to a Realtor? Securing a loan? Let me help you understand the process of finding the home of your dreams!

On our first visit together,

you will learn about the home buying process and what to expect from the We Sell Chicago Team. Since buying a home is a complicated process, it’s important for us to fully understand each other. The relationship between a Homebuyer and an Agent must be based on trust, mutual goals, and understanding.

Let’s discuss the role of a Buyer’s Agent and the representation it involves: A Buyer’s Agent is retained by a buyer to look out for the buyer’s interests and to negotiate the best price from the buyer’s point of view. Just as the agent who lists the seller’s house owes the seller complete loyalty, the buyer’s agent owes the buyer the same degree of loyalty. Realtors who specifically work as a Buyer’s Agent have a sole responsibility to be loyal to the buyer and help them make an informed buying decision.

During this first visit, we will also determine your wants and needs. We have found it is only when a buyer is clear about what kind of home appeals to them that effective work can be done in finding that perfect home. Your home should fit the way you live, with spaces and features that appeal to the whole family. Before we begin looking at homes, we will make a list of your priorities – things like location, size, and of course, price range. Should the house be close to schools?…your job?…to public transportation? Exactly what amenities are you looking for? Together we will establish a set of minimum requirements and a “wish list.” Minimum requirements are those necessary things a property must have for you to consider it, while a “wish list” covers things that you’d like to have but aren’t essential. I can help you avoid making a costly mistake by helping you determine EXACTLY what your housing needs are.

Previously, when someone wanted to purchase a home,

they drove around from neighborhood to neighborhood looking for “For Sale” signs, writing down addresses and calling Realtors to ask the listing price. But times have changed. According to research by the National Association of Realtors®, 3 out of 4 buyers begin their search by checking available properties listed online.

Through the internet, you can view properties and their specifications quickly. In addition to viewing available properties, you can also explore neighborhoods, schools, churches, shopping and entertainment. We have found that buyers who use online searches save a lot of time by eliminating a large number of properties and neighborhoods that are less suited to their needs.

Where do you begin? There are numerous sites available for your search, some are easy to navigate and some are more difficult. The We Sell Chicago search feature takes listing directly from the Multiple Listing Service (MLSNI) and puts the properties right at your fingertips, showing photos, and giving specific information about the home’s features. In addition, we also include special highlights of the properties listed by our agents, which allows you to take a closer look at some of the best Chicago real estate opportunities. We also create customized daily email listings, to show you what is new on the market that meets your criteria. Finding out about great properties as soon as they enter the market can give you a real advantage in finding the right home. In buyer’s markets like we are in today, coming in early with a reasonable price can often be too good to pass up for sellers.

When we do find your new home,

we’ll want to be ready to make an offer quickly. An important part of the process is a pre-approval letter from a lender. It is a necessary accompaniment to the contract we will present to the seller. If you are seriously considering moving into a new home in the next few months, we suggest you begin the process before we start looking at properties. Being pre-approved makes you a stronger buyer; it signifies to the seller that you have been approved based upon your personal assets and income and are prepared to move quickly if needed. Plus, in a competitive market, such as ours, it is not uncommon for desirable properties to have multiple offers. Should that situation arise, your pre-approval will most likely help to make your offer the most attractive.

An additional benefit to mortgage pre-approval is you will know exactly what you are qualified to purchase. We’ll never waste time looking at properties you cannot afford or risk falling in love with a property you are simply unable to purchase.

After 24 years in the business, we have established a professional relationship with some of the top mortgage loan officers in the Chicagoland area and have a readily available list to help you get the process rolling.

Once we’ve found just the right property,

the next step is making an offer. Buyers frequently ask if there is a “rule of thumb” when it comes to making an offer. Because every property, buyer, and seller are different and the market is always changing, the truth is that there isn’t. To help you determine what your initial offer should be, we’ll prepare a “Competitive Market Analysis,” which will show what other buyers have been willing to pay for similar properties in the area. We’ll not only discuss property values, but also the pros and cons of various offer strategies. While it may be true that anything is negotiable, it may not be in your best interest to start with too low of an offer especially in a competitive buyers’ market. From our experience, we know that a Realtor skilled in negotiation is your best ally. Let our team of expert negotiators lead you through the process. It can be easy to let emotion cloud your better judgment; you can rely on us to advise you of your options throughout the transaction.

Once we have determined what your initial offer will be, we will need to put it in writing and sign a Real Estate Sale Contract, also know as “an offer to purchase” or “purchase agreement.” The sale contract is a legally binding document that sets forth the terms and conditions of the purchase. The terms and conditions must be agreed to and signed by both the seller(s) and the buyer(s). Contracts can be intimidating, especially if they are thrown at you without guidance. That is why we will always be there to offer expertise and to make sure your best interests are always a priority in the negotiations. We want your first home buying experience to be a pleasurable one!

At the time you sign the contract to purchase, most sellers will expect an earnest money check. The purpose of earnest money is to show “good faith” that you intend to follow through with the terms of the sales agreement. It represents your sincerity in attempting to purchase the property, makes the contract “legal” if accepted, and is totally refundable if the offer is not accepted, or if some condition of the contract is not satisfied by the seller. However, if you are unable to live up to the agreement, (for example, if you are unable to secure your financing in the time frame outlined in the contract, and you do not notify the seller in writing), the earnest money may be forfeited to the seller as payment for any damages suffered as a result of the uncompleted sale. This is rare, but it can happen if you and your attorney do not communicate with the sellers regarding where you are in securing a loan.

The typical initial earnest deposit is between $1,000 and $5,000 and is given at the time the offer is made. Often, the seller will ask that the buyer contribute as much as 5% to 10% of the purchase price within 1 to 5 business days after the offer has been accepted and the attorney’s review period has ended. This additional earnest request can vary depending on the timeline of the transaction and the market and serves as an additional guarantee to the seller that the buyer is serious about the purchase. The earnest money is held in the Listing Broker’s escrow account for the benefit of both parties. Buyers can, however, request that the earnest money be placed in an interest bearing account in their name. The earnest money check is cashed and deposited within 24 hours after a contract to purchase has been fully accepted by all parties. At closing, the earnest money is applied to your down payment.

Once we’ve found just the right property,

the next step is making an offer. Buyers frequently ask if there is a “rule of thumb” when it comes to making an offer. Because every property, buyer, and seller are different and the market is always changing, the truth is that there isn’t. To help you determine what your initial offer should be, we’ll prepare a “Competitive Market Analysis,” which will show what other buyers have been willing to pay for similar properties in the area. We’ll not only discuss property values, but also the pros and cons of various offer strategies. While it may be true that anything is negotiable, it may not be in your best interest to start with too low of an offer especially in a competitive buyers’ market. From our experience, we know that a Realtor skilled in negotiation is your best ally. Let our team of expert negotiators lead you through the process. It can be easy to let emotion cloud your better judgment; you can rely on us to advise you of your options throughout the transaction.

Once we have determined what your initial offer will be, we will need to put it in writing and sign a Real Estate Sale Contract, also know as “an offer to purchase” or “purchase agreement.” The sale contract is a legally binding document that sets forth the terms and conditions of the purchase. The terms and conditions must be agreed to and signed by both the seller(s) and the buyer(s). Contracts can be intimidating, especially if they are thrown at you without guidance. That is why we will always be there to offer expertise and to make sure your best interests are always a priority in the negotiations. We want your first home buying experience to be a pleasurable one!

At the time you sign the contract to purchase, most sellers will expect an earnest money check. The purpose of earnest money is to show “good faith” that you intend to follow through with the terms of the sales agreement. It represents your sincerity in attempting to purchase the property, makes the contract “legal” if accepted, and is totally refundable if the offer is not accepted, or if some condition of the contract is not satisfied by the seller. However, if you are unable to live up to the agreement, (for example, if you are unable to secure your financing in the time frame outlined in the contract, and you do not notify the seller in writing), the earnest money may be forfeited to the seller as payment for any damages suffered as a result of the uncompleted sale. This is rare, but it can happen if you and your attorney do not communicate with the sellers regarding where you are in securing a loan.

The typical initial earnest deposit is between $1,000 and $5,000 and is given at the time the offer is made. Often, the seller will ask that the buyer contribute as much as 5% to 10% of the purchase price within 1 to 5 business days after the offer has been accepted and the attorney’s review period has ended. This additional earnest request can vary depending on the timeline of the transaction and the market and serves as an additional guarantee to the seller that the buyer is serious about the purchase. The earnest money is held in the Listing Broker’s escrow account for the benefit of both parties. Buyers can, however, request that the earnest money be placed in an interest bearing account in their name. The earnest money check is cashed and deposited within 24 hours after a contract to purchase has been fully accepted by all parties. At closing, the earnest money is applied to your down payment.

Your offer has been accepted! What’s next?

Select an Attorney

In Illinois, nearly every home purchase requires that there be a buyer’s attorney to represent you in the transaction. Most contracts allow anywhere from 3 to 7 business days for an attorney to review the contract. We strongly recommend you use a Real Estate Attorney. We have available a list of attorneys that have been highly recommended by past clients. Your attorney will review the Real Estate Sale Contract and make any necessary legal modifications. They cannot make changes to any of the dates on the contract or change the purchase price. Your attorney will make sure ever legal aspect of the contract is taken care of from purchase through closing. They will also attend the closing and explain all of the closing documents to you.

Select a Home Inspector

After choosing your attorney, your next decision is to choose a home inspector. Most contracts allow 3 to7 business days for you to schedule and complete a home inspection. We Sell Chicago also has a list of home inspectors highly recommended by past clients. The home inspection will take anywhere from 1 1/2 hours to 4 hours, depending on the size and condition of the property. The inspector will check out all of the major structural components, as well as the electric and heating systems. He or she will identify any major problems, and point out minor maintenance issues you may want to take care of. A home inspection will cost anywhere from about $300 to $500, depending on the size of the property. We strongly encourage our clients to be present for the home inspection. It’s a great opportunity to learn about your future home. You can also choose to have additional testing done, for radon, mold, etc.

If any major issues come up during the home inspection, we can go back to the seller to request that those items be repaired prior to closing, or a price reduction or concession be made to cover those items. Some buyers look at the home inspection as an opportunity for a second round of negotiations, and want everything fixed to bring a house into “as new” condition. This train of thought is not recommended. Generally any post-inspection negotiation focuses on items of a substantive nature or are health or safety related that were not disclosed or evident when an offer was made.

Contact Your Mortgage Loan Officer

Since you will have already been pre-approved for a mortgage, the next item to take care of will be an easy one. You must contact your mortgage loan officer and schedule a time to meet and make an official loan application. This loan application needs to be done as soon as possible; there are time limits to securing your final loan commitment. Your loan officer will give you a Good Faith Estimate of the closing costs involved with the financing. This estimate will include the mortgage and any recurring costs that are paid by the buyer, such as homeowner’s insurance and property taxes.

Your loan officer will likely require the following documents:

  • Contract for purchase

  • Copy of valid picture ID (drivers license, state ID, or passport)

  • 1 month worth of pay-stubs

  • W-2s for the last 2 years – if you are self-employed 1040s for the last 2 years

  • Name and address of employers for last 2 years (or school info. if applicable)

  • Mortgage or rental history for past 12 months

  • Copy of diploma (if graduated within last 2 years)

  • Last 2 months’ bank statements

  • HUD-1 from home sale (if applicable)

  • Credit card information

  • Insurance agent’s info. (if applicable) and attorney’s info. (if not on contract)

  • Divorce degree (if applicable)

  • Evidence of payments or receipts of child support/alimony

  • Auto loan information

  • Installment debt

  • Proof of funds for your down payment

We have found the key survival tactic to moving is to prepare early. Here are some suggestions to making your move an easy one:

Move yourself or hire a moving company?

Decide early whether you are going to do the move yourself and whether you need to rent a truck, or whether you are going to use a moving company. Needless to say, a moving company is by far the easiest, but it can be quite costly. You will need to decide whether the cost is worth avoiding that particular stress. Should you choose to hire a professional mover, we suggest you begin your search as soon as possible. Movers are in high demand during the spring, summer, and fall, so be sure to book far enough in advance to get your first choice of moving days. If you decide to pack and move yourself, it will cost less than if you use a moving company. Keep in mind, you will save money, but you will greatly increase the amount of time you will need to move. Should you need to rent a truck, factor in the costs for truck size, amount of time needed, mileage, plus the cost for boxes and packing material.

Change your address

Not only do you need to contact the postal service, but don’t forget to send change of address cards to magazines and organizations. It is also a good idea to contact your credit card companies, car loan companies and any other organizations that you make monthly payments to. This way, you will not have to rely on the post office to forward your mail, and there will be no delay in receiving it. Also, don’t forget to send new address announcements to your family and friends, especially before the holidays hit.

Utilities

As part of your move, you will need to cancel all existing utility accounts, or have them transferred to your new address. We will provide you with a list of the necessary phone numbers. Or you can go to http://whitefence.com/, a convenient site for changing all of your utilities in one visit.

Don’t forget the schools

If you have children, you will want to contact their current school and request any documents necessary to register them at their new school. Contact their new school early to make sure you have all the correct paperwork.

On the morning of closing, or a day or two before,

we will make a final inspection of your soon to be new home. Together we will “look over” the house to make sure it’s in the condition we expect and to make sure that any repairs agreed to by the seller have been completed. We’ll also make sure that all items included in your purchase contract are there and those items that should not be there have been removed. If we see anything that needs to be addressed, we’ll deal with it right away so it can be handled before closing.

Here at We Sell Chicago,

we know that closing day can be a scary prospect for new homebuyers. It can certainly feel like you are signing your life away with all of the pages that require your signature! The important thing is to think about the investment you are making in your future. Stay relaxed and enjoy the experience. It is certainly an achievement to get to this point!

Be sure to bring a drivers license and any other documents required. Not having the appropriate forms can require rescheduling the closing, which would be a very big inconvenience for all parties.

At the end of closing, you should receive the keys to your new home. Congratulations, we did it!

Now, it’s time to move in!

Since you’ll have plenty of things to keep you busy on moving day, the last thing you should worry about is what to eat for dinner. A member of our team will be calling you before closing to get your exact moving date. They’ll also ask you for a head count of all your friends and family that will be assisting in your move. Then on moving day, you can unload and unpack and TA DA…We’ll have pizza delivered for you. Now, the only thing left to do is…enjoy your new home…and…don’t forget to tell all your friends and family how we also delivered a successful home buying experience!