Lawsam.com Estate Planning, Real Estate, Elder Law

Buying Real Estate-Home Purchase Through a Realtor

How Much to Pay. Your realtor should give you a list of comparable sales or “comps” for you to decide how much to pay for the house. Some information is available on the internet (as described in the By Owner Purchase Section of this site). Very few sellers will allow the contract to be contingent on an appraisal. So you must be sure that you are not overpaying for the house before you put in an offer.

Home Inspection Right Away. All Buyers should do home inspections. The inspection must be done within 5 business days of signing the contract AND the notice of any problems must be sent within that time. The Buyer should consult a qualified inspector and schedule a time immediately with the inspector. In the summer it can be hard to get inspectors. The Buyer should try to be reasonable in asking for repairs. If there were 4 offers on a house and it was on the market for 24 hours, the Seller will not be hugely motivated to make repairs. On the other hand, if undisclosed problems are found, the Buyer can cancel the deal and get all his money back. I suggest a cash credit from the Seller for most items. Buyers tend to be dissatisfied with the repairs done by the Seller (especially if done by the Seller himself).

I hesitate to recommend home inspectors because some Buyers discover the inevitable defects in a home after closing and want to sue the inspector (and me for recommending the inspector). But in the interests of simplifying the closing process and making it less stressful for you, I can suggest the following:

Broyce Home Inspections, 847-540-5400

Michael Allan and Assoc., 847-382-6065

For a listing of home inspectors by zip code try the American Society of Home Inspectors web site at http://www.ashi.com/

Mortgage Company Selection is Key. The single biggest influence on the ease of closing from a Buyer’s perspective is the choice of the Buyer’s mortgage company. Generally, selecting an out of state mortgage broker, a mortgage company out of the newspaper based on a low rate quoted, or a mortgage company over the internet, for their low rate, is not a good idea. It works best to select a local lender with a local office. Almost all lenders are mortgage brokers now, meaning they process the file but the funds come from an underlying lender. A reliable local mortgage broker is the way to go. Dealing with a 1-800 number and a changing cast of people when you are trying to close is not a good thing.

You should obtain a good faith estimate of closing costs from the lender when you apply. This is a list of what the mortgage company will charge. Common fees are $75 for a tax service fee, $300 application fee, $50 flood certification and a document preparation fee of $150.00. Fees called “funding fee,” or “administrative fee” are junk fees and you should not pay them. The mortgage business is too competitive to overpay such fees. I suggest locking in one’s mortgage rate at the time of application, as long as the closing is within 60 days. Trying to “time” the rate is just to hard and adds too much stress.

It is often a good idea to ask your mortgage company to waive your tax and insurance escrow so you can pay them on your own. They generally charge 1/4% of the loan amount but some charge nothing.

The following mortgage brokers I have found to be consistent, ethical local mortgage brokers:

Biltmore Financial, Michael Bischof, 847-934-5000, http://www.biltmorefinancial.com/
Countrywide Mortgage, Tom Cramer, 847-277-7012 http://countrywide.dorado.com/tomcramer

Contingent on Sale or Not? For most people, it’s best to have a contingency on the closing of your current home. In fast-moving real estate markets as we have seen on the last few years, a remarkable and risky thing happens. Buyers buy homes with no contingency on their sale. For years, all Buyers who had a property to sell would sign a contract on their purchase with a contingency on them selling and closing on their sale. The Buyer would get his money back if he couldn’t close on his sale. There is a trade-off to having a home-sale contingency: the Seller keeps the property on the market and can accept other offers.

When the real estate market is so active, Buyers try to freeze out other Buyers, so they made non-contingent offers. This works fine in an active real estate market. But, things can change quickly. Right after September 11, 2001, for example, Buyers returned to using sale contingencies because many sellers' homes did not sell and quite a few Buyers defaulted (lost their earnest money).

I still suggest that you use a contingency on your sale, unless you can clearly afford to close on the purchase without your sale AND a mortgage broker pre-qualifies you for a purchase without closing on the sale. It’s just too risky to take a chance if your house does not sell.

Amount you Owe to Close. In order to estimate the amount that you need to close, click on our Buyer's Estimate Page to get an idea of the amount needed. (This does not take taxes into account. Generally the tax credit will work to the Buyer's benefit and reduce the amount needed to close)

Attorneys Fees for Real Estate Closings through Realtors. I charge a flat fee of $350.00 for closings through realtors.

By Owner Home Purchases

Be Careful What You Pay. You should be very careful when buying a home direct from the seller without a realtor. If you know the market and the neighborhood in which you are buying you should be okay. Many buyers just guess on the price of the house. Realtors control the information on recent home sales so it’s hard to obtain this without their help. You can check the Chicago Tribune Homes site for sales price data at: http://marketplaces.chicagotribune.com/marketplaces/homes/transactions/search/form It tends to be a little behind, like 6 to 8 months, in terms of sales data. Another good source of home values is http://realestate.yahoo.com/realestate/homevalues Here you type in the address of the property you want to buy (or sell) and comparable sales in the neighborhood pop up on screen, going back to 1996. These services do not include by owner sales, just realtor sales and purchases.

All of the points mentioned above in buying through a realtor apply to By Owner purchases too. Once you know how much to pay for the house, I suggest the following:

Make a Verbal Agreement on the Price. Some sellers won’t do this, but the majority will. It’s not binding on either of you. Then get the name and phone number of the seller’s attorney. Call me and I will put together a real estate contract. Usually this is faxed to the other attorney, who looks it over. We make any changes then the buyer signs it and brings it or mails it to the seller. This process usually takes anywhere from 1 day to 5 days.

Make the Contract Contingent on Appraisal. Because you are buying by owner it is wise to make the contract contingent on an appraisal. Your mortgage lender will require this anyway, so we will just use theirs. If the property appraises for less than the purchase price you can cancel the contract, or better, negotiate a reduction of the purchase price.

Do Home Inspection. It’s important to do a complete professional home inspection and to have the attorney notify the seller in the 5 day period of any problems.

Don’t Forget to Do a Walk-Through. For some reason, By Owner buyers always forget to do a walk-through the day before closing. A home inspection is done when you first sign the contract, and a walk-through is done the day before closing. The purpose of each is different: the home inspection is to find defects that you want fixed, the walk-through is to be sure that the house is in the same condition as when you signed the contract.

Get a Cashier’s Check/Insurance for Closing. The Buyer brings in a cashier’s check (no personal checks) to closing payable to him or herself to pay for the house at closing. Cash or personal checks aren’t accepted. The Buyer also brings in a homeowners insurance policy in at least the amount of the mortgage.
Amount you Owe to Close. In order to estimate the amount that you need to close, click on our Buyer's Estimate Page to get an idea of the amount needed. (This does not take taxes into account. Generally the tax credit will work to the Buyer's benefit and reduce the amount needed to close)

Attorneys Fees for Real Estate By Owner Closings. I charge a flat fee of $450.00 for By Owner closings.

Note: This site is for informational purposes only. Please discuss your situation with the lawyer of your choice.