|
FAQs
What Should I Do First?
One of the first steps you should take in the home buying process is to get pre-qualified by a mortgage lender. Pre-Qualification is a service provided by all mortgage lenders. There is no charge. There is no obligation. It can all be done by telephone. It usually takes only ten to fifteen minutes. The mortgage lender will ask you a few questions about your income and expenses, and from that he will be able to tell you how much you are qualified to borrow under today's mortgage rates.
Pre-Qualification serves two important functions. First, the mortgage lender will be able to inform you how much you are qualified to borrow, and how much you are qualified to purchase. Second, and more important, at the end of the pre-qualification process the mortgage lender will give you what is known as a Pre-Qualification Letter. In today's fast moving marketplace, it is critical that you have this Pre-Qualification Letter, so that the letter can be enclosed with an offer when you decide to submit one. Although a Pre-Qualification Letter is not a legal requirement in order to purchase real estate, it is a practical necessity in today's marketplace. Most sellers will use the sales proceeds from the property you intend to purchase to go purchase a new property. In fact, it is not uncommon for a seller to have already contracted to buy another property, before putting his existing property up for sale. As a result, it is absolutely critical that when the seller signs a contract to sell his property, that the new buyer is as assured as possible that his financing will be approved. Stated differently, the seller simply cannot take the risk of finding out that the buyer is unable to get mortgage financing, two or three weeks after the contract has been signed.
Back to Top
Mortgage Brokers vs. Mortgage Bankers: What's the Difference?
An important distinction to understand is the difference between a Mortgage Banker and a Mortgage Broker. Mortgage Bankers tend to be large, well-known, institutional mortgage lenders. The draw back with Mortgage Bankers is that when you apply for a loan with a Mortgage Banker, that Mortgage Banker only represents one source of funds, namely himself. By contrast, Mortgage Brokers typically represent several dozen "Wholesale Lenders". As a result, a Mortgage Broker is usually in a much better position to shop the marketplace to find you the best loan for your particular situation. The mortgage broker that I recommend is Bob Hathorne at First Switzerland Mortgage. His telephone number is 773/744-5046.
Back to Top
Pre-Qualification vs. Pre-Approval: What's the Difference?
As previously described, Pre-Qualification is merely a verbal exchange between you and the Mortgage Lender. The Mortgage Lender asks you questions about your income and expenses. From the answers that you provide to the Mortgage Lender, the Mortgage Lender provide you with an estimate of how much you are qualified to borrow, and how much you are qualified to buy.
By contrast, with full Pre-Approval, you actually submit all of the documents that you would if you were actually applying for the mortgage loan. Here's why this is important. A mortgage loan application actually consists of two parts. The first part is known as your Personal Financial Profile. Your Personal Financial Profile consists of a statement of your income and expenses, as well as your assets (items that you own) and liabilities (your credit obligations). The second component of a mortgage loan application is an Appraisal on the property that you will be purchasing. While we don't know what property you are going to be purchasing at this point, you can see that the items in your Personal Financial Profile will be the same regardless of which property you decide to buy. The reason this is important is because a Pre-Approved buyer is basically as strong as an all-cash buyer, and presents less risk to the seller than a mere pre-qualified buyer. My advice: get Pre-Qualified today, and work to get Pre-Approved at your earliest convenience.
Back to Top
Fixed Rate Loans vs. Adjustable Rate Loans: What's the Difference?
As described above, a fixed rate loan is a loan where the interest rate is set at the beginning of the loan, and never changes over the entire life of the loan. By contrast, an adjustable rate loan is a loan where the interest rate changes (or adjusts) at least once and sometimes several times over the life of the loan. The key benefit to an adjustable rate loan is that the initial interest rate (and therefore the monthly payment) is usually lower with the adjustable rate loan than it is with the fixed rate loan. Additionally, all adjustable rate loans have their interest rate adjustments occur at pre-defined time periods. Common examples include once a year, once every three years, or once every five years. Additionally, some adjustable rate loans are somewhat similar to fixed rate loans. Examples include the 5/25 loan and the 7/23 loan. With either of these two types of loans, the interest rate is fixed for the first time period (i.e. 5 or 7 years) then it adjusts once after the expiration of the initial period, and the interest rate remains fixed for the remainder of the loan (i.e. 25 years or 23 years, respectively).
Back to Top
Locking the Rate vs. Floating the Rate: What's the Difference?
Another issue that you could discuss with your mortgage broker is whether you want to "lock the rate", or "float the rate". Mortgage rates can change on a daily basis. When you apply for your mortgage, your mortgage broker will give you the option to either lock in a rate or float your interest rate. If you lock in your interest rate, the interest rate that your mortgage broker quotes you on the day that you complete the application for your mortgage will be the interest rate that you will receive on your mortgage at the closing. If you float your rate, the rate that you receive on your mortgage will be the mortgage rate at the date of closing. Obviously, your decision as to whether you lock in a rate or float the rate will be based on your estimate as to what will happen with interest rates between the date you make application for your mortgage and the date that you actually close on your home. If you have a strong feeling that interest rates will decline during that period, obviously you would want to think about floating the rate. On the other hand, if you think that rates will rise, or you are uncertain about the direction of interest rates, then you would probably want to lock in your rate.
Back to Top
No Money Down Loan Programs: Is It Really Possible?
Yes. For borrowers with good jobs and good credit, low money down and no money down loan programs are available. However, there is a catch. Even if you qualify for a no money down loan, you will still have to put up a good faith deposit (Earnest Money) for the period starting from when the contract is signed and continuing all the way to the closing. Typically, the Earnest Money deposit is equal to 10% of the purchase price. However, for purchasers who will be putting less than 10% down, the Earnest Money is typically reduced to the amount of the proposed down payment but in any event, usually not less than 5% of the purchase price. Thus, even if you qualify for a no money down loan, you will be expected to come forward with a good faith Earnest Money deposit equal to 5% of the purchase price of the property. For an accounting standpoint, assuming that you obtained a no money down loan, your purchase price would be satisfied by the mortgage amount at closing, and you would receive your 5% Earnest Money deposit back at the closing in the form of a check.
Back to Top
Condominiums: What's A Condo Anyway?
Everybody has a basic understanding of what they are buying when they buy a condominium: namely, an apartment within an apartment building. However, it is worthwhile to delve a little deeper below the surface. When you buy a condominium, you are buying an apartment within an apartment building. You are also buying an undivided interest in the common areas of the building. From a legal standpoint, condominiums operate as non-profit corporations. The income to the Condominium Association primarily consists of the monthly assessments. The expenses consist of the operating expenses of the building, such as natural gas, electricity, water, insurance, doorman, etc. As the purchaser of a condominium, you automatically become a member of the Condo Association. Collectively, all of the members of the Condo Association elect a Board of Directors, typically three to seven people. The Board of Directors is charged with the responsibility of operating the building. In a larger building, the Board of Directors usually turns this duty over to an outside Property Management Firm. However, in a smaller building (12 units or less) the Condo Association is often a "Self Managed" Condo Association.
Back to Top
Agents: Why Should I Work With An Agent?
When you are looking to buy real estate, you have three choices. First, you can look by yourself. Second, you can work with everyone, meaning all agents. Or, third, you can work with someone, meaning a particular agent.
First, if you try to do it on your own, you are limited to private sellers and open houses. In either case, you are limited to a very small percentage of the properties that are currently for sale. The result is a lot of missed opportunities, more work for you, and it usually takes longer.
Second, the second way to find a property is to ask every salesperson you contact to help. The problem here is that no one sees you as a loyal customer, so no one can afford the time it takes to help you find the best property. As you'll quickly discover, the level of customer service you get from an agent is in direct proportion to the amount of loyalty you return to that agent.
Finally, the best way to find a property is to select one professional real estate agent who will take the time to clearly understand your wants and needs, and who will invest their own time to help you find the very best property for you. As with everything, the best service comes from loyal customer relationships.
There are eight good reasons why you will benefit by working with one agent to find your new home. What you want is the best home, in the area of your choice, at a price you can afford. Here's how your agent can help you do this.
First, your agent can help you to prepare to look for a new home. Your agent can help you crystallize your wants and needs before you look, and help you match your wants and needs to what is available in the marketplace.
Second, your agent can help you select the best price range. Some buyers actually underestimate what they can afford, and settle for a smaller home or one with fewer features than necessary.
Third, your agent can expose you to the whole market. Your agent has access to our company listings, as well as access to all other real estate company's listings through the Multiple Listing Service. We can also represent you in dealing with builders, condo converters, and private sellers ("for sale by owners"). Frequently, we will also know of properties that are not yet listed, but will be coming on to the market soon.
Fourth, you will benefit because your agent won't take you to every home for sale, but will carefully match your needs and wants to what is available now to find the best home for you. This will save you time and aggravation.
Fifth, if necessary, your agent can help you decide. Sometimes, choosing between two or three ideal homes can be difficult for a buyer. As an objective third party, with a clear understanding of your wants and needs, your agent should be able to help.
Sixth, your agent will help you present your offer professionally. Your agent will make sure the seller clearly understands that you are a serious, qualified buyer. That is important at any time, but it is extremely important when the seller is comparing two or more offers.
Seventh, your agent can help you find the best financing. We have extensive knowledge of which lenders are best for what types of loans, because selling real estate is all we do, and our clients can not buy the property they want unless they get the financing they need.
Eighth, your agent will help coordinate the closing and make it go smoother. Once an agreement has been reached between you and seller, there are a lot of complicated procedures and paperwork. Your agent will stay on top of all the details to minimize delays and inconveniences. Your agent's goal is for your closing to go as quickly and smoothly as possible.
Back to Top
Agents: How Do Agents Get Paid?
Generally, most agents are paid on commission. They only receive their commission if the transaction closes successfully, i.e. you get the property you want. Finding and purchasing a home is a time consuming process both for the buyer as well as the agent. Most agents are knowledgeable hard-working people who want to see their clients buy the property that the client wants. As discussed above, the level of customer service you receive from your agent will be in direct proportion to the amount of loyalty you display to your agent. After all, how would you feel if you did a full weeks worth of work, and your boss gave the paycheck to someone else? The best way for you to get the service you want and deserve as a buyer is to find an agent you like, and make a commitment to work with that agent for the entire transaction.
How an agent gets paid depends upon the particular transaction. For properties which are listed through the Multiple Listing Service, the agent's commission is paid by the real estate agent who is representing the seller. It is important for you to be aware that easily 90% of the properties which are for sale are handled by a real estate agent, and therefore are in the Multiple Listing Service. For the few remaining properties which are not in the Multiple Listing Service, most private sellers will pay a commission to a buyer's agent, if the buyer's agent asks for one. To get the best service from your agent, be sure to give your agent this opportunity, otherwise your agent will likely confine their attention to only properties which are available through the Multiple Listing Service.
Back to Top
Agents: Who Does Your Agent Represent?
Common sense would indicate that your agent represents you. And, today that's true. However, it wasn't always that way. Prior to the mid-1990's, a buyer's agent was, legally, the "sub-agent" of the seller. This was not only contrary to the expectations of most buyers, it was contrary to the way most buyer's agents actually conducted their business. Finally, in the mid-1990's, Illinois law was changed so that buyer's agents actually do legally represent the buyer, and not the seller. And that's a good thing.
One departure from this rule happens in the case where the agent represents both the seller and buyer in the same transaction. This is known as a Dual Agency situation, where the agent is legally obligated to look after the interests of both the seller and buyer. Occasionally, it can become difficult or even impossible for the agent to reconcile the interests of both the seller and buyer. Which is just another reason why you as a buyer are much better off having one agent whose sole job it is to look out after your own interests.
Back to Top
Open Houses: What's The Inside Secret?
If you see a home where they are holding an open house, feel free to go in and take a look. However, be sure to tell the agent that is hosting the open house that you are working with an agent, and give the host your agent's name and phone number. Most open house hosts will have a sign-in sheet were they will ask you for your name and phone number. The problem with putting down your name and phone is that every agent you visit will pester you to death with follow up calls. The solution to this problem is to put down your agent's name and phone number. That way, all the follow up calls will go to your agent, and you will not be bothered. Additionally, if you like the home you see on the open house, be sure to let your agent know, so they can follow up and get the information you need.
Back to Top
Newspaper & Internet Advertising: What's The Best Thing To Do If I See An Ad?
If you see an advertisement for a particular property, write it down and call your agent right away. We recommend that you avoid calling the seller's agent because every agent you speak with will play a cat-and-mouse game with you to obtain your name and phone number. Once they have your name phone, they will pester you with follow up calls. The solution to this problem is to contact your agent. Your agent can frequently obtain more and better information for you through the Multiple Listing Service than the seller's agent will reveal. Additionally, your agent may also have personal knowledge to share with you regarding the condo unit, or building, that the seller's agent would prefer not to reveal.
Back to Top
For Sale Signs: What's The Best Thing To Do When I See a "For Sale" Sign?
Similar to open houses and advertisements, the best thing you can do is write down the address and phone number and then call your agent for more information. And above all, please respect the seller's privacy and avoid knocking on the door. The sellers don't want to deal with people without an appointment; that is why they hired an agent.
Back to Top
Multiple Listing Computer: What Is The Multiple Listing Computer?
In the same fashion that any travel agent can book you a ticket on any airline, a similar situation exists with real estate agents. Real estate agents "cooperate" with one another; for example, if I represent you as your agent (and I work with Lakefront Realty Group), and you see a property listed by another real estate company (for example, Coldwell Banker), I can get you all the information on that property, as well as set up an appointment for you to view the property. In fact, upwards of 90% of all residential real estate transactions involve two agents; one representing the seller, and one representing the buyer. Real estate agents exchange information regarding properties that are for sale through a central computer system known as the Multiple Listing System (MLS). The Multiple Listing System is operated by the local Real Estate board, whose primary function it is to operate the Multiple Listing System. When a seller hires an agent to sell a property, that agent must put the information regarding that property into the Multiple Listing System. Once that information is in the computer, it is instantly available by virtually every other real estate agent in the same area. Thus, if you see a property that you are interested in, but it is not listed with Lakefront Realty Group, I can still get you all the information you want regarding that property. Additionally, a useful service that I can offer you is the ability to e-mail you information about new listings as they become available.
Back to Top
Booking Appointments to See Specific Properties: What Do I Need To Know?
Once you see a particular property that you would like to view, please call me and I will set up the appointment for you. Your appointment can either be for a specific date and time, or for within a specific window of time on a particular day. Generally, I need at least one days advance notice in order to book appointments on properties. The reason for this is that the seller's agent will usually accompany all the showings. This sometimes creates logistical nightmares, as instead of having to coordinate two peoples schedules (yours and mine), now we have to coordinate the schedule of three different people. The marketplace practice of having the seller's agent accompany all showings is a phenomenon which is peculiar to the Near North Side of Chicago, in the Lincoln Park and Gold Coast neighborhoods. Stated differently, in other areas of Chicago this phenomenon usually does not occur. However, on the Near North Side this phenomenon occurs with regularity, and you and I are always at the mercy of the sellers agent. Another way that this phenomenon creates a problem is when you want to see six to eight properties in a row. Inevitably, I will set up all of the appointments approximately twenty to thirty minutes apart, get many of the requests approved at the time that they were originally requested, but have one or two appointments not be available at the original time. As a result, it is not uncommon to have a gap in a schedule.
Back to Top
Viewing Properties: Any Tips Regarding Viewing Properties?
First and foremost, it is critical that you are on time for your first appointment. If we are viewing multiple properties, and you are late, it will create a domino effect in that we will be late for all future appointments, because I usually create a tight schedule with properties being viewed every twenty to thirty minutes. Next, be sure to wear comfortable clothes and shoes. In winter time, you may be asked to remove your shoes frequently when looking at properties, so avoid shoes or boots with laces, if possible. I will provide you with computer printouts for each property that we will take a look at. It's a great idea for you to take notes on the individual properties as we see them, particularly if we are going to be looking at six to eight properties during the course of a day. Additionally, I would suggest that you adopt a ranking system to grade each property that we look at. A simple, yet effective, method is to simply mark each property as "yes", "no", or "maybe". Using this method will make your after the fact analysis much easier.
Back to Top
Comparative Market Analysis (Sales History): What Is A CMA?
For any condominium unit that you are interested in, I can provide you with a comparative market analysis or sales history. The comparative market analysis consists of three parts. The first part has similar units recently sold. Obviously, this information would provide a good basis for comparison to establish the value of the unit that you are interested in. Additionally, I am usually able to obtain the prior sale information on the unit that you are interested in, including the actual sales price and the date of sale. The second part of the comparative market analysis is similar units which are for sale now. These other units are units that the seller of the unit that you are interested in is competing against. The third part of the comparative market analysis are those units which are "Pending" or "Under Contract". These units were for sale, an offer has come in, was accepted, and the transaction is now headed towards a closing. The prices shown on units which are under contract are the asking prices, and not the actual sales price; the actual sales price is not disclosed until the transaction closes.
Back to Top
Professional Management vs. Self Management: What's The Difference?
Condo buildings are either professionally managed or they are self- managed. As noted above, medium to larger sized buildings tend to be professionally managed, whereas smaller condo buildings are frequently self-managed. In a professionally managed building, the Board of Directors of the Condo Association has delegated the day-to-day operations of the building to an outside Property Management Company. With a self-managed building, the Condo Association, through its Board of Directors, elects to handle the day-to-day operations itself. Medium to larger sized Condo Associations tend to go with outside Professional Property Management firms for several reasons. These reasons include that the Board of Directors does not have the time, or the expertise, and simply because the job is just too big. Although there is nothing inherently wrong with the Condo Association that has chosen to self-manage itself, an extra level of diligence is called for on your behalf when considering a self-managed building.
Back to Top
Percentage of Owner Occupancy: Why Is This Important?
The percentage of owner occupancy is a key statistic for all condominium buildings. The reason for this is that the percentage of owner occupancy will have a significant influence on your ability to obtain a mortgage for a unit in that building. The key level is the 60% mark. For condominium buildings which have an owner occupancy percentage of 60% or higher, mortgage financing is readily available. However, for condominium buildings which have an owner occupancy percentage below 60%, the availability of mortgage financing is significantly restricted. The reason behind this is as follows. If you wanted to purchase a condominium thirty years ago, you went to a mortgage lender, they made you a loan, and the loan that they made you was from their own money. Today, that is no longer the case. Today, the day after your loan is made, your lender will sell your loan in the "Secondary Mortgage Market". The lender then receives his money back, and is able to repeat the process over again. The mortgage loan which is sold is packaged with hundreds or thousands of other mortgages and then sold as a package on the world-wide financial markets. This all relates back to the issue of percentage of owner occupancy in that in order to be sold in the Secondary Mortgage Market, a condominium loan must be from a building which has an owner occupancy percentage of 60% or greater. However, this does not mean that all hope is lost for buildings that have an owner occupancy percentage below 60%. There are lenders in the marketplace who specialize in making these types of loans. However, those lenders are fewer in number.
Back to Top
Parking: What Are The Basic Parameters Regarding Parking?
Parking is a critical issue when it comes to condominiums, especially in the Lincoln Park and Gold Coast neighborhoods. From a legal standpoint, parking can be handled on one of four different bases: a Rental basis, a Deeded basis, a Limited Common Element basis, or a Licensed basis. From a physical allocation standpoint, parking is provided either on an Assigned-Space basis, or on a General-Admission basis. From a service standpoint, parking is either provided on a Self-Park basis, or on a Valet-Service basis. Several permutations of all of the above are possible.
Back to Top
Parking: What Are The Legal Variations Regarding Parking?
As noted above, there are four different legal variations on how parking is provided within a Condominium Association. First, lets take a look at the rental basis. With rental parking, you pay a monthly rental fee to obtain your parking spot, and you are obligated to pay that rental fee for as long as you wish to use your space. Generally, most condominium buildings that provide rental parking own the parking structure that they are renting back to the unit owners. However, a few buildings do not. If the rental parking structure is not owned by the Condominium Association, then all of the parking tenants are essentially at the mercy of the owner of the parking structure. In Condo Associations which do not own their own parking, the monthly parking rates tend to be about the same amount as one would expect to pay in a commercial garage in the same location. By contrast, parking in lots where the Condo Association owns the rental parking tends to be significantly less than commercial rates. Thus, a key question to ask in a rental parking situation is: Who owns the parking - the Condo Association or an outside third-party (typically the Condo Developer). As a rule of thumb, probably 80% of the larger condo buildings are rental parking buildings. Almost all rental parking buildings own their own parking structures with a few notable exceptions: 1030 N State St (Newberry Plaza), 405 N Wabash (River Plaza). Rental parking can be offered on either a Self-Park basis or a Valet Service basis; it varies from building to building. Rental parking is usually provided on an Assigned-Space basis, but occasionally is offered on a General-Admission basis. Another key question to ask in a rental parking building is whether or not there is a waiting list to obtain parking. Some buildings have them, and some buildings don't. As a general rule, those buildings which have Valet-Service do not have waiting lists. However, those buildings which have assigned-space, self-park spaces, sometimes have waiting lists.
The next major basis on which parking is offered is the Deeded parking basis. As the name implies, with a Deeded parking spot you actually own the spot, and receive an actual Deed to the parking space just as you receive a deed to the condominium apartment. Because it is a separately Deeded piece of real estate, you will also receive a separate monthly assessment bill, and a separate property tax bill, both of which are very small in dollar amount. In theory, the Deeded parking option might seem like a preferred basis. In practice, this sword cuts both ways. The problem is that in a Deeded parking condo building, there are frequently not as many Deeded parking spaces as there are apartments within the building. This means that some individual apartments will not have a Deeded parking space. While Deeded parking spaces can and do sell independently of an apartment within the building, it is a rare occurrence. Additionally, prices of $30,000-$40,000 are not uncommon for Deeded parking spaces on the rare occasions when they do become available. Thus, in a Deeded parking building a key question to ask is: Is a Deeded parking space included and/or available for purchase with this particular apartment? Hopefully, the answer is yes. In a pinch, even if a Deeded parking space is not available for purchase with a particular apartment, sometimes the seller of the apartment can make available an assignment on a lease that the seller is renting from a third party Deeded parking space owner. One must be careful with this type of arrangement because as the renter of a Deeded parking space you are at the whim of the owner of the space. Even more menacing than the possibility of a future rent increase is the possibility of a non-renewal of the lease. Finally, the Deeded parking space is almost always provided on an assigned space, self-park basis.
The third legal basis for providing parking is that of the Limited Common Element. The Limited Common Element is similar to the Deeded parking space, with several notable exceptions. First and foremost, unlike the Deeded parking space, the Limited Common Element Parking Space sometimes can not be sold or transferred independent of a sale of the apartment unit to which that parking space is assigned. Second, the Limited Common Element parking space does not receive a separate monthly assessment. Third, the Limited Common Element parking space does not receive a separate property tax bill.
The fourth way parking is offered from a legal standpoint is on a Licensing basis, also known as Deeded Valet. I have seen two condominium buildings offer this particular parking option: 195 Harbor Drive ("Harbor Point"), and 655 W Irving Park ("Park Place Tower"). The licensed parking option is sort of a limited version of the Deeded parking option. The original purchaser of the license paid a fixed fee to obtain a license to park in the building. However, it was not on an assigned-space, self-park basis. Rather, the holder of the License is granted access to have his or her car parked by the valet service, on a general admission basis.
Back to Top
Pets: Why Are Pets Such An Important Issue?
Dogs are frequently an issue in high-rise buildings. As a rule of thumb, approximately 50% of the high rise condo buildings do not allow dogs at all. The balance of most of the buildings do allow dogs, however they are usually limited to dogs which are less than 30 to 35 pounds. A few high-rise buildings do allow full size dogs, most notably 1212 N LaSalle. On the other hand, cats are generally not a problem, except for a few buildings which do not allow any pets at all. By contrast, most smaller condo buildings will allow both cats and dogs without any problem.
Back to Top
Swimming Pools: What Questions Do I Need To Ask?
Of the buildings that have swimming pools, some allow use of the pool at no additional charge, while other buildings will impose a seasonal fee. This fee typically runs between $50 to $100. Additionally, some buildings also impose a charge to bring guests to the pool. This charge typically runs between $5 to $10 per guest, per day. The reason that buildings charge for guests is not so much to raise revenue, but rather to keep pool usage within reasonable limits. Also, it is the policy of most buildings that the guest charge will be imposed even for sun bathers; i.e. those who do not intend to actually go in the pool.
Back to Top
Other Amenities: What Are "A La Carte Fees"?
As is the case with swimming pools, some Condo Associations also have "A La Carte" fees for the usage of other building amenities. Typically, these are for tennis courts and exercise rooms. While the fees are usually relatively small, it's a good idea to ask whether or not the association charges extra for the use of these facilities, and to find out how much those charges are.
Back to Top
Rentals: Why Are Rentals An Important Issue?
Many Condo Associations impose restrictions on the rental of individual condo units. The typical restriction is that a condominium unit may not be rented for a period less than one year, and the lease must be executed on a standard lease form. The reason that most condo buildings have the minimum one year lease requirement is to prevent a unit owner from running a "Corporate Suite", where there is a new tenant in the unit every thirty days.
Back to Top
Move-In Fees: You Mean They're Going To Charge Me To Move In?
Many Condo Associations also impose "Move-In" or "Move-Out" fees. These fees can run anywhere from $100 to $500 per move-in. This fee typically has to be paid every time an occupant changes in the apartment. This fee is an important item to consider when making an income and expense analysis on the projected rental of a condominium unit.
Back to Top
Special Assessments: Why Are Special Assessments Such A Critical Issue?
This is the phrase that every condominium unit owner dreads to hear. In theory, the operation of a condo building is similar to that of an apartment building. Both buildings collect income; rent for apartment buildings, and monthly assessments for condominium buildings. Both types of buildings pay out expenses; typically, natural gas, electricity, water, insurance, and perhaps payroll for the doorman. In addition to the recurring monthly expenses, the major components of the building, such as the roof, boiler, air conditioner, must be repaired or replaced from time to time. Larger condo buildings are managed by professional property management firms. These professional property management firms in turn hire professional engineering firms to come in and make a study of the estimated remaining useful life of each of the major components of the building, and also to estimate what the replacement cost of those items will be. This is known as a Reserve Study. Based upon the Reserve Study, the condo building will hopefully arrange its budget so that when the time comes for the replacement of a major component, the condo building can simply write a check for it. Unfortunately a few condo buildings sometimes fall behind in accumulating their cash reserves, and find that they do not have sufficient cash on hand to pay cash for these replacements when they become necessary. As a result, the Condo Association is then forced to turn to its unit owners to ask for an additional cash contribution in order to fund the payment of these projects. This demand for payment is known as the Special Assessment. Frequently, the Condo Association will offer two payment options for the payment of special assessments. The first is to pay cash in full. The second is to pay off the balance in monthly installments with interest over several months or years.
Two important questions to ask regarding special assessments are first, are there any special assessments pending now, and second what is the likelihood of special assessments being levied in the future. The likelihood of special assessments in the future is influenced primarily by two factors. First, is the level of cash reserves. Second, is the current state of maintenance within the building. Obviously, the ideal situation is to have large cash reserves and no deferred maintenance. However, if you have only one of the two items, namely large cash reserves or no deferred maintenance, this frequently can be considered an acceptable level of risk. Not surprisingly, if a building needs work, but has the cash to pay for the work to be done, this is not a big problem. Conversely, if the building has lower level of cash reserves, but no deferred maintenance, this shouldn't be a problem either. Predictably, when a building has a low level of cash reserves, and a significant amount of deferred maintenance, the possibility of a future special assessment becomes likely. The important thing to remember is that the level of cash reserves is not the only factor in the analysis. The current state of maintenance of the major building components must be considered as well.
Back to Top
New Construction: What's Important To Keep In Mind Regarding New Construction?
There are a host of special issues which must be considered when new construction is involved. I could probably write another manuscript just on this particular topic alone. The two biggest concerns from a purchaser's stand point are that of price and timing. Sometimes, the price issue is easily enough dealt with by agreeing to accept a particular unit as the builder intends to build it. Timing, however, is quite another issue. While builders will generally give you their best estimate as to when a particular unit will be ready for occupancy, delays unfortunately are common. Some of these delays are caused by factors within the builder's control, but other times there are factors which are beyond the builder's control, such as weather, and labor and material shortages. Even if a unit or project is delivered on time and on budget, frequently there are several minor defects which need to be corrected prior to closing. The list of these defects is known as a "Punch List". In conclusion, I would give two pieces of advice. First, know your builder and his reputation. Second, get a real estate attorney that has experience in dealing with new construction.
Back to Top
Price: What's The Best Way To Determine The Price To Offer?
Obviously, this is one of the most important terms in the offer. As discussed previously, I can furnish you with a comparative market analysis or sales history on that property, for any property that you are considering. This will show you not only units which are for sale in the building now, but will also show you past sales of similar units within the same building. For additional discussion on the subject of price, see the section below entitled "Bidding Strategies and Multiple Offer Situations".
Back to Top
Earnest Money: What Is Earnest Money & Why Is It Important?
Earnest Money is the legal term for what you would commonly think of as deposit money or good faith money. Buyers put up Earnest Money in order to assure the seller that the buyer will complete the transaction. If a buyer fails to complete a transaction as planned, the Earnest Money is subject to forfeiture. By custom, the Earnest Money is held in a trust account by the seller's real estate agent. In this respect, the seller's agent is stepping out of their role as an advocate for the seller, and is assuming the role of a Trustee. As a Trustee, they are subject to the strict accountability standard of performance that the law imposes upon all Trustees. As the purchaser, you will probably receive interest on your Earnest Money while it is on deposit with the office of the seller's agent.
Probably the two most important issues regarding to the payment of Earnest Money are the amount and the timing. Typically, a $1,000.00 personal check is enclosed with the initial offer. This sum is usually increased to 5-10% of the purchase price within seven business days. The only time that the Earnest Money is reduced from the standard 5-10% figure is when the buyer is coming in with less than a 5-10% down payment. For example, if a buyer is coming in with only 5% down, then as a practical matter the Earnest Money is also reduced to 5%. The check for the balance of the Earnest Money (increasing the deposit to the agreed on figure) may also be paid by personal check; a cashiers check or money order is usually not necessary.
Back to Top
Closing Date and Possession Date: What Are Important Factors To Consider?
The closing date and possession date are probably the second most important terms in the contract. The closing date is the day that you and your mortgage lender will turn over the funds necessary to purchase the property, and you in return receive legal ownership of the property. The possession date is the date that you will receive access of the property. The closing date and the possession date are usually the same day, although they need not necessarily be the same date. Sometimes, a buyer will want to obtain possession of a property in advance of closing. Other times, a seller will want to retain possession of the property after the closing. However, and as stated before, the closing date and the possession date usually are the same. Many buyers also seek to have the timing of the closing of their purchase coordinated with the expiration of their lease. My general recommendation is that you try to have the closing and possession date of your new condominium be approximately two weeks prior to the expiration date of your lease. This will allow you one week to do any necessary fix up to your new condominium (e.g. new painting and carpet). It will also allow you another week to get moved into the property. Obviously, if you plan extensive redecorating and remodeling, you may need more than two weeks.
Back to Top
Mortgage Contingency Clause: How Does Having One Protect Me?
The Mortgage Contingency Clause makes your offer contingent upon your ability to get mortgage financing. Stated differently, the Mortgage Contingency Clause states that if you cannot get the mortgage financing that you thought you could, you get to back out of the contract and receive a full refund of your Earnest Money. The Mortgage Contingency Clause will contain the exact terms of the mortgage that you seek to obtain, for example a thirty year, fixed rate mortgage, at 7% annual interest, with no points or loan service charge. One common misunderstanding is that people think the Mortgage Contingency Clause obligates them to get a mortgage on those terms. In fact, the opposite is true. What the Mortgage Contingency Clause states is that if you cannot obtain a mortgage for at least those terms or better, then you get to back out of the transaction without penalty. One critical provision within the Mortgage Contingency Clause is the expiration date, which is the date by which you must obtain your Mortgage Commitment. Your attorney should be watching this date closely for you, but it is a date that you should diary for yourself as well. The importance of this date is that this is the last day that you may back out of the contract through the Mortgage Contingency Clause. Stated differently, if you fail to serve notice of your inability to obtain mortgage financing on or before the expiration date of the Mortgage Contingency Clause, you will be considered to have waived your right under the Mortgage Contingency Clause. As a result, your offer would then convert into a "cash offer", which means that if you fail to close the transaction on the scheduled closing date for any reason, that your Earnest Money will be subject to forfeiture.
Back to Top
Attorney Approval Clause: What Is It And Why Do I Need One?
An Attorney Approval Clause is a standard provision in residential real estate contracts. The Attorney Approval Clause allows your attorney to do an after-the-fact review of the contract within a short time period, typically the first five business days. The need for the Attorney Approval Clause arose from the fact that most attorneys generally work from Monday thru Friday from 9 to 5. Conversely, many consumers buy real estate on evenings and weekends. Many a good property has been lost, due to the fact that the buyer waited until the next business day so they could consult with their attorney. As a result, the Attorney Approval Clause was implemented as a standard provision within residential real estate contracts. In order to protect Illinois consumers, Illinois courts have given Illinois attorneys broad discretion to modify or kill residential real estate contracts. However, this power may only be exercised during the relatively short time period in which the Attorney Approval Clause runs; typically the first five business days after the contract is accepted by the seller.
Back to Top
Inspection Contingency Clause: What Is It And Why Do I Need One?
The Inspection Contingency Clause allows you to bring in a home inspector shortly after the contract is signed (typically within the first five business days) to examine the property for any physical defects. You have three choices as to whom you will choose to perform your home inspection. First, you may hire a professional home inspector. Professional home inspectors typically charge between $200 to $400. Condominium units are typically at the lower end of the fee schedule, whereas single family homes and two flats are at the higher end of the fee schedule. Your second option for a home inspector is to bring in a knowledgeable friend or relative. Your third option for a home inspector would be to conduct the investigation yourself. If you are purchasing a single family home, a two flat, or other free standing dwelling, I would suggest in the strongest possible terms that you hire a professional home inspector, because your inspection is critical for these types of properties. On the other hand, when it comes to purchasing a condominium, particularly in a large high rise building, having a professional home inspector is not as critical, but is nevertheless important.
Back to Top
Condo Disclosure Package: Why Is This So Vitally Important?
As the purchaser of a condominium in the State of Illinois, you are legally entitled to a specific disclosure package from the Condominium Association. Section 22.1 of the Illinois Condominium Property Act states that there are ten specific items that the Condo Association must come forward and disclose to you as a purchaser. These ten items include, but are not limited to, an official set of condominium documents, a set of financial statements, a confirmation of insurance, a statement as to whether or not the condominium association is involved in any lawsuits, among other things. Your contract will provide that you will have seven days from the date you receive the materials to review and approve them. Usually these disclosure packages indicate that there are no problems with the Condo Association. On the rare occasion that a problem is indicated, your attorney will be able to help you assess the situation.
Back to Top
Negotiations: How Are Negotiations Typically Handled?
In general, offer negotiations proceed as follows. The buyer puts the initial offer in writing, and the offer is then submitted to the seller. Unless the seller accepts the offer as-is (which is rare), the seller will usually respond with a counter-offer. While the buyer's initial offer must be in writing, all of the counter-offers are typically conducted by telephone. Each party (buyer and seller) will receive and respond to each counter-offer through their respective real estate agents. Each party's real estate agent then relays the information to the other party's real estate agent, who in turn relays that information to that agent's client. Most of the counter-offer negotiations will concern the subject of price, however closing and possession dates can also be an equally important item. Because of the fact that the counter-offer negotiations are done by telephone, most negotiating sessions are concluded within two to eight business hours. There are a couple of exceptions to this rule which can cause delay. Some delays can be caused by one of the parties to the potential transaction being unreachable, typically that the party that is on cross-country airline flight. While negotiations sometimes continue into the late hours of the evening, frequently the parties will agree to merely "suspend" the negotiations until the following morning, at which time the negotiation continues at the point where it left off. In any event, you can see why it is important to maintain telephone contact with your agent during the time that negotiations are taking place. Ultimately, the buyer and seller will either reach a specific set of terms under which the property will be sold, or they will fail to agree. If the parties are able to agree on all of the price and terms, this is called having a "verbal agreement". Once a verbal agreement is reached, the buyer's agent will return to meet with the buyer to have the buyer sign off on all of the final changes to the contract. Then, the buyer's agent delivers the contract to the seller's agent, who meets with the seller to have the seller sign off on all of the final changes to the contract. At this point, there is now a binding written contract between buyer and seller. On the other hand, sometimes the negotiations will result in an impasse, typically over the issue of price. Here, the buyers maximum price is below the sellers minimum price, and the negotiations fall apart, or become permanently stalled. In such case, the negotiations are declared to be dead and the buyer receives back their uncashed check for their Earnest Money deposit.
Back to Top
Multiple Offer Situations: What's a Multiple Offer Situation?
Sometimes there will be more than one offer submitted on a property at the same time, due to desirability and heavy buyer demand. Depending upon the circumstances, one of three possible scenarios will unfold. In the first possible scenario, the seller's agent will call up each of the buyer's agents, notify them that they are in a multiple offer situation, and indicate a specific price the seller is willing to accept. If a particular buyer wants to pay that price, the property may or may not be sold, depending on other factors. This specific scenario, called "countering with a specific price" is not used as frequently as it once was. The second possible scenario is known as the "Best Shot" procedure. In this scenario, the seller's agent will call up all of the buyer's agents, and notify them that they are in a multiple offer situation, and advise each agent to come back with their "best shot". While the use of this procedure tends to expedite the negotiations, some buyers complain that this puts them in somewhat of a dilemma. Specifically, buyers complain they have difficulty formulating what their "best shot" response should be, since they have no idea where the other buyers will be coming back with their response. Stated another way, each buyer does not know how high is too high, or how low is too low. Nevertheless, the seller's agent always dictates the negotiation procedure. When in a "best shot" situation, the buyer must respond with their best shot, much as in the same fashion as submitting a bid at a "sealed bid" auction. Both the "specific price" and the "best shot" procedures are typically used when there are approximately two to five offers submitted on a particular property. The third scenario is what I call the "avalanche situation". In an "avalanche situation", between 12 and 20 offers may be submitted on a property within the first 24 to 48 hours after the property hits the market. In an "avalanche situation", there are no counter-offer negotiations. The sellers agent merely spreads all of the offers out on a conference table in front of the seller, explains each one of the offers, and allows the seller to pick whatever offer best suits their needs.
Back to Top
Bidding Strategies: What Are Good Tips Regarding Bidding Strategies?
My recommendations for bidding strategies will depend on whether you are the only purchaser who is submitting an offer, or you are involved in a multiple offer situation.
If you are the only purchaser who is submitting an offer, my recommendation is that you submit an offer which is high enough on the price so as not to be perceived as ridiculous, but yet low enough so as not to be accepted. Hopefully, this procedure will help you "smoke out" what the seller's bottom line number is. While this procedure is frequently effective, you must nevertheless be mindful of the possibility that very soon after you submit your offer, yet another offer may be submitted, and thus you will then be at a "multiple offer situation".
In a multiple offer situation, you are well advised to make your initial offer a strong offer. If the multiple offer situation is an "avalanche situation" (twelve or more offers) it is imperative that your first offer be your highest and best offer, for the reason that you will probably not get an opportunity to submit or respond to a counter-offer. Additionally, you would be well advised to attempt to find out what the sellers desired possession date and closing date is. If you can find out what this date is, by all means use this as your intended closing and possession date even if it means a slight inconvenience to you. Further, you may want to consider the possibility of submitting a "cash offer", in order to further increase the likelihood of your success.
Back to Top
Cash Offers: What Does The Term "Cash Offer" Mean?
Let me let you in on a secret: You don't have to have all cash to use a cash offer. The cash offer, from a legal standpoint, is merely an offer which does not contain a Mortgage Contingency Clause. While a cash offer may be used by a buyer who is in fact paying all cash, a cash offer may also be used by a buyer who intends to finance the transaction, but is so confident in their ability to obtain a mortgage that they are willing to waive the protection of the Mortgage Contingency Clause. What kind of buyers have this extraordinarily high level of confidence in their ability to obtain a mortgage? The answer is a buyer who has a full pre-approval from a mortgage lender. That said, lets now move on to the benefits and risks of using a cash offer. The biggest benefit for you as a purchaser to use a cash offer is that it reduces the seller's biggest fear: that the transaction will not close on schedule due to the buyer's inability to get mortgage financing. Stated differently, seller's will frequently give preference to cash offers over non-cash offers, for the reason that cash offers rarely, if ever, fall through. An additional benefit to the buyer in using a cash offer is that the purchase price may also be slightly lower than that which might otherwise be obtained through the use of a traditional offer which is contingent on mortgage financing. However, the use of cash offers is not without significant risks. As discussed, the cash offer simply means that your offer to purchase the property is not contingent upon your ability to get financing; you can not back out of the transaction without a penalty if you do not get your mortgage. When you couple this "no way out" aspect of the cash offer, with the fact that you will also have to put up an Earnest Money deposit (frequently 10% of the purchase price), this means that someone who writes a cash offer and fails to close the transaction on time for any reason, will risk forfeiting their Earnest Money (OUCH!). Sellers are usually well aware of this provision, and are easily persuaded when a buyer submits a cash offer. A nefarious seller might accept a cash offer actually hoping that the purchaser will default on the contract, but as long as the purchaser closes the transaction on time without problem, there is no penalty. While the cash offer can be an effective and persuasive tool in contract negotiations, it is obviously not for those with a low tolerance for risk.
I'll relate to you a short story which dramatically illustrates the effectiveness of the cash offer. One day, I received a telephone call from a man and his wife who were looking to purchase a bungalow on the Northwest side of Chicago. I told the man that I usually sell condominiums and townhouses in Lincoln Park and the Gold Coast, and that bungalows on the Northwest side of Chicago were a little out of my area of expertise. Nevertheless, he wanted me to be his agent, so I agreed to work with him. To make a long story short, after an extended search for the perfect home, we finally found one. It was a gorgeous brick bungalow on an extra-wide lot that had just hit the market as a result of an estate sale. Within 24 hours, an "avalanche situation" of multiple offers developed. We were lucky in that when we viewed the property, we found out that there were already about eight or nine offers in on the property. Since this was an estate sale, I knew all of the offers would be reviewed by attorneys, and attorneys love cash offers. Fortunately for this buyer, he had a full pre-approval from his mortgage company. He also was a certified public accountant, and fully understood the risks of submitting a cash offer. Since he really wanted this house, he decided to take the risk of submitting a cash offer. Ultimately, there were a total of 15 offers submitted on this property. Seven offers were below list price. One offer was for the full asking price. Seven offers were actually above the list price. Believe it or not, my buyer did not have the highest price offer. He was actually only the second highest price offer. But, my buyer submitted a cash offer, and the highest price offer was from a buyer who made his contract contingent upon obtaining mortgage financing. Lawyers being lawyers, they of course jumped for the cash offer. As a result, my buyer was successful in beating out fourteen other prospective purchasers for this property. He also was able to obtain the property for approximately $4000 less than the high bidder (the home was in the $220,000 price range). The moral of the story is that my buyer knew about the option of submitting a cash offer, understood its risks, took the gamble and won. In conclusion, I wouldn't recommend cash offers to everyone, but you should be aware of it as a potential option.
Once in a while, I will get a true cash buyer; that is, a buyer who truly intends to pay all cash, and not obtain a mortgage to finance the purchase. Without exception, true cash buyers feel that they have an advantage in the marketplace because of their all cash status that they can use to extract a lower price from the seller. Unfortunately, this is frequently not the case. The reason for this is while a cash buyer does not have to worry about obtaining financing, a buyer who has been pre-approved by a mortgage company is assured of getting a mortgage as well. As a result, true cash buyers frequently do not have the leverage in the marketplace that they think they have. This also illustrates the importance of getting pre-approved for a mortgage before beginning your house hunting search.
Back to Top
Contract Components: We Finally Struck A Deal. What Documents Should I Have?
The first thing to do is to make sure that you have copies of the contract and the disclosure forms. The first document is the contract itself, which sets forth the price, closing date, and so forth. The second component is any riders that may have been attached to the contract. The third component of the contract is the Illinois Seller Disclosure form which is known as the Residential Real Property Disclosure Report. The fourth component is the Federal Lead Based Paint Disclosure form. The fifth component is the Internal Revenue Service W-9 form. This form is necessary so that the holder of the Earnest Money can pay you interest on your Earnest Money deposit.
Back to Top
Diary Key Dates: What Dates Are Important To Put On My Calendar?
It is critical that you diary the key dates related to your purchase contract. These key dates include: the expiration date for the Attorney Approval Clause (typically 5 business days after the sellers acceptance); the expiration date for the Inspection Clause (typically 5 business days after the sellers acceptance); the due date for the payment of the balance of the Earnest Money (typically 7 business days after the sellers acceptance); the expiration date for the Mortgage Contingency Clause (typically 25 calendar days after the sellers acceptance); the closing date and the possession date (typically the same date, but not always).
Back to Top
Attorney Approval Clause: What Do I Need To Do?
The attorney for both the buyer and seller will have a period of time to review the contract, and make any changes that may be necessary. The time period for the Attorney Approval Clause is short, typically the first 5 business days after the seller's acceptance. As a result, it is critical that you fax your attorney a copy of the contract as soon as possible.
Back to Top
Home Inspection: What Do I Need To Do Regarding The Home Inspection?
During the Home Inspection Contingency Clause, (typically the first 5 business days after the contract has been accepted by the seller), you will have the right to conduct a home inspection. As discussed elsewhere in this document, your home inspector can either be a professional home inspector, a friend or relative who is knowledgeable about construction issues, or you may conduct the inspection yourself. If any defects or concerns are found as a result of a home inspection, these items should be put into writing and forwarded to your attorney immediately. Once your attorney has received these items, your attorney will send a letter to the sellers attorney, and request a response. As to each item listed, the seller will typically respond in one of three ways. The first possible response is that the seller agrees with your identification of the defect and will agree to have a defect repaired prior to closing. The second possible response is that the seller agrees with your identification of the defect and will propose a specific dollar amount as a cash adjustment to the transaction, in lieu of having the item repaired. The third possible response is that the seller will disagree with your identification of the defect, and refuses to take any action. Your attorney will help you formulate a response in the event that the seller does not agree to have all issues taken care of to your satisfaction.
Back to Top
Appraisal: How Is The Appraisal Handled?
Your Mortgage Lender will dispatch a professional Appraiser to the property to prepare a written appraisal. This will happen automatically without any action necessary on your part. The Appraiser will contact the sellers agent to make an appointment to gain access to the property. One important thing to note is that because you are paying the Appraiser's fee, you are entitled to obtain a copy of the appraisers report. If your lender does not give you a copy, you can call them and ask for one and they must give it to you. Usually, there will be no problem with the appraisal. However, occasionally the Appraiser's estimate of value will be below the stated purchase price on the contract. If this happens, there are several options available. The first option is to file an appeal with the Appraiser. Typically this involves reviewing the Appraiser's report, and reviewing what other properties the Appraiser has based his estimate of value upon. Sometimes, the Appraiser will have inadvertently overlooked a recent sale which would justify contract price. In the event that an appeal with the first appraiser is not successful, the second alternative is to have another Appraiser dispatched to the property to perform a second appraisal. Sometimes this will solve the problem, sometimes it won't. In the event that the second appraiser is also not able to justify a sufficient value, the third alternative is to apply for a loan with a different lender, who will also dispatch another Appraiser. As mentioned previously, for most purchases a low appraisal is not a problem. A fourth possible solution to a low appraisal problem is for the buyer to increase the amount of his down payment. The reason for this is that properties truly never fail to "appraise out"; they are just appraised for values lower than the buyer had hoped for. A numerical example will best illustrate this situation. Lets say that you agree to purchase a property for $100,000, and your lender had agreed to make you a loan for 90% of the value of the property, in this case $90,000. Let us also assume that the appraisal came in at only $90,000, and not the $100,000 that you had hoped for. In this case, the lender would still be willing to make you a loan, but only for 90% of the appraised value ($90,000) of the property, which would translate to a loan amount of $81,000, instead of the $90,000 loan amount that you had hoped for. Since the original contract price was $100,000, and the bank would be willing to lend you $81,000, you could still complete the transaction by increasing your down payment to cover the difference. However, this would be $19,000, which would be a $9,000 increase over the original $10,000 down payment that you had originally intended. Fortunately, most low appraisal situations will not result in a doubling of the amount of your down payment; I just picked these numbers because they are round numbers that illustrate the concept.
Back to Top
Loan Application: What Do I Need To Keep In Mind?
There are two important points for you to keep in mind regarding your loan application. First, it is important that you contact your mortgage loan officer promptly to let him know that you have signed a contract to buy a property, so that he may begin the mortgage loan application process at once. Second, it is critical that you get all of the documentation requested by your loan officer to your loan officer as soon as possible. The reason for this is that your loan application package can not be submitted to the "Loan Underwriter" for a final approval until every necessary document is within your file.
Back to Top
Earnest Money: How Is The Earnest Money Handled?
Your contract will require that you post Earnest Money or deposit money from the time period from when the contract is signed until the closing. Typically, the initial Earnest Money is a personal check for $1,000.00 with the offer. A subsequent Earnest Money payment will typically be due ten calendar days after the seller has signed the contract. The total Earnest Money amount is usually equal to 10% of the purchase price, for buyers who are coming in with a 10% down payment or greater. However, if a buyer is coming in with less than 10% down payment, the total Earnest Money requirement is usually reduced to the buyers proposed down payment. Personal checks may be used for both Earnest Money payments in most cases; cashiers checks and money orders are usually not necessary. By custom, the buyers Earnest Money is held in a trust account in the seller's real estate agent's office. At the closing, the seller's real estate agent will bring a check equal to the total amount of your Earnest Money deposit, which will be applied to your purchase price. As discussed before, you will receive a check for the interest that was earned on your Earnest Money while it was on deposit.
Back to Top
Insurance: What Kind of Insurance Is Required?
The first important thing to determine regarding insurance is whether or not the property you are buying is a condominium (not in the architectural sense, but in a legal sense). If the property that you are purchasing is legally a condominium, then by law the Condominium Association is required to purchase a "Master Policy" which provides fire and liability insurance on the building. As a condominium unit owner, you only need to purchase contents coverage, which is similar to a renters policy. The key reason for finding out whether or not the property you are buying is legally a condominium is that if the property is a condominium, it is not necessary for you as the purchaser to bring evidence of insurance coverage to the closing. If you are buying a condominium, your mortgage lender will contact the insurance agent for the Condominium Association, and obtain the necessary Certificate of Insurance.
On the other hand, if the property that you are purchasing is not legally a condominium (such as townhouses which are only subject to party-wall agreements, single family homes and 2 to 4 unit buildings) then you are absolutely required to bring evidence of insurance coverage to the closing. If you fail to bring this evidence of insurance to the closing, your transaction will not close! The evidence of insurance that you will need is an actual policy (not merely a binder) plus a receipt showing that the premiums have been paid in full for one year. For more details, contact your insurance agent.
Back to Top
Reserve Your Move-In Date: Why Do I Need To Do This Promptly?
It is very important that you be aware that in many condo buildings and virtually all large high rise buildings, you can not move in or out at any time you want to. First, you must call the management office of the building and specifically reserve a date and time for your move-in. Second, many condo buildings only allow moves at certain times. While the management office of your building will of course be the final guide, a typical restriction might be that moves are permitted during a three hour period on Monday thru Friday from 9 A.M. until Noon, or from 1 P.M. until 4 P.M., or Saturday mornings from 9 A.M. until Noon. Many condo building prohibit moves during the evening or on Sunday. In addition to having restricted hours in which you can make a move, many buildings only allow one move to proceed at any given time. Since many condo purchasers will have their closing near May 1st or October 1st, many of the preferred moving time slots will go quickly. It is imperative that you contact the management office of your building and request your time window of choice as soon as possible. On a related issue, many condo buildings will also charge non-refundable "move-in" fees, and will also require you to post a refundable damage deposit. The non-refundable move-in fees can range from $100.00 to $500.00. Also, refundable damage deposits upwards of $300.00 are not uncommon. Another important factor to be considered related to the subject of booking a move-in date is whether or not the property is tenant occupied. While owners can generally be counted on to move out on time, tenants frequently forget about the advance reservation requirement that most condos have. If the property is tenant-occupied, extra care should be taken to verify that the tenant reserves a move-out date in advance of your intended move-in date.
Back to Top
Re-Decorating: What Should I Consider When Planning For Re-Decorating?
When possible, it is a good idea to plan on doing all the re-decorating possible prior to your actual move-in date. The only day that your condo will be vacant is the day that you buy it. It is much easier to have new carpet installed, and to get painters in when the apartment is vacant. Additionally, with the busy real estate market, building tradesmen and contractors of all kinds are very busy and require advance notice in order to schedule a job. You are well advised to contact all of your intended building tradesmen as soon as possible after you have signed a contract.
Back to Top
Closing and Post-Closing Issues: What Do I Need To Do To Prepare For The Closing?
Prior to closing, your attorney will inform you regarding all the items you will need to bring to the closing. Your attorney will also be able to handle all the paperwork for you at the closing. For a list of all of the documents that you should walk away with after the closing is finished, ask us for a copy of our Buyer's Checklist. As regards to post-closing issues, common sense will be your guide, but for a list of typical items which need to be done, again see our Buyer's Checklist.
Back to Top
|
