Category Archives: millennial buyers

Questions to ask when choosing a mortgage lender to buy a home.

When deciding to buy a home, the first step is getting preapproved. With so many mortgage lenders out there, how do you choose? Many home buyers who come to me say the same thing. I just called my bank to get preapproved…they have all my information and my car loan…

Banks who are good for checking accounts or even car loans are not always stellar at mortgages, which are riskier and more complicated transactions. The right mortgage lender can be the difference between getting or not getting a home. In a competitive market where the right homes are going into multiple offers, listing real estate brokers and there sellers may evaluate offers, including which lender will get the job done. If lenders have a bad reputation, it can hurt your offer. And the wrong mortgage lender can definitely cost you a lot of time, heartache and money if they do not get the job done.

Beware – rates are not everything. Mortgage companies that cloak themselves in the best rates are not often the best to deal with. If they can’t get the job done, it won’t matter what their rate is.

So here are 6 questions to ask a mortgage lender to see who will get you into your new home.

1. What do I need for a preapproval letter? If they don’t ask you for tax returns, w2, bank statements and proof of employment income right from the start….and pull your credit report…your preapproval is not worth anything and will be worthless to a listing broker with an offer. Sellers want to know the loan will go through and so do you. They need all this information to ensure you will have a successful loan.

2. Do you do your own underwriting locally or in your office? Underwriting is the key to all loans. Underwriting is where they look at all the documentation and ensure the company/investor is satisfied with a minimal risk of default on the loan. This is very complex and involves a lot of precision but also a lot of subjectivity. If the underwriters are with another company or in another state or even another office, the loan officer will be powerless if anything is tricky with you or the house to ensure the loan gets done.

3. Who do I deal with during the loan process? Service counts for a lot. Companies where you deal with multiple people in multiple locations, states, etc. usually will delay your loan and cause you more hassles. You want a team where the loan officer, the person you start with is still involved and still your point of contact for you, your Realtor and your attorney. Companies who have you talking to a different person every time will just give you a headache and waste a lot of your time. Internet companies are famous for this, you often are pushed from person to person.

4. What are your loan fees? Of course you want to know what the loan will cost you. But just like rate, you should ask the question (and get it in writing) but that should not be the only factor considered.

5. What loans can you do? Not all banks, mortgage companies and credit unions can perform all mortgages. Renovation loans, FHA loans, various grants and programs loans with home buyer assistance at local or state level…if you are looking for a particular loan product or a few, you want to know they can do the job in house and not send out for underwriting and processing.

6. How many of your deals go through? This is a very important question. Some loan officers are salaried (many banks) while mortgage companies typically are strictly commission…they don’t eat if they don’t close loans. If they could care less if you close or not and merely are fulfilling a quota of preapprovals or applications…they are likely not the lender for you. And lenders who don’t close at least 90% or more of all loans they submit preapprovals for…that is a red flag.

What you need to know about using an Attorney in a Real Estate Closing

Many of my clients ask if they have to use an attorney when buying or selling a home. While the answer is no you don’t have to but you need to use an attorney when buying or selling a home and here is why.
1. Who is going to explain all the paperwork to you at the closing? By law in Illinois, only an attorney can explain the mountain of paperwork from the mortgage note to the deed to the closing charges to ensure that you are getting what you paid for and that you understand everything you are signing. So unless you want to just sign a bunch of papers you don’t understand, you need a real estate attorney there with you when signing.
2. If you are selling property…there are a myriad of paperwork that needs to be completed for transfer taxes and there are documents to be reviewed like the title, survey, deed. If you don’t understand every word and paragraph, how do you know it is completed properly? How do you know that your error will not put you in future litigation?
3. Dealing with the other attorney…In Illinois, most sellers use an attorney, so if you are a buyer, you would have to deal directly with the attorney on everything, inspection repairs, extensions, title problems and review? While these things are not rocket science they do require a level of knowledge and experience to be successfully achieved. If the other side has it and you don’t…you are putting yourself at a disadvantage.
4. Are you sure you are protected and getting what you are entitled to? Buying and selling a home is complicated. The deed and title need to be reviewed to ensure there are no liens. The survey needs to be reviewed. Real estate taxes and exemptions can expose you to paying more taxes out of pocket than necessary. A real estate attorney will review all these items and protect your interests now and in the future.
5. Make sure it is a real estate attorney who has experience in real estate. You would not have a cardiologist perform brain surgery. Both doctors, but specific knowledge and experience are required. Same with attorneys, there are nuances that only attorneys who practice in real estate will know and recognize. This could be the difference between preventing or solving a problem or something you will have in the future.
6. Where do you look for a real estate attorney? Your Realtor and/or lender are great resources. They work with attorneys every day and can give you a personal recommendation. Then you should talk to them and ensure you feel comfortable with them. It is important that you feel comfortable asking questions and ensure they have time to help you and will communicate with you.
7. What should I expect from my attorney? Some attorneys are the “just see you at closing types.” You are better off with someone who is with you every step of the way, not just on the day of closing. They should review all the paperwork, communicate with the Realtors, lender, title company and other attorney. They should answer all your questions and keep you up to date. They need to protect your interests and do what is best for you. And they should work well with all the parties involved to make a smooth transaction. If they seem difficult to work with, they are likely not the right choice. Real estate transactions have a lot of moving parts, all parties need to work together to ensure a smooth and successful experience. And keep in mind, while an assistant or paralegal can do a lot of the paperwork, they should not be the one answering your questions and explaining paperwork. That is what your attorney is for.

8. What should you pay for a real estate attorney? You usually pay a flat fee, not by the hour, phone call or retainer for a real estate transaction. It is paid at closing. You can negotiate the fee, especially as the seller of the property, but again it is more important to get a good attorney than save a few bucks.

Simply said. You don’t know what you don’t know. In every industry there are experts that people rely on to protect, educate and inform them. Doing it yourself you could miss something that will cost you money, hassle and more in later years. Unless you understand all the paperwork and laws…get an expert. After all, this is not only your home, but your largest investment.


Appraisals are a necessary component of getting any home approved for a loan when buying or selling a home. Cash deals do not require appraisals but loans, which comprise most home deals, DO require an appraisal which needs to be valued at least at list price.
Appraisals for buying a home and selling a home have both objective and subjective components.
Market value – Appraisers consider 3 of the comparable properties in the last 6 months against the selling home. Which comparables they use are subjective, but the comparables are objective. This is 80% of the appraisal value.
Adjustments – Similar home type, square footage, immediate area (subdivision or town), school district…these are the criteria generally used by appraisers to establish comparable properties, but minor adjustments can be made to ensure a fair appraisal when selling a home. Adjustments for finished vs. unfinished basement, number of bedrooms, number of baths, number of garage spaces ad whether attached or detached, type of siding on the home, age of the home, lot size, condition/upgrades, and whether or not a home is distressed (foreclosure or short sale) all can factor into an appraisal when selling a home. All these adjustments have guidelines, but the adjustments and the amounts are subjective. Upgrades and lot size usually take the hardest beating on these adjustments and never really get a real and true value. If you have an acre and other homes are subdivision lots, don’t expect the price of the lot itself to be accurate in the adjustment. It will be a fraction, mostly due to the flat vacant land market and difficulty in value. The same is true of exceptional upgrades. You may get a superior value, which will help, but it will not be the cost of what you paid. So, if your home is over-upgraded for your market, compared with similar homes, it will be a fraction of what you paid for the upgrades. This is usually around 10% of the appraisal value.
Condition – Totally subjective. Appraisers would not have seen other comparable homes, but can see pictures on the MLS. They assign a poor , fair, average or superior rating. This can affect 10-15% of the homes value. Also, if you have an FHA loan, there are some repairs that would be required to be done before the home can be loanable. This is subjective but also is

required by FHA requirements. These are all generally safety requirements. Roof condition, GFI outlets, etc.
Frequently asked questions about appraisals when selling a home.
If a neighbor with a similar home sells their house undervalue just to get out, will that hurt my homes’value? Yes, if it is not a short sale or foreclosure, there will be no adjustment.
If the house does not appraise, can the buyer pay extra to meet the agreed price? Sometimes, it depends on the lender and the type of loan. However, it is often difficult to convince a buyer that they should pay over value for a home. Also, they would need to have extra cash, since any payment over the appraised price would need to be in cash. Not the difference between the loan amount and the appraised value, but the appraised value and the purchase price of the home.
Who pays for the appraisal? The buyer
Does the seller get a copy of the appraisal? No, unless they are asking for a price adjustment as a result of the appraisal.
Does the appraisal amount stay with the home if a deal were to fall through? Possibly. If it is an FHA loan and the lender files the case number and the appraisal, then the appraisal – bad or good – will stay with the home for up to 6 months.
How to basements count toward assessed value. Whether finished or unfinished will count, however, walkout, lookout basements are still considered below grade, even if one foot is below grade. The square footage, qualified bedrooms and bathrooms will still only be counted at a percentage of their total worth as compared with above-grade.
So, it really doesn’t matter what you, your buyer, or the agents think of the worth of the house. It only depends how it stands up to similar homes in the area.

Housing Trends…in-law arrangements in homes have made multigenerational buyers more common

Home buyers looking for in-law arrangements in homes have experienced sharp increases in demand putting sellers with the potential for in-law arrangements and suites in a great marketing position.

Parents are aging and sometimes costs of care and other complications require adult children to take them in. But on the other side of the generations, high cost of renting, divorce and difficulties finding jobs have resulted in necessity for in-law arrangements adult children and sometimes their families to live with the folks too.

In many cultures, multi-generational living is commonplace, but it is new to the masses in the US.
What multi-generational buyers are looking for are ways to have a complete or partial living arrangement for either side of the familial spectrum, while maintaining a comfortable separation, when needed.

Older parents coming out of their own living arrangements are often the most difficult to accommodate. They are used to living on their own, so “downgrading” to something less than what they had on their own can be a sore subject.

They will at minimum want as much of their own separate space as can be provided. Private bedroom with on-suite bath (usually no tub), decent-sized bedroom and closets, sometimes a sitting area and sometimes a kitchen. And usually no stairs.

While basements can often accommodate all this and more, older parents usually can’t or don’t wanted to be relegated to the “dungeon” – even with a chair-lift to handle the stairs. And they want to feel comfortable in the space to live as their own home, not like they are intruding.

Buyers looking for this kind of accommodation will likely have to do some renovation to make this happen. Renovation loans can be obtained in order to make changes, even moving walls, etc. They require a higher level of and come with a bigger interest rate, but the money in the mortgage is cheaper than credit cards. Sometimes the sale of their home can be used for this extra money. But don’t look for sellers to be ok with 2 home contingencies to buy a home. Not going to happen.

However, additions are more expensive and a lot more hassle. Looking for homes with extra 1st floor rooms, like a den, sunroom or 1st floor master bedrooms often can be a perfect in-law suite. Adjacent living rooms can be tapped to make a suite where parents can have privacy to have friends over, etc. If utilizing the 1st floor master, enough space has to be made to accommodate a 2nd master on the 2nd floor.

Many “in-law arrangements” are basement suites. While this will not often suit older parents, it is often perfect for young couple, single or young family needs. They can benefit from the proximity of parents for potential babysitting and save a lot of money with no rent payments, and sometimes better schools and area than they could afford. And they also have a completely separate retreat and living area, which both parents and adult children alike appreciate.

Depending on the family dynamic, the in law may not the final decision maker, but they may have a say in the final plan. Need to plan ahead to ensure you don’t ruin the space so it can not be reasonably reverted if necessary by a future buyer.

Sellers who have this type of feature in their homes or can even offer an idea of how it can easily be done, can certainly market that feature to capture some of these new buyer needs and put their homes ahead of others in the marketplace.

Selling and Buying a Home with Home For Sale or Close Contingencies – Facts and Fiction

If you are selling you home, do you buy a new home first or do you wait until you sell and risk two moves and being homeless. It can be a dilemma and can be exacerbated by complications of a large family or work schedule, schools, transportation, etc.

Once upon a time, buying a home contingent on the sale of your home was normal. When the housing slump occurred, sellers did not have enough confidence in the market that the buyer could sell their home to risk taking their home off the market. Since 2015, that is beginning to change. Sellers are having more confidence in the market, but not total confidence. Here are some facts for buyers and sellers about contingencies.

. You can not purchase a foreclosure or short sale home contingent upon the sale or close of your home. And banks will not give you months to sell and close on your home.
. A purchase contingent on sale or close is a big seller concession, they need to be compensated with a better offer price to risk losing market time.
. Best time to ask for contingent on sale or close is during the winter months. Sellers are not risking as much. . You have better chance and price negotiation on that – still no foreclosures or short sales.
. Do the inspection up front, but not the appraisal. Yes, the inspection costs money but you need to show the seller good faith that you are serious about the deal. Inspection items are negotiable and need to be done within the 1st week of any contract so no one wastes their time.

. Never take a contingent on sale/close contract over a non contingent contract. Yes, you may get a little money more, but it is not a done deal and wasting precious market time can cost you more than you gain if it doesn’t go through.
. Your house is NOT SOLD. There are no sure things here, there is always a risk. Keep showing it.
. Your agent should do a market analysis of the buyer’s home to ensure their home is saleable or closeable to mitigate the risk.
. Don’t compound contingent on sales. So don’t you get a house contingent on sale/close when your buyer has the same situation. And don’t take a contingent on sale/close deal if the buyer’s buyer has the same. Just like dominos, too much risk, it could all come tumbling down.
. Not all sellers should consider a contingent on sale/close. Contingent on close is better, but if you are in a good market and getting tons of activity…..better not to risk it.

The property ladder can not move without someone taking a risk. Contingencies on sale/close can work, but due diligence is required to calculate the benefits and risks. Many sellers and buyers benefit from this, but both must be realistic.

The RIGHT way to look at closing costs when selling a home or buying a home

Closing costs when selling a home or buying a home seem to always be a tug of war between buyers and sellers. Buyers think that sellers should include closing costs for them. A lot of times when I show younger people their parents or grandparents always tell them “they (the seller) should include closing costs.” Sellers often oppose the idea of including closing costs for buyers, often sellers say. “Why should I pay their closing costs. If they can’t afford closing costs, maybe they shouldn’t be buying a home.” The truth is both parties are wrong. When selling a home or buying a home, closing costs become just part of the equation to make the deal happen. However, the way to look at it is not seller concessions or seller paying the closing costs…it should be seller allowing the buyer to finance their closing costs by making it part of the deal.

Many buyers need the closing costs to make the deal happen. There are a lot of people who just are not savers any more. They may good money but the down payment is about as much as they can do. But buyers need to realize that the seller doesn’t owe them anything. And while every thousand dollars costs a buyer $5 dollars a month in monthly payment, $1,000 dollars is a $1,000 to the seller.

Sellers need to realize that they don’t get to decide who gets to buy a home or who does not get to buy a home. Sellers should not care who is buying and what their financial situation is, as long as they are approved to buy the home and will get the loan and offer an agreeable price.

When buying a home, you should consider financing your closing costs. It can help you get into a home and use your savings for down payment or improvements to the home, moving, etc. it all takes money and if you can finance the closing costs, it can cost you only a few dollars more each month.

When selling a home, you should consider the request to “pay” buyer closing costs as allowing the buyer to finance their closing costs. It does not affect your net. As long as you are getting the amount you want, what do you care if they include the closing costs in their mortgage?

I often negotiate my deals based on the net to the seller. Don’t include closing costs in the initial negotiation, but let the other party know you intend to add the closing costs to the deal once a net to the seller price can be agreed upon. That way it is not an emotional or adversarial issue for the buyer or the seller. It is a non issue and you can focus on the price – bottom line to the seller.

The only time this becomes an issue is when the appraisal does not meet value. Then it becomes a little sticky. Appraisers are supposed to consider the closing costs paid on the contract, but sometimes they don’t and the closing costs become a pawn in the renegotiation.

When buying a home, buyers need to understand that sellers are entitled to get at least the value of the home, as appraised. Remember, appraisals are not always true to the real value of the home. It is based on the recent comparables, so sometimes the home’s value is more, but it is suffering from lack of comparables or neighbors who are giving away homes to get out.

Home Sellers need to understand that appraisals may or may not be indicative of the true value of the home, but the current market value depends on the comparables, nothing else. And while sometimes, the buyer can come to the table with money above the appraisal, sometimes they don’t have that extra money. And often it is difficult to get a buyer to pay above the appraisal price.

Closing costs need to be considered by both parties as a part of the deal and means to the end to make negotiations go smoother.

Buying a Home at a Home Auction

Real Estate Home Auctions have always existed from Sheriff’s sales to tax sales and the traditional “on the lawn” auction, but to buy a home at auction in today’s auction environment, there is a lot to know.

What you need to know about home auctions:
1. Advertised prices are OPENING BIDS not the acceptable reserve price – usually will sell for 30-50% more.
2. No contingencies for attorney review, inspection or mortgage approval.
3. If you don’t buy after contract, you will lose your earnest money – usually around $2,500.
4. You often will be required to pay a buyer fee or premium up to 5% of the purchase price.
5. Some home auctions will not allow any utility turn on to inspect home – buyer beware. NO FHA loans then.
6. You may not be able to see the home. Some are site unseen purchases. Appraisal could be an issue.
7. Some home auctions will have properties that the condition may not be loanable.
8. Contracts are not subject to change – again no attorney review.
9. Home auctions will not allow longer than 30 days to close. Lenders often can’t do that.
10. Some home auctions still have occupants in the home that the buyer will have to legally remove.
11. Home Auctions sell homes based on reserve prices that are minimally acceptable to the bank/seller. You will never know that amount.
12. You can bid online and there is no charge to bid.
13. After unknown reserve price is met, top bid wins.

What homes are sold at home auctions? The past 5 years have changed the way home auctions are done. Foreclosures and now even short sales are regularly put into home auctions by banks to quickly reduce inventory with market time. Each bank or government entity has their own policies and procedures, but most banks put the least marketable homes in home auctions. Some banks use home auctions for overflow houses that they want off their books quickly. So contrary to prior years, some home auctions have homes that are in decent areas and are not total gut jobs. It just depends. Some homes that are even occupied are sold at auction, which require the buyer to legally remove the occupants and purchase site unseen.

Home auctions also provide an ability for bids to increase the competition and SOMETIMES get close to market value. While deals exist in auctions, the price advertised on the internet is the opening bid, not the accepted price. Contrary to traditional home sales, the advertised price is usually 30 to 50% lower than the reserve “acceptable” price the bank will allow for the home. Banks usually want a reasonably close to market price for the homes. The past sales price and the area market values can give you an idea of what the bank will accept for the home.

Buying a home at a home auction is not a traditional sale and it does not have the same contingencies in a traditional purchase. Auctions are really designed for cash-buying investors, but it is possible for a regular buyer to buy at a home auction under circumstances but are always at a higher risk. You will have to pay a deposit at bid win and this will not be refundable. So if you don’t get a loan or if you find a dealbreaker at inspection, you lose that money. Usually minimum $2,500, so a lot to lose if something happens. And if you don’t like the contract, tough. No attorney review. You need to go in with eyes wide open and get expert help from a Realtor who understands auctions and the market to give you the best advice.

Millennial Buyers – How to Live for Free

I blog a lot about Millennials because they are very important to every aspect of our economy and housing recovery. One of the millennial trademarks that is unique to this generation is the “boomerang” or “failure to launch” effect of millennial graduates moving back in with mom and dad.

Let’s face it, after the taste of freedom in college, living with your parents as an adult is a little awkward and can be difficult to conduct your life on your terms and spread your wings.

It can have the same difficulties to your parents who don’t keep the same nocturnal calendar as their adult children and are tired of having to tell an adult to pick up their things.

To solve all of those problems and plan for the future, several of my millennial buyers have come up with a new idea that I am calling the Millennial Boarding House.

Instead of living with mom and dad, this formula can be used by smart millennials who don’t want to waste money on rent and want independence. You can be a first-time buyer and create an investment nest egg to move up in the housing market, get government grants and most importantly LIVE FOR FREE. Here is how it works….

1. Use your good credit rating and income to qualify for a nice starter home that has a good price, good area, good schools and is in an accelerating and not a declining area and has potential for future resale. You can do some work updating it if you like or not. The idea is good for now and easy to sell in the future. There are still deals out there and we are in an accelerating marketplace. Interest rates are good. Waiting will cost more.
2. Use government grants through the @Home Illinois program to get $5k in free down payment and/or closing costs.
3. Find a few friends to be roommates and charge them a few hundred dollars each month. Cheap for them and they get independence from their parent’s house or basement.
4. You can live for Free. If you have two or three extra bedrooms, you can charge friends enough to cover your monthly payment and you pay nothing or next to nothing each month to live.
5. You save money by not having to pay anything each month to live, building your nest egg for the future.
6. In a few years when you are ready to get married or start a family, you sell the house for a profit and a nice down payment on your first family house. Or, you keep the house as an investment and rent it out for future income.

There it is, an easy formula for success to start saving money, not waste money on rent and plan for the future. Do yourself a favor and call a Realtor – call me – and get on the path to future equity and success.