Articles for ‘Home Buying’
Thursday, November 3rd, 2011 by Sari Levy
When you are purchasing a home, it is important to understand the economics of the home and property taxes are a huge factor in the equation. So, just how do you figure out what your taxes will be?
It is not a good idea to simply look at what the current owner is paying because there are many variables. In Chicago, we typically tell our clients to expect a tax bill at about 1.5% of the purchase price. In Du Page County, the range is from about 1% in Oak Brook all the way up to nearly 3% in Glendale Heights. Oak Brook is home to many large corporations and of course Oak Brook mall which helps keep property taxes low.
So, how did we come up with the 1-3% range? Below is the formula used in Du Page County to calculate property tax.
Du Page County Tax Calculation
- A home’s fair market value: $5000,000 – Fair Market Value is defined as the amount a buyer would be willing to pay for the property.
- Tax assessor’s adjustment: $500,000 x 33% = Equalized Asessed Value – In Du Page county, the assessor uses of 1/3 of a homes fair market value in determining DuPage County property taxes.
- Equalized assessed value: $165,000 – This is the adjusted fair market value of your property used for property tax calculation purposes.
- Property tax rate: 5% **Rates vary by city as indicated in the table below – 5% used as a simplification for example.
- Property tax calculation: $165,000 x .05 – Equalized assessed value multiplied by a property tax rate of 5% .
- Total property tax : $8,250
Du Page County Real Estate Property Tax Table
||As % of purchase price
||Elk Grove Village
||Oak Brook Terrace
In communities where there are more than one township, the higher of the tax rates is shown in the table above.
Monday, October 24th, 2011 by Sari Levy
Looking to live in Utopia? Then you might want to check out the Hamptons of Hinsdale. Located near the intersection of 59th and Washington Streets in Hinsdale, the Hamptons plans to offer over 100 luxury units, both townhomes and condos set in a serene park like location with ponds and open space. The infrastructure and site improvement work is virtually complete. The first four-unit town home building is complete (pictured below) and a 23-unit condominium building is also under construction. Foundation work and underground garages have been completed for two additional condominium buildings.
In 2002, Wextrust Development purchased the property for $18 million. Wextrust planned to construct 12 buildings on the Hinsdale site. In the original plan, seven buildings would contain 23 luxury townhomes and five larger structures would house 93 condominium apartments. Prices were to range from $339,000 to $697,900 for the condos and $695,000 to $940,000 for the townhouses. But work on the project halted that year when Wextrust CEO and COO were indicted by a federal grand jury for involvement in a $255 million Ponzi scheme.
After sitting on the market for sometime, The Hamptons was purchased by a subsidiary of Oak Brook-based Inland Opportunity earlier this year from Citizen’s Financial Bank. According to The Hamptons website, The Hamptons is “Well-funded, carefully planned and on schedule for completion in the near future.” Next Generation Development out of Wheaton will handle construction, sales and marketing.” The Hamptons sales trailer is now on-site along Grant Street, well as the rear entry near Washington & Kennedy.
Located on a 12.5 acre parcel of land, The Hamptons offers 26 Villa Townhomes and 93 Condominiums set among landscaped grounds, featuring shingle-style architecture, open space with gazebos and a tranquil pond. The Hamptons is situated in the highly desirable Elementary school district 181 and in Hinsdale Central High School District.
Marketed as “affordable, intelligent living”, there are four town home designs that span 2,473 to 2,817 square feet and 9 condo floor plans are available, ranging from 1,262 to2,239 square feet. In a small change from the original plan there will be four condo buildings and six villa buildings. Below is a table showing the units being offered with links to more information for the units available now.
The grand opening took place the weekend of September 9th. There are two units listed for sale in the MLS as available now, the Broadmoor and the Cotswold. Both are listed substanially higher than the starting prices listed on the table above -with the Broadmoor being listed at $689,900, and the Cotswold for $697,000. Also, not in the MLS but listed as available on the Hamptons site is the Prescott for $722,000. As of October 20, 2011, one unit has sold, and that was for a Prescott unit back in 2008 for $1,036,058. Bet that guy is anxious for some neighbors who are going to pay about 30% less than he did. Ouch.
Hinsdale Condo Market Conditions
Currently, there are a total of 68 units on the market in all of Hinsdale priced from $60k to $1mm. In the last 12 months, in the Hinsdale Market, 16 condo/townhome units have sold ranging in price from $142,500 – $950,000. Simple math indicates that there is already a 4 1/4 years supply of inventory. With The Hamptons adding an additional 112 units, the time triples. It will be very interesting to see what sort of demand the Hamptons is able to create.
Monday, March 21st, 2011 by Sari Levy
Ahh, spring is in the air here in Chicago land. For me, spring always brings a sense of optimism and hope.
For those of you who wish to live in Hinsdale, there are some great opportunities. For example, you can get this two bedroom condo at 300 Claymoor #3E. The Claymoor complex is actually very nice and is nestled quietly amongst single family homes valuing from $700k up to several million There are four buildings with 20 units each and 1 garage spot for each unit. There is plenty of exterior parking for residents and guests as well. The association is very well managed (financially) and the grounds are beautiful with an abundance of flowers and mature trees throughout the property.
If you have just about double that to spend, you might want check out this townhome in Chanteclier. At $319,900, this townhome has 3 bedrooms, 2 1/2 baths and is completely remodeled from the bathrooms to floors and kitchen. At both complexes the assessments are reasonable and under $250 per month.
For just another MILLION dollars, you can buy a “Dazzling Creekside Graue Mill Villa” . The listing agent Joan McInerney of Adams and Meyers decribes the home as:
3 Levels & 6000 Sq Ft of Magnificent Living Right out of Architectural Digest. Two Master Suites, Newer Chef’s Kitchen, Incredible Newly Completed Master Bath, Dramatic Loft Library/Office. Add Vaulted Ceilings, Skylights, Hardwood Floors, Crown Molding & 3 car garage. Lower Level Great Room overlooking creek & private deck access. This is one Incredible home!
There are several condo and townhome communites located in Hinsdale. The map below gives you a rough idea of where each complex is located. The details can be found on on our Hinsdale Market page where you can find other relevant information on the Hinsdale real estate market.
Monday, December 6th, 2010 by Randy Whiting
There are a few common ways that I have seen an FHA 203k loan used. Predominantly the clients I’ve worked with use this type of loan to purchase a property that either needs some general rehabbing throughout or to finish a job that was left incomplete for one reason or the other. As rehab loans of any other type have virtually disappeared the FHA 203k loan has been on the tip of many buyer’s tongues lately. The only challenge is that the type of property that would motivate a buyer to seek this type of loan typically ends up in a multi-offer situation; speaking in terms of my local market. If you had a chance to read my short article on TheChicago77.com entitled, “Short Sale and Foreclosure Multi-Offer Strategy” or you have had any experience as a buyer or buyer’s agent attempting to purchase distressed properties then you already know that in a multi-offer situation an FHA 203k loan gets the lowest priority of any offer on the table. For an in-depth explanation of why please visit the article mentioned above. The long and short of it is that the FHA 203k loan has a huge amount of contingencies, outs, or reasons to fail before close, and that is very unattractive to a bank. As banks are the ultimate decision makers in many distressed property sales it is their opinion that counts, and they want nothing more than the quickest close possible.
Clearing The Air
I’m sure there will be some of you reading this who have used an FHA 203k loan to buy a distressed property, and I do not mean to say it is impossible. Local market conditions significantly impact the possibility that this loan will be accepted for the purchase of a distressed property. For example, with most suburbs of Chicago and a few of the fringe neighborhoods of the city proper the competition is virtually nonexistent. A bank attempting to sell a property in areas with low demand are often so desperate for any type of offer that on the slight chance that one comes it matters not what type of loan it is; they’ll pounce on it like a starving cat.
Back To Business
The purpose of this article is to illustrate an example that worked out very well for a buyer that I have been working with for quite some time. As with many savvy investors my client was very particular about what he wanted in a property. His goal was to find a distressed building, preferably a multi-unit, and convert it into a beautiful modern single family home for himself. As such it took us quite some time to locate the perfect property. When we finally did it was a gutted two unit that had little more than the bricks, the studs and a pile of rubble lining the floors. With an asking price of around 180K it was ripe for the plucking. When he asked me to put an offer in on the place, protocol demanded a pre-approval or proof of funds and I asked him for such. A few moments later he forwarded me a pre-approval letter from his lender for an FHA 203k loan. Knowing what I know about this type of loan and also about the desirability of this type of property to other investors I correctly surmised that a multi-offer situation was at hand. Given a very small number of days on the market, there was little chance the seller of this property would jump on a 203K loan. Instead, they would graciously acknowledge our offer and hold out for something more attractive; cash or a conventional loan offer with a low number of contingencies. Given this, I called a couple lenders who I know that have their fingers on the pulse of the lending market and we came up with a solution.
Our challenge was how to make our offer stand out on top versus the others that were sure to come. Knowing my client had enough cash to buy this property with some to spare, I asked him why he chose an FHA 203K loan. He gave me the answer I was expecting, “I want to save my cash for the rehab.” Knowing what we now know about the low desirability of this type of loan it was only natural that I council him on the unlikeliness that his offer would be considered. As the ball was in my court to find a superior alternative I shared my discovery with him.
FHA 203K Refinance
Let me cut to the chase. If you buy a property with cash there is no title seasoning requirements to re-finance the property with a 203K loan. As such the refinance can happen immediately after purchase. Combine that with the huge desirability of cash in the eyes of the seller and this significantly increases the likelihood of a win-win situation.
What If I Don’t Have Cash?
Here’s the good news for investors out there who want to take advantage of this scenario but don’t have enough capital to purchase with cash. The FHA 203k refinance has the same title seasoning requirement (zero days) if you purchase with a conventional mortgage. In other words, if you buy a property with a conventional loan, right after you close you can turn around and re-finance it with a FHA 203k loan allowing you to obtain extra money to do some rehabbing on the property. So why not make the initial offer with an FHA 203k loan and why did I not recommend a conventional loan to my client and encourage him to save the cash for the rehab? To get that answer I suggest you read my article on Multi-Offer Strategy.
Ciao for now!
Wednesday, September 15th, 2010 by Gary Lucido
Buyers often wonder what bureaucratic torture they are going to be subjected to in order to obtain a mortgage. Therefore, I asked Russ Martin of Perl Mortgage to explain the required documentation for a mortgage application.
In general, a conforming loan (i.e. conforms to the guidelines established by Fannie Mae and Freddie Mac) will require the following documentation:
- Driver’s license
- Two years w-2’s
- Two year tax returns, all schedules. If self-employed, we will also need two years business returns
- Most recent 30 days paystub(s)
- Three month’s statements for all assets – checking, savings, 401k/investments. The bank will want ALL pages of the statement, so if the statement says Page 1 of 4, they need to provide all four pages even if one page is blank
- If paying rent to an individual, they will also have to provide 12 mos of cancelled rent checks
- Any large deposits or movement of funds on the asset statements will need to be verified
- If not a US citizen, we will need a copy of their work visa such as an H1-b.
Keep in mind that these documentation requirements could change over time. And non-conforming loans could have different requirements – possibly even more stringent than the list above.
The list doesn’t look too onerous unless you have a complicated financial situation. For conventional financing, banks pull a 4506-t which is a request to get copies of the borrower’s tax returns from the IRS directly on every mortgage. Most underwriters will ask about other income that is showing up on the returns if it is not documented. For example, you may be getting a salary and w-2, but you may also have income as a minority partner in a small business. They are going to see that on the tax returns and request information on it. This is the primary reason I ask for the borrower’s copy of their tax returns ahead of time so I know about it before the underwriter does. That way we can prepare for the questions that are going to come up.
It used to be easier to deal with borrowers who have more complicated financial situations back in the day when we had stated loan programs which is what those loans were for. However, they were abused so now it doesn’t matter how complicated an individual’s personal/business life is…. EVERYTHING has to be documented.
The reason most borrowers complain about the paperwork is because most borrowers never really sit down and get themselves pre-approved and truly prepare for their financing ahead of time. This is why financing is so spotty and inconsistent on real estate transactions. Realtors are really disconnected from how their clients truly shop for mortgages. Most borrowers aren’t nearly as qualified as they think these days because they really have no idea what it takes to get a mortgage. Combine that with the fact that they also are so focused on getting the lowest rate and what they perceive to be the best deal, it causes problems because they wait till the last minute to really get their financing in order because they don’t want to commit to anyone ahead of time fully until they know their rate/fees which can’t be guaranteed until a property is under contract which is when we can lock rates. So in short, most borrowers don’t know squat [edited for a family audience] about their ability to buy a house until they are under contract.
Part of this is probably driven by big bank advertising which shows the call center monkey talking about getting pre-approved in five minutes. No one gets approved to borrow hundreds of thousands of dollars in five minutes.