…will definitely hurt them.

I was poking around this morning doing some research on enhancing real estate searches for our Web site. We’re about to introduce building specific searches. While testing the listings for 340 On The Park I discovered that we are only allowed to show 9 listings, while there are actually 15 units for sale in the building. Why can’t we show those other 6 listings? Well, we could if we required you to register but we don’t want to do that because registration is a pain in the ass. Furthermore, it’s a real turn off for real estate buyers who are afraid that some pushy real estate agent is going to start harassing them – not to mention that many home buyers provide bogus registration information when faced with that requirement.

But why do we have to get you to register to see these other 6 listings? Because the real estate brokers that are listing those units do not participate in an arcane and convoluted program called broker reciprocity. As explained in that prior post real estate listings from brokers that participate in the program get put in the IDX feed, which is broadly available on all realtor Web sites without registration. If a broker does not participate, their real estate listings are only available in the VOW feed that requires registration to access on a realtor’s Web site.

What is surprising about the 340 On The Park situation is that 6 out of 15 listings are not in the IDX feed. That’s a huge number. Just the other day I did a quick estimate and determined that in the city of Chicago only about 2 – 3% of the real estate listings are missing from the IDX feed, which is consistent with what the MLS folks tell me. That’s the reason that we decided to not require registration on our site.

So why is 340 On The Park so different? It all comes down to the dominant broker in the building who has all 6 of those listings. Apparently, this broker does not participate in the reciprocity program. This is especially peculiar in light of the fact that a real estate broker has to actually go through the trouble of opting out of the broker reciprocity program. In addition, opting out of the program only prevents the listings from showing up on other realtors’ Web sites. The listing brokerage still has the ability to advertise the listing on any Web site they choose – e.g. Realtor.com, where these “missing” listings do appear and without registration. So the listing brokerage selectively withholds access from the Web sites of brokers like us who refuse to require registration for accessing MLS listings (we still have access to the properties through the MLS system but we can’t put them on our Web site without requiring registration).

All of these shenanigans highlight yet another problem you can run into using the top producer. So, if your home is currently listed and you want to find out if your realtor is holding out on you just check for your home on our site. If it doesn’t show up then it’s not getting the broadest distribution possible.

As I asked before, why would any broker not want their listings to receive the broadest exposure possible? Could it be that they are trying to restrict access to their listings so as to increase  the likelihood of their getting both sides of the transaction? Nahhhh. A real estate broker would never put their own self-interest above that of their client.

Key Steps in the Home Buying Process

The following 10 steps are meant to provide a short overview of the steps that one should take in the home buying process.  While it is by no means a comprehensive list -it provides valuable tips and reminders to all home buyers.

Figure out how much you can afford
Talk with a mortgage professional.  In fact, talk to three mortgage professionals.  Not all lenders are created equal, there are bankers and brokers.  Get good faith estimates.  Compare bottom line only…meaning don’t just look at the rate being offered, consider all closing costs related. Get pre-approved, not pre-qualified.

Choosing the Right Property Type
In order to determine the best property type for you, think about how much you can afford and your reasons for buying. Each property type comes with its own pro’s and cons.  After consulting with a lender, you will know what you can afford in terms of dollars.  Now, you need to decide amongst a Condo, Townhouse or Single Family Home.  In fact, it may be more difficult to obtain financing on a condo than a single family home.  It is important that you consider the goals for your real estate purchase, both short term and long term. For example if it is going to be your primary residence, you want to make sure it can comfortably accommodate your current and future family i.e. children or in-laws. If the market takes an unfavorable turn and it become difficult to sell then you can still live comfortably in your home until the market recovers.

Finding the property
Now that you understand your budget and the type of property you are looking for, its time to start looking. So where do you start? I recommend finding a local real estate professional.  Buyers’ agents are paid at closing by the seller, not by the buyer.  The total commission is generally split between the buyer’s agent and the listing agent.   Bonus: If you choose a buyer’s agent from Lucid Realty you can receive up to 50% of their commission at closing. Basically, you are getting a “free” high level service and money in your pocket.  Your agent will want to know about you and how you like to live and other important criteria.  From there, the agent will send you properties to review and view in person.

You found the property
Before placing an offer on a home you should know how much it is worth to ensure the listing price is in line with the actual value.   Your agent should provide you with a CMA (Comparative Market Analysis). A CMA compares homes based on size, location, condition and several other factors to estimate the value real estate in a given area.  Hopefully, it will give you a better understanding of the local market.  It is also important to understand that everything is negotiable.  A good agent will help you learn as much about the seller and the property as possible.  It also is important to include contingencies in the offer as well. The most common types of contingencies are a mortgage contingency and an inspection contingency.

Hire A Real Estate Attorney

Once the offer is accepted, get it to a real estate attorney to review. Real estate brokers and agents are professionals at finding an ideal home and negotiating the terms, but attorneys are experts at reviewing and explaining contracts. As a result, it is best to have an attorney review all contracts before entering into any agreements with the seller. The best way to find a good attorney is to ask your real estate agent. Real estate agents regularly work with a number of attorneys in many different capacities and know which attorneys will be best based on your specific needs.  It is in the agent’s best interest to recommend an attorney that they know is competent, trust worthy and focused on protecting their clients’ interest.  It is also advisable to use a real estate attorney as opposed to a family friend who specializes in any other law to get the best representation.

Hire a Home Inspector
A home inspection is an essential part of the home buying process.  A home inspection will validate that you are investing in a good home or uncover significant defects that you would otherwise not have known about until moving into the home.  It is far more valuable to know what you are buying before you buy.   So what happens when defects are discovered by the inspector? In most instances the buyer and seller come to a mutual agreement on how to deal with the issues. Sometimes the seller may agree to take care of the issues. In other instances the buyer may assume the responsibility for a discount in the price. It really just depends on the specifics of the defects. As a buyer, it is best to know as much about your home before you purchase it as possible.  One word of caution:  be prepared for seeing a laundry list of really scary issues. This is normal. Many inspectors relish the idea of finding problems and some tend to exaggerate how bad things are.

Mortgage Application
Once of all the terms are finalized following the home inspection, complete your mortgage application. The first step would be to provide your lender or bank with the real estate contract.  In most cases, your agent will take care of this step for you.  They will ask for a signed copy of the contract along with other financial documents needed to complete your loan application. It is important to get this application in as soon as possible so the bank has as ample time to process your application. In accordance with the contract, the bank must provide the buyer with a commitment letter by a specific date. The commitment letter states that the bank is going to give you the loan. If the lender does not supply this by the specified time, they buyer runs the risk of forfeiting their earnest money.   You won’t lose your money if you don’t get your commitment in time but you may have to walk away from the deal or you have to ask for an extension – which can scare the hell out of the seller.

Get Insurance
After the bank provides a commitment letter, the only additional requirement from the buyer s the insurance binder. Before the bank can complete the loan the buyer must purchase home owners insurance.  Again, talk to three people.  Perhaps start with the person who insures your automobile – or perhaps one your agent recommends. The insurance binder is then sent to the lender prior to closing. Now the funds are all set to be released on the specified closing date.

Review the HUD
1-2 Days before you close, your attorney will provide you a settlement statement (also called a HUD) for your review. It is important that you, your attorney and your Realtor review the charges, fees and adjustments to ensure everything is correct. The HUD will have all of the information such as the closing costs, tax adjustments, utility adjustments your real estate rebate and several other fees. It will also state the amount you need to bring to closing. Any funds brought to the closing should be done in the form of a certified or bank check.  We recommend that you bring at least a few hundred more to closing to help avoid any unforeseen issues.  If you bring too much, the title company will issue you an overage check.

Closing Day
So what do you need to bring to the closing? You will need at least 2 forms of identification, and a certified or bank check for any additional funds.  The closing is typically attended by the buyer(s), seller(s), closing attorney, your attorney and the real estate agents involved in the transaction.  Your attorney will explain all of the documents to you prior to signing any of the disclosures at the closing. Once you are finished signing, you will receive your keys. Congratulations! You get your keys and now its time to figure out how you are going to spend your rebate!

Keeping a deal together now more than ever requires that agents remain professional, emotionally unattached and in constant communication with the other agent.  Follow through is key.  One way to be sure a deal falls apart is to leave it only in the attorneys’ hands.  Attorneys don’t often understand the client well enough to represent them in a transaction.

For example, just yesterday I closed on a deal as a sales agent.  Several times throughout the course of the transaction, the deal was ready to fall apart.

First, the negotiations were almost killed over a few thousand dollars.  The seller came down as far as he wanted to, and the buyers offered as much as they could afford.  Both the listing agent and I were able to talk to our clients and get them to come down/up and then we had a deal.  Keeping calm and rational was key.  It was also important to ensure my client was seeing the big picture.  They were getting a nice home in a great neighborhood….there wasn’t anything better on the market that we found after seeing about 50 homes.

Then, the inspection report totally freaked out the first time home-buyers.  A list of more than 25 necessary repairs was noted by the inspector. At that point, it was in my hand to help the buyer understand what they should expect to be fixed and what they might accept since they were buying a used home.  More importantly, it was also in my hand to set the expectations with the listing agent as to what my clients would be asking for and WHY.  A verbal conversation can convey so much more than a letter drafted by an attorney.  At any rate, my client asked for certain repairs, and the seller agreed.  Whew.

Well, then came the appraisal/FHA inspection to approve the loan…which we figured would be fine since the seller had agreed to repair all the safety related items from the home inspection.  The FHA inspection in fact didn’t care about any of the issues identified (roof leaks, improper electrical wiring) BUT they wanted a fence painted or removed from the perimeter of the property.  The property lot size is 100 X100, which mean 1000 feet of fencing needed to be removed.  The house was built prior to 1978 and the fence paint was chipped and the logic was that it could have been lead based paint.

Objection #1 – Seller doesn’t want to take the fence down or paint it.  He didn’t want to incur a cost or go through the trouble, after all, he had already agreed to the other repairs.

Rebuttal – My clients will remove the fence on their own dime, but since it was a requirement of the loan, the removal had to occur prior to property transfer, and this of course presented its own set of issues. My client may not get the house and thus his labor would be wasted.  Okay, they decided to take the chance.

Objection #2 – If the buyer doesn’t get the loan, the seller now has an unfenced property.  He feels the fence is attractive to buyers, and while the fence was great – I couldn’t help but agree.  Kids and pets typically necessitate a fence.

Rebuttal – My client will waive their mortgage contingency, and the lender has provided a mortgage commitment document.

Objection #3 – Removing the fence will cause a devaluation of the property upon inspection.

Rebuttal – Okay, this objection was close to killing the deal.  Thankfully, the appraisal specifically stated that the fence had “No contributory value” which meant the value of the property was the same with our without the fence.  Nonetheless, my clients agreed to put the fence back up if for some reason they could not take ownership of the property.

Of course, all of this was occurring a week prior to closing and my clients current lease is up at the end of the month, so it was pretty crucial that we got it done in time for a re-inspection.  What did that mean?  That meant my client, who happens to be a female had to physically remove the fence herself, since her male partner was out of town.  She solicited her father for help.  I felt pretty bad about her predicament so my mother and I helped as well.

Bottom line, I knew my clients wanted this home and I knew it was a good value.  It sure would have been easier to let the attorneys hash all of the issues out – but I’m pretty sure that staying on top of all the details and ensuring constant verbal communication got us to the finish line.

What is Title?

The word “title,” can mean a number of things. In real estate, “title,”refers to one’s right to ownership, or any form of evidence of land ownership. Title is your rights to the land and improvements.

 What is Title Insurance ?

Title insurance is a protection mechanism that will protect you against any kind of damage caused by a defect in the title. Defect in a title?  What?  A title can be defective for a number of reasons such as forgery and impersonation.  Title insurance will protect against such defects as well as  the expenses incurred in defending the title (your right to ownership). Title insurance not only verifies ownership, it will also detect any possible “clouds” on your title. Clouds?  Unlike a defect,  a cloud implies that the title is not clear and these clouds could be in the form of IRS claims, liens, or other uncertainties of ownership.

Further, there are two different title insurance policies issued in every real estate sale. The first type is an owner’s policy, which will protect the new owner from any ensuing claims to the property. The second type is a lender’s policy, which will protect the lender against loss of an unpaid loan balance in the event of a claim.

Title insurance policies are important because they protect against possible non-recorded claims against your property and ensure free and clear ownership. As such, these policies benefit consumers in establishing safety and security in owning real estate.

To ensure the property is free to transfer title, the Title company will perform a search on the property using a “pin” or “permanent index number” which is each parcel of lands own unique ID number.  The title company will collect information about the property that is found in public records such as: the county recorder’s offices; property tax records; sometimes in county courthouses.  

Who Pays for Title Insurance?
Title can be paid in a number of ways, but the most common is for the buyer and the seller in a transaction to pay for  a policy. There are two types of policies: a lender’s policy and an owner’s policy. As far as the lender’s policy goes, it is usually paid for by the buyer of the real estate. The owner’s policy is paid for by the seller of the real estate.

Did you ever wonder what happens at closing in a real estate deal?  Many think of it as a time where a bunch of documents are signed.  What does the signing of the documents actually accomplish?

Officially, a closing is the culmination of the entire real estate transaction and here is what happens:

• Documents that tranfer the ownerhsip of the property from one party to another (conveyance) and other required instruments are signed and delivered
• A monetary accounting is conducted between the parties based upon the Real Estate Settlement and Procedures Act (RESPA)
• Parties determine if condition of title is acceptable
• Funds are deposited with title company
• Money, in the form of checks is given to the Seller, Listing Agent, Selling Agent and on occasion the buyer, the buyer/seller attorney (referrred to as disbursements) per the HUD-1 by the Title company (escrowee) as directed by parties
• Ownership of the property is transferred
• After closing, the documents of conveyance are sent to the county recorder’s office for recording by the Title company

Below is a chart that shows the common costs in a real estate transaction along with who is typically responsible for paying them.  The chart was provided by First American Title.