Keeping up with Chicago's North Shore Real Estate Market!

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Wednesday, July 25, 2018

Green Tips - More consumers interested in Greener Housing

Sixty-one percent of Realtors® reported that consumers are interested in sustainability according to the National Association of Realtors®' REALTORS® and Sustainability 2018 report.
The report,, which stems from NAR’s Sustainability Program, surveyed Realtors® about sustainability issues in the residential and commercial real estate markets and the preferences they are seeing in consumers in their communities.

Wednesday, July 18, 2018

5 real estate cliches that are true...

One of the cliches I have found in this business, is that many clients believe and think being a real estate agent is straightforward and not too challenging.   While I beg to differ, that's another blog post.    But there are cliches in this industry that I find are straightforward and common knowledge...  here are 5 that I think stand the test of time:

1) Location, location, location

It's often said that this is the first rule of real estate.   It's absolutely true.   The value of a property is not in the house or the construction -- it's in the location.  A gorgeous house in a lousy location will often sell for less than a fixer-upper in a prime location. 

Which leads to the next cliche:

2) Worst house, best street
You can always change a house, but you can't change an address.   I would always recommend selecting the neighborhood(s) first -- then finding the house.   When I first moved to the city, I lived in a pretty lousy apartment -- but it was a wonderfully safe neighborhood ...

Choosing a property that needs renovating, on a great street, can be a great way to create a long term investment.

3) The first offer is the best offer
I have found this cliche to be pretty accurate.  While there are exceptions, it has been my experience that the longer the market time, the lower the asking price.   Sellers sometimes reject early offers only to find themselves accepting a lot less later. 

4) You only get one chance to make a good first impression
I have found this to really be true.   Buyers rarely revisit homes that they reject initially.   If the house is overpriced, in the buyers' mind it's eliminated from consideration in the future.  If the landscaping is a mess -- if the house is cluttered or dirty -- if the neighborhood looks messy -- if the photographs on the internet are lousy -- all these things impact first impressions.  First impressions can make the difference between a property selling or sitting.  Note how bad pictures can impact your impression:

5) Time in the market, not timing the market
I remember a client telling me that they made a killing in real estate -- but they made the killing when they bought the property -- not when they sold it.   It was an interesting thought, that made a lot of sense.  Home buyers should probably be leary of buying a home too high a price at the top of a boom.  Real estate markets can be hard to predict and those buying in for the short-term might feel the pain.

So what cliches do you hear about real estate and how accurate have you found them?

Wednesday, July 11, 2018

Is it a good offer?

Selling your home?

There is nothing more exciting than receiving an offer for your home -- especially when there is competition out there.

Yet, sometimes I'll review an offer from a buyer and feel utterly ecstatic with the terms presented, only to find the sellers are disappointed and even angry.

Realtors and sellers often have a different opinion about what constitutes a "good offer."  Maybe because we see so many offers, we tend to evaluate each one with more dispassion and logic. 

So what is a good offer?

Obviously, if someone comes in offering asking price, with no contingencies and a cash deal -- it's a fantastic offer.  That's an easy one, which by the way, I've never seen before... there are always contingencies.

The North Shore contract has over 10 pages of clauses and conditions so there are lots of terms, that need to be considered, when evaluating any offer.

Let's take the...

Purchase Price... Buyers can offer any price they want and they sometimes do.  Today, I have seen buyers come in as low as 80% of the asking price.   (For example, $2M home -- initial offer: $1.6M).  Sellers need to understand, that this is just the starting point... it's a negotiating position.  It's not personal!   Be grateful for the offer.  You've hooked the buyer... now reel them in. 

Consider the offer thoughtfully and logically.  What is the market average for that price range?  For example, right now in Winnetka the market average for a $1M home is 94.5% of the last asking price -- that's the average.  Generally buyers know that information.   They might be reluctant to pay more than 95% of asking ($950,000) on this property, so their starting position will be somewhat lower than $950K.   Further, if the house has been on the market for more than 90 days, they will probably offer less and expect to pay less.   And if comparable houses have been selling for around $900,000, they probably won't pay much more than that, so their initial offer will be around $850,000 -- or lower!

Sometimes sellers price their house right at the market value.   When they price aggressively,  sellers often receive up to and even over 100% of asking price.   Buyers will pay full asking price, when they see that the home is priced fairly.

I've often had sellers say to me, "Well we started at $950K and dropped the price to $899... so they should be paying us, at least, $895K." 

WRONG.   Buyers could care less, where the seller initially priced the property.   In their opinion, if you didn't get a sale with the initial asking price, then you were overpriced right from the beginning.   Buyers ONLY look at the current asking price.  

Sellers need to really understand what is happening in their market and in their neighborhood.   Sadly, what a seller has financially put into the house may or may not factor in when determining the fair market value of a property.   Further the appraised value or the assessed value have little to do with the market value.  (Read more at What's the Value of my Home?)

While price matters, I find sellers often hone in on the asking price and devalue some of the other terms.   Some of these other terms can make a deal significantly more valuable.

For example:

The close date... when it comes to owning a home, time is money.   Every day a house sits on the market -- particularly a house that is empty -- sellers are spending money.... taxes, maintenance, utilities, landscaping, etc.  Add it all up and deduct it from the proceeds.   A quick close can mean the difference of hundreds, if not thousands of dollars.

Case in point: My very first deal, two weeks after the house came on the market, the client was offered $805,000 and a quick close.   He refused the deal - he wanted a better offer.   Nine months later, he got his better offer for $810,000.   Sure, he sold the house for more money, but within those 9 months he incurred well over $5,000 of expenses maintaining an empty house.  It was a pyrrhic victory.

Sadly, I've also seen sellers reject a quick close, because it was "inconvenient" -- only to miss an opportunity to get the best deal.   You never know the future and as they say, "a bird in hand..."  Just imagine, if you had received an offer on September 1, 2008 that asked for a quick close, and you turned it down due to inconvenience.  I had some clients, who did exactly that and learned a very costly lesson.

A quick close is a fantastic term and should be given extra weight when evaluating an offer.

Mortgage contingency vs. cash deal.... In general, a cash deal is more valuable than an offer with a mortgage contingency.   Sometimes buyers are unable to get their financing.  Usually you know quickly when there is a problem, but I've had a case or two where the buyers are scrambling days before the close date trying to secure the funds for purchasing a property. 

Today, getting a mortgage is not quite as challenging as it was right after the 2008 financial meltdown... during those days a cash deal was worth A LOT.   Regardless, a cash deal is a beautiful thing and needs to be factored in when evaluating any offer.

Home sale contingency
This is a term, where I might hesitate.   What it means is this:  the sale is contingent on the sale of the buyers' home.   If this term appears on the offer, I would ask for it to be removed.  However,  keep in mind, the buyer probably can't get a mortgage unless they sell their home first.   The only situation,  where I might go along with a home sale contingency, is if a short leash is put on the buyers.   In other words, the buyers have to get their home under contract within no more than 30 days or the deal is over.   Further, I would also factor in the time of year.   A seller might accept a home sale contingency in October or November, but not in the middle of the spring market when there are more buyers looking.

Home close contingency
This term is less onerous.   What it means is this:  the sale is contingent on the close of the sale of the buyers' home.  Their home is already under contract and waiting to close.   I'm not as uncomfortable with this clause, although it's important to know more about their contract.  Have their buyers had their home inspection?   Are they beyond the attorney review period?  How solid and financially stable are their buyers?  All these questions need to be factored in when considering a home close contingency.

Money in escrow 
Money in escrow represents good faith money that buyers are willing to include with their offer.   It is money toward the purchase price, however if the buyer backs out of the deal after all the contingencies are lifted, that money should go to the seller.   Escrow usually comes in two payments: initial escrow (around $1-5,000) with the acceptance of the offer and then a final escrow amount usually at the completion of the attorney review.

While there is no hard and fast rule, how much money are the buyers willing to put in escrow upfront?   I like to see around 5% of the asking price, but for some buyers that's quite a bit. 

I guess the question I would ask, is the amount in escrow enough, that buyers won't leave it on the table?  For a buyer purchasing a $250,000 home, even $5,000 is a lot to walk away from.    For buyers purchasing a $2M home, we would expect significantly more money in escrow -- at least, $75,000.

* * *

These are only the major terms that we tend to see in our market.  There are many others including things like tax prorations, home warranties, home appraisal contingencies, "as is" clause just to name a few.   It's a given that offers have attorney and inspection review contingencies as well.

Sellers, before an offer comes in, read the whole contract, so you understand the language that is there.  Sellers will also have an attorney review period where the attorney can advise the seller on the terms of the deal.

So what is a good offer?

Here is my advice to sellers, when answering that question:
  • Look at the whole offer -- not just the asking price.
  • A quick close is a beautiful thing and should be given a little more weight. 
  • Understand market values and trends in your neighborhood -- don't assume the offer on your home is going to be exceptional, when the neighbors are getting average offers.
  • I know this sounds self-serving, but if you have an experienced agent, please listen to them.  They have seen a lot in this market and can probably advise you whether the deal is decent or not. 
Finally, consider the value of "done."  Moving on is your ultimate goal.  You may not be thrilled with the offer, but some money is better than no money and being DONE can feel great!

Tuesday, July 3, 2018

Name that colonial home - a 4th of July quiz

Can you match the house to its owner?
Washington, Adams, Jefferson, Madison, Monroe

                      Ash Lawn - Highland

Mount Vernon


With gratitude to our founding fathers, 
I wish you a happy 4th of July!