Home Buying Process in Illinois
We know that buying your first home is daunting so below we have outlined the home buying process in Illinois. The infographic below shows the process and we have detailed the steps below.
Here is a copy of our Home Buyer Guide here:
Should I Buy?
Advantages of owning
- Cost of owning – In many case the cost of owning is less than the cost of renting. With a fixed rate mortgage the only change in your monthly payment is as property taxes and/or insurance premiums increase. For renters there is less stability as monthly payments frequently increases on an annual basis.
- Savings – Ownership is a form of forced savings which is important down the road when the mortgage has been paid down by a substantial amount. Also, historically, home increase in value.
- Tax advantage of owning – Owners have a tax deduction on the mortgage interest and on their property taxes. Renter do not have this tax deduction.
- Freedom of choice – Owners have the freedom to decorate, remodel and make home improvements as they desire.
- Credit Rating – Mortgage payments made on time a a significant impact on the owners credit rating.
Disadvantages of owning
- Mobility – for most home owners if they want to move they are forced to sell their home before they can move.
- Repairs & maintenance – For renters when something is broken or needs repair, you call the landlord to fix. For owners the cost of repairs and maintenance is all on the owner.
- Investment risk – historically home value have increase in value almost every year since the mid 1940’s. An notable exception to that was the recent devaluation of real estate prices from 2007 to 2013.
How Do I Pay For My New Home?
First and foremost you need a pre approval letter from a Mortgage Lender or Bank. If you would like us to send you recommendations of Real Estate Lenders please let us know or you can use your own lender. Currently there are Down Payment assistance programs for First Time Home Buyers available from the State of Illinois. Please ask your lender if you might be eligible for one of these programs. The program eligibility is based on your credit score, number of people in household and the geographical location of the property you want to buy. Not all lenders are approved for these programs, contact us for more information.
Search for Homes
Once you know how much you are eligible to borrow for your new home purchase then you can contact us. We will set you up a customized search of all currently available properties that meet your specific criteria. These will be sent to you directly from the MLS Service for Northern Illinois and new emails will come on a regular basis as new homes become available for sale. This system is very interactive and has a Google Earth function. We know it’s tempting to look at Zillow or Trulia etc… for listings but please keep in mind that the information found on these real estate portals is not always as up to date as the real MLS.
Once you have identified listings that you like you can mark them as interested and then let us know which ones you would like to make an appointment to see. We usually need about 24 to 48 hours notice to schedule the appointments because many homes were going to see are still being occupied by the owner.
When we look at homes we will point of latent defects which are potential problems with the home that are visible from the naked eye. Latent defects are different from patent defects. Patent defects are sometimes hidden and require a home inspection to discover. Once an offer has been made and accepted on a property your will normally hire a home inspector to do a more through examination of the property. In the event that a patent defect is discovered you can discuss with your real estate attorney a credit for the repair, that the home seller remedy the defect or possibly backing out of the contract. More about the home inspection and your real estate attorney later.
At this point we are in a buyer agency agreement. We will be representing you as a buyers agent. That means we must promote your best interests as follows:
- Seeking a transaction that meets the terms of your agency agreement or that is otherwise acceptable to you
- Presenting all offers you wish to make to the seller or their agent
- Disclosing material facts about the transaction
- Accounting for all money/property received from you or for your benefit
- Obeying your lawful instructions
- Promoting your best interests first above our or someone else’s best interests
- Exercise reasonable skill and care in performing brokerage services
- Keeping your confidential information confidential
- Complying with the Act and other laws that might apply, i.e. fair housing and civil rights statutes
How Do Realtors Get Paid?
You as the buyer do not pay for our real estate services. In a normal real estate transaction the seller will hire a real estate agent to sell their home for them. The seller will pay their Realtor for this service. The sellers agent will share part of their commission to bring them a buyer. This is how we get paid. Despite this, we are still bound by the Buyers Agency Agreement which requires us to look out for your best interest in your home buying process.
We will always ask if you are currently working with another Realtor before we will work with you. Real estate agents are paid by commission only and we don’t like to take another agents client away from them. So, if you do decide you want us to work for you please don’t use another agent at the same time.
I Have Identified the Property I Want to Buy… Now What?
Frequently buyers know the property they are going to purchase as soon as you walk in the door! We will also be asking you as we tour the homes to grade them on a scale of 1 – 10 with 10 being the best. This way we can get a better idea of exactly what you are looking for. When you have chosen a property that you would like to make an offer on we will prepare a buyers contract for you. We can also prepare a market analysis on the home for you. The market analysis will show you recent sales in the neighborhood of similar homes to the one you are purchasing so you have a better understanding of the price to offer.
We will prepare a contract for you which has been written by attorneys, we as Realtors fill in the blanks. We will be entering into the the contract your name as you want to see it on your deed. We will discuss with you how much you want to offer, the amount of earnest money you are willing to pay (more later) the mortgage contingency date (usually 45 to 60 days from the acceptance date of your contract), the closing date (usually about 1 week after the mortgage contingency date) and some other information.
We will present your offer to the sellers agent and wait for them to discuss with their client. They will accept your offer, decline you offer or counter offer. In most cases if your offering less than the sellers asking price you can expect a counter offer.
We have been seeing multiple offers on homes lately because of the shortage of inventory in many neighborhoods and communities. In the case of multiple offers the sellers agent will usually notify all buyers agents that multiple offers have been submitted and will give all the buyers a opportunity to submit their buyers highest and best offer. The sellers agent will never disclose the amount of the other offers as doing so would be a violation of their fiduciary responsibility to their client the seller. Ultimately, we won’t know how much a particular property sold for until after the sales has closed and the sales price has become a matter of public record.
My Contract Has Been Accepted
At this point you should contact an Illinois Licensed Home Inspector and an Attorney who specializes in real estate transactions (i.e, not a Divorce attorney etc…) and let them know you have entered into a real estate transaction to purchase a property and would like to hire them. Make sure to ask the home inspector and the attorney you hire exactly what they are going to do for you. If you need referrals to home inspectors and attorney’s just let use know and we will send you a list.
Earnest money is like a deposit you are offering to take the property off the market. Once the offer is accepted we need to get the earnest money agreed to in the contract to the sellers real estate agent within one business day. This earnest money check will be cashed immediately. The money is yours and is held in a separate escrow the sellers real estate agent office has until the time of closing. This money will be used toward your closing costs and/or down payment.
In our offer contract we asked that we have 5 business days to conduct a home inspection of the property. You must hire a licensed Illinois home inspector to protect you in case they find something terribly wrong with the property such as it needs a new roof or there’s a big crack in the foundation. We will arrange an appointment with the seller’s agent for you and we will meet you and your inspector at the property to gain access. The home inspector’s report will be sent (usually the day after the inspection) to you and your Real Estate Attorney that you have hired.
Your real estate attorney will review with you the home inspection. This must also be done within 5 business days of the offer acceptance. If at that point you want to exit the deal because there is something really bad on the report you are able to with the help of your attorney or if it’s some reasonable repair you can ask your attorney to ask for a credit for the repair or for the seller to repair the problem. In 14 years of selling residential real estate in Illinois we have yet to see a home inspectors report that there are no defects. In other words, every home has some minor issues or defects. So choose wisely what issues you want to fight. If you ask for everything to be repaired the seller will probably reject your offer.
Now that the home inspection is done the whole mortgage process will start and your attorney will be working on their duties.
Closing the Deal
About 45 to 60 days later your mortgage broker or lender will issue a clear to close. At that point your real estate attorney will schedule a closing. Your lender or your attorney will let you know how much money to bring to closing for the down payment and/or closing costs. The money you bring to closing must be a cashiers check from a bank, they will not accept a personal check. You will also need to bring a current I.D. with you to closing.
Immediately prior to the closing, that is, the day before or even the day of the closing we can schedule a final walk through of the property. If there is any issues seen in the final walk through such as damage the seller caused while moving out, missing personal property which was included in the contract or stuff left behind that shouldn’t be in the home than make a note and discuss with your real estate attorney at closing.
At closing you will meet your attorney, the sellers attorney, the title company agent who is doing the closing and us your real estate broker. Also at closing may be the seller and their real estate agent.
At closing their will be a lot of paper you need to sign. Your attorney will explain each document to you. Once all the papers have been signed and sent to the lender your lender will send funds to the title company for the purchase. The title company will prepare checks for everyone involved in the transaction and the seller will give you the keys to your new home.
Congratulations! You have just finished the home buying experience.