Initial Earnest Money Due
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Stefani Residential Group (REG) exists to give you the best real estate experience. We are assisting clients around the Chicago area buy, sell, invest in and rent properties every day — and love what we do. Our teamwork, experience and humble commitment to serving our clients is the reason why our referral business continues to grow. We strive to make the search, valuation and transaction processes simple, making you feel right at home, even before we locate the perfect property.
Stephanie G., River North
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Selecting a Real Estate Agent is an important decision. Buyers should consider an agent’s referrals, sales experience, communication skills, industry resources and market knowledge when determine which agent to work with. Chris and the team bring all these tools to the table.
Speaking with a lender/mortgage broker will assist in determining a buyer’s budget range. Selecting an experienced and highly communicative lender/mortgage broker is one of the keys to providing an efficient and hassle-free buying and, more importantly, closing process.
Understanding a buyer’s motivations to purchase is key to assisting Stefani REG when targeting the right properties to review. Information regarding minimum beds, baths, location, size, property type all (along with budget) help Chris and the team craft a specific search for each individual buyer. As the property search progresses, a buyer’s criteria will generally adjust. Therefore, Stefani REG believes in clear communication throughout the buying process.
Touring prospective properties is a fun process once the previous steps are properly executed. The process averages four to eight months (including the average two-month period from contract date to closing date). Stefani REG recommends buyers tour 10-20 properties prior to making an offer, as in-person visits are always more informative than reviewing properties on-line. Each tour provides a learning experience that builds on itself, ending with an accepted contract (and happy client).
Once the perfect property has been found, it is offer time. Stefani REG works with clients to determine a target property's value based on market comparables and develop an offer strategy. Chris explains the offers terms to his clients and presents the offer to the listing agent (along with the buyer’s pre-approval).
Chris and the team enjoy the negotiating process. They have multiple negotiating strategies depending on the target property’s situation. The following are influences on negotiating strategy: slow/hot market, property days on market, property price point and multiple offer situations.
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Stefani REG exists to give you the best real estate experience. We are assisting clients around the Chicago area buy, sell, invest in and rent properties every day — and love what we do. Our teamwork, experience and humble commitment to serving our clients is the reason why our referral business continues to grow. We strive to make the search, valuation and transaction processes simple, making you feel right at home, even before we prep yours for sale.
Buyers are allowed to procure a licensed home inspector at their own cost once the parties reach contract terms. The final sale may depend on either the property conditions meeting the buyer’s satisfaction as-is or with certain additional credits based on the results of the inspection.
Once the buyer's and seller’s brokers have organized the terms of the contract, both parties generally have the document examined by their separate attorneys, who may then suggest altering some non-consequential contract language.
Before the sale is considered final, the buyer must provide proof that they have secured a loan towards the purchase. This contingency allows the buyer to rescind their offer if financing does not materialize, and the property will be placed back on the market.
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Several milestones exist post-contract and prior to closing. Below are the milestones buyers should be mindful of throughout the buying process. Lengths of time below are estimates and are often extended by mutual agreement of both parties.
Initial Earnest Money Due
Within in a few days, buyers are expected to deliver an initial earnest money check (generally) to the property’s listing brokerage. There is no standard amount due. However, most of the time initial earnest money ranges from $1,000-$5,000 (often depending on the property’s purchase price and mutual agreement by both parties). Submitting initial earnest money essentially takes the home “off” the market and allows for the attorney review/inspection period to begin. Initial earnest money is generally refundable based on the findings and further negotiations during the attorney review/inspection period.
Attorney Inspection Period
The buyer and seller attorneys will review and modify non-consequential terms. Modification occurs for several reasons, including tweaking of contract language and the negotiation of inspection and/or tax credits. The inspection period generally runs concurrently with attorney review period. This allotted inspection window allows the buyer to have subject property inspected to review its condition for any noteworthy issues not noted during the property tour. Stefani REG recommends buyers always conduct the property inspection. Inspection findings are different per property, so buyers and sellers will negotiate either fixes and/or a credit due to the buyer for any issues that are exposed during the inspection. Stefani REG encourages the use of an experienced real estate attorney and professional property inspector to assist in the buying process.
Earnest Money Balance Due
Once the parties agree to the terms negotiated during the attorney review/inspection period, the earnest money balance check is due to the property’s listing brokerage (generally 3%-5% of the purchase price). At this point, there are only a few ways to get the earnest money refunded (e.g., the buyer is not approved for a loan).
Mortgage Contingency Period
This time is allotted for the formal lender evaluation of the borrower’s credit worthiness and the property’s appropriate value, which entails an appraisal scheduled by the lender (paid for by the buyer). A mortgage commitment is different from a pre-approval. The pre-approval is a preliminary approval for a loan amount based on initial information the buyer provided to the lender. Once a purchase price has been agreed upon, lenders call for a formal loan application. This begins the lender’s process of reviewing the buyer’s financial worthiness and determining if the subject property is warrantable (e.g., worthy of the purchase price, meets lender loan requirements). It is important to note that once the lender has approved the loan, the total earnest money delivered is basically non-refundable (depending on the specifics of the deal).
Walk-Through
A walk-through by the buyer and both agents is usually scheduled within 24 hours prior to closing to verify the subject property is in good condition and that all (if any) agreed to inspection repairs were completed.
Closing
Finally closing time. Buyers are in attendance at the title company and are guided through the signing process by their attorney. Sellers generally do not attend closings, as they pre-sign the closing documents.
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Although Stefani REG will manage the buying process throughout, an attorney will handle the deal’s legal aspects upon contract. An attorney examines transaction documentation, negotiates any possible sticking points with the seller’s attorney and provides important guidance at the closing.
Inspectors evaluates the condition of the home’s major mechanical/appliance systems and structural integrity. An inspector will to assess how these systems work together and identify areas that need to be monitored, repaired or replaced.
If an inspector notes a material issue during an inspection, it is certainly a good idea for a buyer to call in a professional contractor to give a legitimate estimate for how much the issue might cost to repair or replace. It is best to do this during the concurrent attorney review/inspection period.
An experienced lender/mortgage broker will streamline the buying process. Quality lending professionals accelerate the search process and post-contract via a pre-approval letter and mortgage commitment letter, respectively. Most sellers require a qualified pre-approval before they even consider an offer, so Stefani REG recommends clients get pre-approved before or very early during the search. There are multiple benefits to getting pre-approval prior to the search. They include verifying the mortgage amount for which buyers qualify for (saving time by defining by the search price range), alerting buyers of any credit report issues (enabling clients an opportunity to repair the problem) and informing buyers of transaction buying transfer costs.
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Pre-qualification is a simple process. The buyer is asked specific questions about their income, assets and liabilities. Based on this information, lenders provide buyers for which they may qualify for to purchase a property. This process is often completed verbally or electronically.
A pre-approved buyer is one who is actually approved for a loan of a certain amount. The pre-approval process is much more involved. The borrower provides proof of income, list of assets and liabilities, which will all be reviewed by the lender. Sellers generally want a bona-fide pre-approval prior to even reviewing and offer.
When dealing with borrowers, lenders’ main concern is risk. Lenders proactively manage these risks by requiring four things from a borrower:
Down Payment: Statistics have proven that borrowers who put down 10% or more unlikely to default on a loan.
Excellent Debt to Income Ratios: Borrowers with high debt and low income are a high risk because they are using too much of their income to pay down their current debt (e.g. credit cards, car loans, etc.). A potential borrower with high debt and low income is noted as having a high DTI (debt to income ratio).
Job History: Long-term employment is a good predictor that a borrower will have a steady stream of income, which likely will not be interrupted by a career change or termination.
Excellent Credit: Credit scores give great insight to the lender regarding a borrower’s creditworthiness. Lenders take a close look at a buyer's FICO scores. FICO stands for Fair Isaac Credit Organization, the organization that developed the formulas used by credit bureaus to calculate credit scores. Go to www.myfico.com to learn more.
The three major credit bureaus are: Experian, Equifax and TransUnion. Credit scores will vary from bureau to bureau because each bureau emphasizes different credit factors, several of which include delinquencies, a high number of credit cards, high credit card balances, too many recent credit inquiries, tax liens, judgments, bankruptcies and length of credit history.
Credit scores are calculated using a scorecard that allocates points for each of the above factors; however, lenders do not get to see the entire scorecard, all they see are the final scores. FICO scores can range from 300-850.
That is easy. Just contact Chris at (312) 672-2250 and/or at [email protected].
Stefani REG's goal is to ensure your real estate journey is seamless and enjoyable, whether you're buying, selling, investing and/or renting. With our passion and expertise, we'll guide you home to the perfect property.