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CONTRACT FOR SALE = HOUSE SOLD? Not Always!

INSPECTION, FINANCING ISSUES OFTEN DOOM SIGNED DEALS!

In Chicago and all over the suburbs these days, properties for sale often have extended market times.   Even the best staged, most-competitively-priced listings don't sell as quickly as they used to.  But when a contract comes in - it's time to celebrate, right?  Absolutely not - as many hurdles and pitfalls can lie between contract and closing.

In this buyer-oriented market these days, brazen home buyers often ask for a long list of expensive home repairs during the five-day inspection/attorney review period that follows most conventional real estate contracts in the Chicago area.  Requests for roof repairs or replacements, furnace or air conditioning tune-ups, or new hot water heaters are common.  Or, in the alternative, buyers often demand several thousand dollars in order to continue to close.

We advise our Listing Clients not to be intimidated by these requests.  Unlike a few years ago, however, when the market here was more robust, more seller-friendly, buyers are often taking a hard line when repair requests are refused.  With a lot of competitive inventory in many areas of Chicago, buyers feel they can kill the deal, go elsewhere, and perhaps strike a better deal with someone else.  They feel there is so much to choose from - they can have their cake, and eat it, too - twice!

Sometimes, discussions over included personal property hurt the deal.   Requests to include high-end washers and dryers, or window treatments, or custom light fixtures, if refused by the seller, could stop things in their tracks.  We counsel our sellers to remove and replace expensive items of personal property not staying, or, if not possible, make it clear during the earliest point in negotiations that these do not stay with the home. 

We've encountered several buyers agents, who, during negotiations, fail to make clear the list of excluded personal property unless price is first agreed on.   Here, the removal of a fancy washer-dryer pair can appear as if the seller is attempting to muddy the negotiation - the buyer may then walk!

In 2008, issues involving the buyer's financing is often the biggest stumbling block to a successfully-closed transaction.  A couple of years ago, when mortgage money appeared free and easy, low appraisals could be resubmitted, credit issues explained in an explanation letter from the buyer to the lender, low or no down payment loans easy to close, and lack of complete employment or income documentation worked around.

Not so today!   In areas identified with "declining" property values by appraisers, lenders now ask for an additional five or ten percent down payment, if the original plan was to put less than 10% down.  If the buyer doesn't have this money - the loan gets denied, on or before the contract Loan Commitment Date.  If the buyer's credit score drops prior to closing, or their employment situation changes, this is often uncovered during a Quality Control call by the lender, often only a day or two prior to closing.  Again - denial!

Buyers owning investment property must show current leases on that property, with acceptable rent levels, to substantiate income.  Once upon a time (say, 2005), the lease was simply glanced at - not scrutinized!

Even those with acceptable credit sometimes face higher-than-anticipated interest rates or fees as a condition for closing.  Should these fees or interest rate increases rise too much, the solidity of the transaction can be weakened.

For many years, we have advised our clients, somewhat tongue in cheek, that "The money is not in your hands, until it is in your hands!"  It's truer today!

Read Marilyn Kennedy Melia's article in today's Chicago Tribune for more.

DEAN MOSS & DEAN'S TEAM CHICAGO

Posted: Sunday, March 16, 2008 10:42 AM by Dean's Team

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