Danielle Pierce, ADPR

There is not a week that goes by that I don't receive a call from someone wanting to know about "rent to own" properties. After working with several clients to obtain this type of property, I have developed the following steps that MUST be taken to ensure a successful transaction.

1) Do NOT lock in the sales price of the property upfront. Of course, the seller is going to want to force this issue, but it makes no sense to establish the sales price in rapidly changing markets. After all, many markets around the country are still declining!

2) Make sure the contract includes the right of first refusal. Again, this is just added protection for the tenant. You don't want to end up in a situation where the house has literally been sold from under you to another Buyer!

3)CONTACT A LENDER UPFRONT! This ties in very closely with number 5. Renters, you need to know where you are starting from and what steps are required to get to that magical PRE-APPROVAL letter. A good lender will be able to tell you your current credit score, what score you need to buy a home and what steps must be completed. AND, if they think you are serious they will make it a point to follow up with you every 60-90 days or so to make sure you are on the right path. Credit repair is not difficult, it just takes consistency and perseverance. So, put the time in now to make sure you can reach your desired outcome. 12 months goes by really fast!

4) Make sure you understand all the terms of the entire agreement! For example, some owners will credit a portion of the monthly rental back to the Buyer at the end of the lease. Some owners will offer other incentives to the Buyer for following through with the transaction. And still other sellers will include stiff penalties for failing to go through with the transaction. If you need to, have an attorney review the agreement BEFORE you sign!

5) Most important of all! REPAIR YOUR CREDIT! Most individuals that are seeking a rent to own situation are doing so as a result of credit issues. I have lost count of the number of renters that I have worked with that spend the ENTIRE 12 MONTH rental doing ABSOLUTELY NOTHING about their credit! HELLO.....if you are serious about buying at the end of the lease, you better make sure to put yourself in a position to buy! I am always amazed at the number of people that find themselves in this very predicament! Sure, I know we all have hectic, busy lives, but we all need somewhere to live, right? Right! For those renters that fail to repair their credit enough to buy, they will most likely be looking at losing their ENTIRE deposit AND an increase in rent from the prior year.

Hopefully, this provides some clarity on an often misunderstood topic! Best Wishes!

Okay, here's the deal! Buyers, if you want to buy a home, you need to contact a lender and get pre-approved! It's really that simple...The only exception to this is Buyers that have CASH!!!!!!

I used to blame so-called "inexperienced/rookie" agents for this epidemic. I can remember when I first started, like it was yesterday. I would take ANYONE, ANYWHERE and never even think to ask for a pre-approval!!! And, if I did think to ask for a pre-approval letter, I would be too afraid of opening my mouth. So, I would take my so-called "clients" to house after house after house...I did not close anything during those early months and I stopped hearing from a lot of my "clients." I quickly discovered after reaching out to more experienced agents, that this was definitely NOT the way to go!

So, here I am, years later and I continually bombarded with calls from people that do not have a pre-approval letter! When I do ask probing questions to try and find out why, here are some of the responses I get...

Me: So, you have not yet contacted a lender, do you have any idea what your credit score is?

Client: No, I have no idea whatsoever..

Me: I highly recommend shopping for a pre-approval prior to starting your home search.

Client: Really...I was going to contact a bank AFTER I located the property. I just wanted to get out and start looking first.

I could go on and on with examples, but you get the idea. Buyers, trying to shop for a home without a pre-approval makes no "cents!"

In fact, it can be a huge waste of your time and everyone else involved. Really, it all just boils down to plain old common sense....don't you WANT to know if you even qualify for a home? Don't you want to know the interest rate and other terms of your loan upfront? Don't you want to find out how much you qualify for, prior to searching for that dream home? And, if you don't qualify at the present time, don't you want someone to tell you what you need to do in order to get a loan?

The fact is, lending requirements have tightened considerably and it is not as easy as it used to be to qualify for financing. Given the declining housing prices, there may be considerable competition in your local market. If you want to be taken seriously as a Buyer, then contacting a lender is an absolute must!

Happy Hunting!

This post is geared towards the first time Buyer that wants to capitalize on the rock bottom pricing in the current housing market and oversupply of inventory.

First and foremost, I would like to congratulate you on your decision! You see, I wholeheartedly believe that now really and truly is a great time to buy! I don't say this as a marketing ploy designed to drum up business. I think first time Buyers today are in a position of envy as they have the opportunity to capitalize on very low interest rates, extensive inventory and great pricing.

On the flip side, I want to caution all first time Buyers that buying a distressed property does come with some inherent drawbacks that you need to make yourself aware of BEFORE starting your property search. If more Buyer would take heed of the following information, I think there would be a lot less confusion, frustration and headache for all parties concerned.

1) The property is probably going to require some rehab. I am constantly amazed at the number of Buyers that request showings and then appear to go into complete SHOCK as they tour the property and discover that repairs are required...Well, OF COURSE, the property requires repairs!!! Hello!!! It is a FORECLOSURE! A foreclosure means that the previous owner usually had some type of financial difficulty which prevented them from paying the mortgage. If they are not paying the mortgage, then they are probably not as concerned about replacing the old windows or getting the tuckpointing done or replacing the carpet... I would say probably 8 or 9 out of 10 foreclosures are going to have some "deferred maintenance" issues. Buyers, please don't expect to buy a foreclosed home in move in condition home at a huge discount. Of course anything is possible and I have seen it happen. But, this should not be your expectation going into the transaction. Expect to have to put some money towards getting the property in livable condition. Oh, as an FYI, make sure you get yourself approved for a conventional loan as well as a some type of rehab loan like the 203k. Talk to your loan officer for more details.

2) There is going to be COMPETITION!!! Yes, you read it correctly. In spite of what you hear and see on the news, homes that are PRICED WELL for the condition and reside in a DESIRABLE location are selling like hotcakes! If you are a first time Buyer and you find yourself in this situation, you need to make sure that the offer you submit is competitive enough to compete with other first time Buyers and CASH investors! Please don't make the mistake of thinking that you will submit a low offer and "see what happens" and then submit your highest and best offer after your first offer is rejected. You are just going to find yourself frustrated and unhappy. You are NOT entitled to a counteroffer. For more information, check out my post here: http://southchicagoshortsales.com/post/1475015/are-buyer-s-agents-entitled-to-the-opportunity-to-counter-

3) The Bank can and will pass on some of their closing costs to you. In the good ole days, there were Buyer costs and Seller costs and it was understood by both sides which expenses were required to be paid. In the current market, A LOT of lenders are passing on some of the customary seller closing costs to the Buyer. The biggest example I see of this relates to transfer stamps. Buyers, if you have your sights set on a foreclosed property, you should know that some of these banks are not going to pay transfer stamps, title insurance fees and some other costs that sellers are typically "supposed" to pay. These fees HAVE to be paid in order to close...so guess who will be paying them??? That's right...the Buyer must pay these fees. That is, if the Buyer wants to close the deal. Now some of you may be wondering if this is fair...and the answer is probably not. But, it is being done all day, every day and if you want to purchase a foreclosure, this is one of the drawbacks. On the other hand, some people may not think it "fair" that Buyers today can get so much more for their money than Buyers 3-4 years ago...

4) The Bank may require you to be pre-approved through their in-house lender. Yes, it is annoying: both from the perspective of the Buyer and the Realtor working with the Buyer. But, once again, if you want to play ball, this is just one of the steps. The reason some lenders require this step is to make sure that the Buyer has a legitimate pre-approval and, can, in fact get a loan. I have seen more than a few bogus pre-approval letters floating around. By requiring an in-house pre-approval, banks make sure they don't pull the property off the market for a Buyer that is not even eligible for a loan. So, yes this step sucks. But, it is a necessary evil.

5) The Bank may not allow any CONTINGENCIES. As the market becomes more and more flooded in certain areas, I have started to see this a lot more. The typical contract usually allows for a home inspection and attorney review contingency period. These usually run concurrently and the time frame is generally 3-7 business days. So, if for example, the Buyer gets the home inspection completed and major issues are found, the Buyer can usually cancel the contract as long as it is within the timeframe stipulated on the contract.

NONE OF THIS APPLIES FOR FORECLOSED PROPERTIES, DEPENDING UPON THE BANK.

Once an offer is submitted, the Buyer has essentially agreed that he/she is waiving the home inspection contingency and the attorney review contingency. By signing the contract, the Buyer has agreed that he/she has done ALL of their due diligence upfront. The only way a Buyer will be able to CANCEL the contract is by an Act of God or death! (Okay, that was an exaggeration - but you get the idea) And, did I mention that the earnest money deposit may be NONREFUNDABLE! Again, this doesn't apply to ALL foreclosed properties but more and more banks are following this trend. So, before you make an offer, you better be sure to do your due diligence and work with an experienced professional.

I hope this helps! Buyers: this information is not intended to discourage anyone from buying a foreclosure. Rather, it is intended to empower and inform!

GOOD LUCK!!!

First of all, the intention of this post is NOT to offend anyone or step on anyone's toes.

I just had to air this one out after hearing some of the most outrageous (not to mention downright FALSE) comments made by some of my clients and other Homeowners.

Myth #1: The home across the street from me is identical to mine and sold for $100K less than what I paid....so my lender has to reduce my principal to reflect the reduced value.

Fact: Many Homeowners across the country are dealing with this phenomenon on a daily basis. Values have sunk heavily in many parts of the country and are continuing to sink in other parts. But, the reality of the situation is this - your lender is likely well aware of market trends in your area BUT that does not mean they have an obligation to reduce your principal balance. Period. End of Story.

Myth #2: If I stop paying my mortgage, it will FORCE my lender to lower my payments, interest and/or principal balance.

Fact: Really??? If you stop making your payments, you are, in fact, FORCING your lender to start foreclosure proceedings. Failure to make payments, for any reason is grounds to start the foreclosure process. The fact that you may have a very good reason (i.e. death, job loss, etc) is still not justification in the eyes of the lender. The best thing you can do is call the lender and explain the situation. Many banks and servicers will opt to work with the current homeowner, but they are NOT required to do so.

Myth #3: My best friend has a loan with the same bank that I do and she received a loan workout, so I am guaranteed to receive one also.

Fact: Just in case I haven't made this clear already, this fact may be true and it is also totally irrelevant. I hear this so many times from so many different people. Each situation is different and there is no way to know what factors played a role in your friend's situation. Even if those factors were made apparent, the lender still does not have to do anything for you - although you share the same lien holder.

Myth #4: If I hire an attorney, I am guaranteed to receive a loan workout.

Fact: While it may be true that attorneys tend to garner more respect than the average Homeowner when it comes to negotiations, the best attorney in the world CANNOT guarantee you a loan workout. The bottom line is this - the agreement is between the Homeowner and the Lien Holder - there is no way for any 3rd party to guarantee that the lender will change the terms of its agreement with the Borrower. At a typical cost of $3-$5,000, in most cases that money would be better spent going towards the mortgage.

Myth #5: I am in the process of a loan workout, so my property cannot/will not be foreclosed.

Fact: If you are behind on your payments, foreclosure proceedings can start and/or continue AT ANY TIME. I truly wish banks would do a better job of fully explaining this to Borrowers. I can't tell you how many clients I have spoken to that are in the process of a loan workout only to be summoned to court to respond to a foreclosure proceeding. Most are truly baffled because they thought they were "working something out with the bank." Truthfully, the loss mitigation department and the foreclosure department often don't communicate. I have actually had more than one Homeowner have their homes sold at the auction - DURING the loan workout process!!!!

BOTTOM LINE: While many lenders are doing all they can to help Borrowers keep their homes, any and all efforts made by the bank are purely voluntary. No matter which attorney is hired, no matter what your hardship is and no matter what the market conditions are - the banks still don't owe us a thing!

I am asked all the time about grants and other programs for first time buyers in the City of Chicago. The rest of the time, I constantly hear first time buyers complain about the lack of programs and/or the confusion involved with getting assistance. I have taken the liberty of putting together this list of grant programs which should be a great starting point for anyone interested. The next step is for you to JUST DO IT, ALREADY!

These programs are 100% FREE and they put MONEY IN YOUR POCKET! Realtors, don't continue to let your deals fall through due to financing issues. Spread the word about these programs to facilitate your transactions. Buyers, I urge you to find out ASAP if your lender is participating with these programs. If they are not, then find one that does...GOOD LUCK!

LUCHA: offers FREE grant money to first time buyers. It is required that you attend a one day workshop. In addition to grants for closing cost and down payment assistance, LUCHA also offers interest free loans! Visit this website for more info.

NORTHERN TRUST BANK: has several programs in place for first time buyers. There is NO application fee and NO points required. Income limitations may apply. Buyers are eligible for a $3,000 grant towards closing cost on the purchase of their new home. Contact Kimberly Cannon at 773.602.8007 for more info.

TAX SMART: This is a mortgage credit certificate program that provides a federal income tax credit for qualified first time buyers. Under the program, a home buyer would receive an MCC to reduce income taxes by an amount equal to 20% of the interest paid on a mortgage. The tax credit may be claimed each year the home buyer continues to live in a home financed under this program. Visit this link for more info:

CITY OF CHICAGO HOMEBUYER GRANTS: Several grants are available for FIREFIGHTERS, TEACHERS, PARAMEDICS AND OTHER CITY EMPLOYEES. First time buyers in these categories are eligible to receive up to $7,500 in assistance to purchase a home. Read more info here:

NEIGHBORHOOD LENDING PROGRAM: Qualifying applicants seeking to purchase or purchase+rehab a home may receive deferred, forgivable loans for the following: 1) Down payment assistance 2) Closing cost assistance 3) Lead based paint abatement 4) Affordability assistance. Follow this link for more info.