Lisa Schmitt

A few days ago I took a call from a past client whose elderly parents are thinking of purchasing a smaller home. As she filled me in on their wants and needs, it was becoming apparent that the price of those wants and needs would exceed the stated budget. Past Client then said "well, they will be paying cash. Won't that give them some major flexibility on the price?"

Hmmmm.

Would it?

The answer isn't a simple yes or no. It depends on what is most crucial for the seller during the transaction. If the likely sales price is on the generous side, there is the potential for the home not appraising. That's not a problem with a cash buyer (assuming they don't pay for their own appraisal!).

Conversely, if the likely sales price is barely at the break-even point and all parties want to avoid a short sale situation, the seller may have a specific price he/she simply can't dip below, rendering the 'cash is king' argument useless. For many sellers, price is the number one component, with other terms such as method of payment and closing dates secondary. Of course there are other sellers for whom terms have a higher priority than the price, but I'll save that for another day.

Back to the original question: will paying with cash buy some major flexibility on the price? It's possible, but it all depends on the situation of the seller and how they view it. As a listing agent, I am not automatically bedazzled by a cash offer. There are some great lenders out there who have never failed my clients. I feel confident about the 'closability' of the sale when I see their pre-approval attached to an offer. I would rather see a fair offer with financing from a trusted lender than a lowball offer with a suitcase full of cash.

The short answer? Probably not.

This is probably one of the most common questions I hear from home buyers in the Will County area. The reason for the question is due to the fairly high number of REO (bank owned) properties on the market. If you are a home buyer in this area, chances are more than good that you're going to view at least a few of these properties. Many are being offered at fire sale prices, which begs the question about the property taxes.

So why aren't the property taxes going down if prices are going down? In Will County, specifically, the assessor uses a three year study and is a year behind anyway. The assessed values for 2010 will be based on values from 2006, 2007 & 2008. 2006 was still a pretty good year around here. 2007 wasn't too bad until August. Additionally, the taxing bodies depend on the revenue to support various services such as fire & police protection, schools and libraries. They are operating under a budget that requires a certain amount of funds. If the amount of tax revenue suddenly decreased due to lower property taxes, they would have a problem. What can they do? They can adjust the tax rate to make up the shortage.

For many buyers, property taxes are something to be very mindful of. If your budget allows you to spend up to $130K and you have the good fortune to find a decent home for that price in an area of $200K homes, keep in mind that the property taxes are going to be in line with $200K homes, not $120K homes. Sometimes the amount of property tax can substantially impact your monthly payment.

If you are in Will County IL and would like more information about how property taxes are calculated and other fun stuff, I recommend visiting the Will County Assessor's site. Now to thank you for taking the time to read this, I'm leaving you with this cheerful ditty about taxes from the Fab Four. Enjoy!

Much of my current listing inventory belongs to homeowners wishing to sell and purchase a larger, maybe nicer home that they previously might not have been able to afford.

If you find yourself in that crowd, I have some advice for you before you place your home on the market:

Call a lender!

Purchasing a move-up home on a contingency is difficult enough as it is. There are a lot of logistical issues to work out. Just as important, lending regulations & qualifications have changed greatly since you bought your current home.

*You need to make sure that your credit is healthy.

*You need to determine what you can realistically afford.

*You need to determine how much money you will need to put down on the new home. This is extra important if that down payment is coming directly from the proceeds of the sale of your existing home.

I recently received a call from someone in this situation. I referred her to Gene Mundt of Chicago Bancorp to work out the details. It was a good thing she called him first. She had forgotten about co-signing a loan for a family member some time ago. It's not a major problem, nor will it prevent her from purchasing another home, but she did need to gather some extra documentation to explain the situation. More than that, it does impact how much she can spend on her move-up home. I, and this client feel much better knowing these details BEFORE we start the process.

After that, your next call should be to your local real estate professional for a comparative market analysis on your home. Along with the market analysis, an equity sheet, or net sheet should be completed so that you can see a good estimate of what your selling expenses will be, as well as how much money you can expect to net from the sale. That particular detail could mean the difference between staying put for awhile or moving.

Selling and buying a home is HUGE event in your life. You need to be as educated as possible about it and align yourself with real estate and lending professionals who are experienced and know what to anticipate. Preparation and education are key to a successful transaction!

The Will County Center For Community Concerns is offering free home buyer education classes.

There will be two sessions: the first on March 11th from 6-9PM and the second on March 13th from 9AM to noon. Sessions will be held at the center's office at 304 N. Scott Street, Joliet. Call 815-722-0722, ext. 209 to reserve a spot.

The sessions will cover many aspects of homebuying, including affordability, budgeting, home inspections and home owners insurance among many other topics. HUD-certified housing counselors will teach the courses.

This is becoming a common theme in the Plainfield real estate market--in particular among bank owned properties. On three occasions this week I had to cancel showing appointments with two different buyers because the homes they wanted to see were either already in a bidding war or had an accepted contract. One property was listed on Friday and had eight, yes EIGHT contracts on it by Sunday afternoon. This local market hasn't seen that type of activity since 2005.

One of my disappointed buyers is fairly new to the game and has learned quickly that if he sees a property he wants that he better be prepared to RUN--which in this case means be ready to write an offer.

It means have the pre-approval letter or proof of funds statement at the ready.

It means be prepared to quickly decide how much you want to pay for the home because list price isn't going to get it done.

It means work with a professional who knows the local market and will provide documentation of comparable sales over the last three months so you can make an informed decision vs. an emotional one. During a bidding war, some people get so caught up in the idea of winning that they lose sight of the original goal: getting the right house for the best price!*

It means if you as the buyer really want this house, be prepared to make your move now. Time truly is of the essence. Many buyers believe that because the market is slower the house will still be there. In many cases that is true, but in the case of bank owned properties in the Plainfield, IL area, not so much. These homes are starting to be offered at fire sale prices. RUN!

*At the risk of sounding contrary, I better clarify this: it's true that during a multiple offer situation a buyer may very likely need to offer above asking price to have a shot at the home. That, compared to my statement of "getting the right house for the best price" is not purposely a contradiction. Paying above list price does not necessarily mean a buyer isn't getting a great deal--especially if the listing price is tens of thousands of dollars under market value. It means don't let your emotions get the best of you and pay above what is fair market value just for the sake of winning.