RE/MAX Analysis of Illinois Real Estate Market Reveals What It Takes to Get Home Sales Closed These Days
Chicago, IL, November 18, 2011 --(PR.com)-- The chances of turning a home sales contract into a completed sale increase substantially when the real estate agents successfully overcome obstacles that can block the path to the closing table, according to a RE/MAX analysis of trends in the northern Illinois real estate market.
RE/MAX agents say there is no question that more contracts fall through these days than in the past due to challenges in today’s real estate marketplace.
“Traditionally it was the rare contract that didn’t close, usually not more than 1 or 2 out of 100, reported Tim McCaslin, broker/owner of RE/MAX Sauk Valley in Sterling, Ill. He estimates that this year the failure rate is closer to 5 percent in his market area, while at the same time many more contracts end up requiring extensions but do close eventually.
“We see the same trend in our area,” agreed Pam Jacobs, an agent with RE/MAX of Barrington in Barrington, Ill. She said no single issue is primarily responsible for making it more challenging to close contracts. Rather, she cited a combination of factors that include regulatory changes, increased scrutiny by lenders, greater anxiety on the part of many buyers and added complications that can come with buying a foreclosure or short sale.
According to Paul Fasold of RE/MAX Signature in Chicago, the keys to closing a contract are for both the buyer and the building to be qualified. A real estate agent’s job, he said, is to make sure both are true.
Cindy Banks, broker/owner of RE/MAX Cornerstone in West Chicago, Ill., works extensively with banks, helping them sell foreclosed homes. She said the financing of real estate transactions has become more complicated in recent years.
The Federal Housing Administration (FHA) is one major lender with specific contractual requirements that are clearly spelled out on its website, according to Kathy Dames, broker/owner of RE/MAX Ultimate Professionals in Shorewood, Ill.
“Homes that HUD resells and finances after foreclosure often are great values, but to get that value HUD insists buyers adhere to its rules. So, when buying a HUD home, the buyer and the buyers’ agent need to go over every line of the contract and abide by the letter of the requirements or the transaction may not close,” Dames said.
As for being sure each building also is properly qualified, Fasold said the most common issue these days is when the appraisal required by the lender comes back with a value below the agreed sales price. That usually happens either because the price is too high relative to recent sales in the area or the appraiser lacks the information needed to develop an accurate value estimate.
“It has always been part of my job as an agent to make sure a property goes under contract at a price supported by other recent nearby sales, but today that is more important than ever. And it’s equally vital to give the appraiser the information needed to understand the full value of the property,” said Fasold.
It’s also a good idea, contends Cindy Banks, for the listing agent to meet the appraiser at the property so they can walk through it together.
“An agent isn’t supposed to talk to the appraiser, but you can be present, and you can provide data on comparable properties,” she said. “My goal in those situations is to make it as easy for the appraiser as we can.”
A related issue involves home inspections because “even the most perfect home will have minor flaws,” said Pam Jacobs. For that reason, “both buyers and sellers need to have realistic expectations when it comes to home inspections,” she said. “Buyers shouldn’t treat every cosmetic imperfection as an opportunity to renegotiate the price. At the same time, finding a serious problem, such as one that would cost $1,000 to address, certainly is an appropriate subject for discussion. Agents must educate their clients about the entire purchase process, including the inspection.”
Perhaps the most common stumbling blocks in today’s real estate market are short sales, where the seller’s outstanding mortgage debt exceeds the market value of the home. In some cases, there may be several lenders involved, and all lenders must sign off on the purchase price if the seller is to be released from further financial obligations.
“Ten years ago, I doubt I did one short sale a year,” said Tim McCaslin. “Now, banks have entire departments that do nothing but work on this type of transaction, and our office handles dozens of them annually.”
With such a large volume of transactions and with multiple lenders frequently involved, short sales can take months to complete. As a result, some buyers lose patience and walk away. In other instances, the lenders will decide not to grant the short sale.
To minimize that risk, noted McCaslin, it’s crucial to know upfront what documentation the lender requires, what the lender’s criteria are for approval, and how the documentation should be delivered. Most of all, he noted, agents have to follow up to make sure that lenders come to a decision as promptly as possible.
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RE/MAX agents say there is no question that more contracts fall through these days than in the past due to challenges in today’s real estate marketplace.
“Traditionally it was the rare contract that didn’t close, usually not more than 1 or 2 out of 100, reported Tim McCaslin, broker/owner of RE/MAX Sauk Valley in Sterling, Ill. He estimates that this year the failure rate is closer to 5 percent in his market area, while at the same time many more contracts end up requiring extensions but do close eventually.
“We see the same trend in our area,” agreed Pam Jacobs, an agent with RE/MAX of Barrington in Barrington, Ill. She said no single issue is primarily responsible for making it more challenging to close contracts. Rather, she cited a combination of factors that include regulatory changes, increased scrutiny by lenders, greater anxiety on the part of many buyers and added complications that can come with buying a foreclosure or short sale.
According to Paul Fasold of RE/MAX Signature in Chicago, the keys to closing a contract are for both the buyer and the building to be qualified. A real estate agent’s job, he said, is to make sure both are true.
Cindy Banks, broker/owner of RE/MAX Cornerstone in West Chicago, Ill., works extensively with banks, helping them sell foreclosed homes. She said the financing of real estate transactions has become more complicated in recent years.
The Federal Housing Administration (FHA) is one major lender with specific contractual requirements that are clearly spelled out on its website, according to Kathy Dames, broker/owner of RE/MAX Ultimate Professionals in Shorewood, Ill.
“Homes that HUD resells and finances after foreclosure often are great values, but to get that value HUD insists buyers adhere to its rules. So, when buying a HUD home, the buyer and the buyers’ agent need to go over every line of the contract and abide by the letter of the requirements or the transaction may not close,” Dames said.
As for being sure each building also is properly qualified, Fasold said the most common issue these days is when the appraisal required by the lender comes back with a value below the agreed sales price. That usually happens either because the price is too high relative to recent sales in the area or the appraiser lacks the information needed to develop an accurate value estimate.
“It has always been part of my job as an agent to make sure a property goes under contract at a price supported by other recent nearby sales, but today that is more important than ever. And it’s equally vital to give the appraiser the information needed to understand the full value of the property,” said Fasold.
It’s also a good idea, contends Cindy Banks, for the listing agent to meet the appraiser at the property so they can walk through it together.
“An agent isn’t supposed to talk to the appraiser, but you can be present, and you can provide data on comparable properties,” she said. “My goal in those situations is to make it as easy for the appraiser as we can.”
A related issue involves home inspections because “even the most perfect home will have minor flaws,” said Pam Jacobs. For that reason, “both buyers and sellers need to have realistic expectations when it comes to home inspections,” she said. “Buyers shouldn’t treat every cosmetic imperfection as an opportunity to renegotiate the price. At the same time, finding a serious problem, such as one that would cost $1,000 to address, certainly is an appropriate subject for discussion. Agents must educate their clients about the entire purchase process, including the inspection.”
Perhaps the most common stumbling blocks in today’s real estate market are short sales, where the seller’s outstanding mortgage debt exceeds the market value of the home. In some cases, there may be several lenders involved, and all lenders must sign off on the purchase price if the seller is to be released from further financial obligations.
“Ten years ago, I doubt I did one short sale a year,” said Tim McCaslin. “Now, banks have entire departments that do nothing but work on this type of transaction, and our office handles dozens of them annually.”
With such a large volume of transactions and with multiple lenders frequently involved, short sales can take months to complete. As a result, some buyers lose patience and walk away. In other instances, the lenders will decide not to grant the short sale.
To minimize that risk, noted McCaslin, it’s crucial to know upfront what documentation the lender requires, what the lender’s criteria are for approval, and how the documentation should be delivered. Most of all, he noted, agents have to follow up to make sure that lenders come to a decision as promptly as possible.
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Contact
RE/MAX Northern Illinois
Laura Ortoleva
847 428 4200
www.illinoisproperty.com
Laura Ortoleva
847 428 4200
www.illinoisproperty.com
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