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What To Know: Transitioning from Renting to Buying

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It’s time. You’re ready to move on from following your landlord’s rules and ready to purchase a place you can call home. Follow these steps to make transitioning from renting to buying as easy as possible.

Consider Your Financial Situation

While buying a home may be a better way to build wealth, buying a home is a big financial decision. Take the time to consider your goals and plans for the future, and ask yourself some of the following questions

  • How will my finances look different if I buy as opposed to rent?
  • Do I have the means to maintain a home and the repairs that come with it?
  • Will I be able to make monthly mortgage payments?

Understand the Full Cost of Owning A Home

When you purchase a home, you need to pay more than just your principal and interest rates. Also lumped into your mortgage payment is what’s known as PITI:  principal, interest, taxes and insurance.

You’ll also need to consider the extra costs associated with owning a home, including your down payment and closing costs when you first purchase your home, as well as other monthly payments like utilities and other maintenance needs.

Get Your Homebuying Team Together

When you’ve determined that you’re ready to buy, it’s time to put together your homebuying team who will help guide you through the transaction with ease. This includes a REALTOR®, lender, attorney and inspector. Click here for more details on these individual’s roles during the homebuying process.

Start Your Search

We’ve gathered five easy steps to follow in the beginning stages of the home buying process to make the journey to your new home as easy and seamless as possible. This includes creating a plan, researching, finding a REALTOR®, choosing a loan and getting pre-approved. Get more information on these important steps here.

4 Ways to Price Your Home Like A Pro

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Your home is a major investment in time, money and memories, so understandably, selling it can be an emotional process.

It’s important to lean on your REALTOR® for guidance. After all, this person is your go-to industry expert who is invested in helping you sell on your timeline and for the best possible ROI.

Still nervous about the pricing conversation? We’ve created four pro tips to help you through this process.

1. Higher Isn’t Always Better

Be strategic in your pricing and don’t list too high – that could scare away potential offers!

The longer your house sits on the market, the less likely you are to get your asking price. Buyers are more likely to negotiate a deal on a house that’s been listed for a significant stretch of time. A price-to-sell strategy will give you leverage, options and exposure to potential buyers.

2. Know The Local Market

How did similar homes in your neighborhood sell? These comparables (also called “comps”) play a big role in your own home’s price.

Your REALTOR® should run the average sale price for homes in your area. When selecting comps, REALTORS® generally filter properties within a one-mile radius of your home that sold in the past 90 days. Comparable homes will be similar in age, location, square footage and number of bedrooms/bathrooms.

Based on these results, they’ll pinpoint the differences and assess why price reductions did or didn’t happen. This nuanced understanding is invaluable, particularly when measuring the unique aspects of your home.

3. Upgrades Don’t Always Mean More Money

Buyers want a home they can:

  1. Picture themselves in, and;
  2. Easily make their own.

Help spark their imagination with neutral updates. Upgrades based on specific taste can sometimes devalue a home based on personal buyer taste and preference.

For example, just because you spent $40,000 to update your kitchen doesn’t mean you get to add an extra $40,000 to the listing price. Research from the National Association of REALTORS® states you might recoup 59% of your costs, based on the national average of kitchen upgrades.

Talk to your REALTOR® about what you can do, or have done, that positively affects your home value and listing price.

4. Keep Your Emotions in Check

Don’t let pride, sentiment and nostalgia mislead you!

According to the National Association of REALTORS®, the wrong price can drastically delay your sale. That “fresh factor” tends to wane after just 30 days! Therefore, it’s important to listen to your REALTOR® about your pricing strategy.

Their unbiased perspective combined with knowledge of the market and real estate inventory will help you walk away from the closing table feeling confident in your transaction.

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A Beginner’s Guide to Understanding HOA Fees in Chicago

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If you’re buying a condo or townhouse with commonly shared areas or amenities, the property is likely run by a homeowner’s association (HOA). The fees you pay to the association, otherwise known as HOA fees, go towards the ongoing and future maintenance of these amenities and spaces.

Why Do HOA Fees Vary So Much?

The fees can be collected monthly or yearly, and the amount is influenced by a number of factors:

  • The size of the condominium
  • The age of the building
  • Included utilities
  • The amenities or services provided
  • How much is being set aside in reserves
  • The size/square footage of the individual unit or property

Unlike co-ops or townhomes, everyone who owns a unit in the condo building chips in money to take care of the communal spaces. In Chicago, historical buildings and buildings with high-cost features like elevators and pools are more likely to have higher fees.

BUYER FAQ: What is a co-op?

Unlike a condo, you aren’t buying an individual unit. Instead, you buy shares in a corporation that owns the entire building and get a stake-hold to a specific unit. Services will still be bundled into singular community payments like HOA fees. LEARN MORE

BUYER FAQ: Where can you find the breakdown of HOA fees?

Ask your REALTOR®! They can provide the full list of included services from the listing.

What’s The Word On Reserves?

An HOA payment is divided into two major areas: routine maintenance costs and savings for the association’s reserves. These reserves are applied towards “capital expenses” which are typically large-scale or emergency in nature. For example, repairing or replacing the roof is a common reason to dip into reserves.

The reserves are intended to help cover the remaining costs the building insurance doesn’t cover. If the reserves aren’t enough, then a special assessment may be implemented. Even though your HOA fees will include building insurance, it’s highly recommended, and often required, that you get homeowners insurance for your individual unit and personal property.

Luckily, large expenditures like replacing the furnace or the roof are spaced out over many years. When it’s time to use the reserves or mandate a special monetary assessment, the homeowners association will vote on what to do.

Who Runs The Homeowners Association?

The homeowners! Typically, the association board members are elected from within the residents by all the residents in the building. During the regular HOA meetings, homeowners can discuss big projects or issues. When major decisions need to be made — like dipping into the reserves — all homeowners vote on it.

The board follows and implements official rules, bylaws and processes. These are sometimes called covenants or CC&Rs (Covenants, Conditions & Restrictions). CC&Rs determine what kinds of changes can be made to the exterior of your home, determine if you can own pets (and, if so, what kind), state what qualifies as a quorum on major projects in need of a vote and so on.

Buyer FAQ: What is the City of Chicago Condo Ordinance?

Chapter 13-72 of the Municipal Code of Chicago is the City of Chicago’s Condominium Ordinance. This is an official government document that protects the rights of the tenants in condo buildings. You should get a copy from your REALTOR®.

Buyer FAQ: When will you receive a copy of the bylaws or CC&R to review?

The condo association’s documents will be shared with you when you enter the attorney review period. Ask your REALTOR® to provide a complete journey of the transaction!

So, Are HOAs and HOA Fees For Me?

In Chicago, HOAs are a common entity. Explore different neighborhoods and building types if you’re interested in a condo but would like to target a specific price point in monthly HOA fees.

Here are some helpful considerations you should make as a prospective buyer so you can evaluate if a building with an HOA is the right fit for your living style:

  1. How do you prefer to pay for maintenance for your home – are you comfortable with making a monthly deposit for a future expense or with paying out of pocket when the emergency or need arises?
  2. How does something like a monthly HOA fee factor on top of your estimated monthly mortgage payment?
  3. What sorts of utilities are you comfortable being bundled into these fees?
  4. How important are lifestyle amenities like gyms, pools and common kitchens?
  5. How much freedom or autonomy do you want to make changes to your home?
  6. Do you have a preference between owner-occupied or investor-owned buildings?
  7. Do you plan on turning your home into a future investment property?

When in doubt, ask your REALTOR® about HOA fees during the homebuying process.

5 Financial Questions To Ask Yourself Before Buying A Home in Chicago

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Finances are typically the most intimidating part of the homebuying process. So, here are five financial questions to ask yourself so you feel as empowered as possible.

#1: How Are Your 4 C’s?

Let’s look at loan eligibility or “buying power.” Most lenders evaluate a person’s buying power based on four elements called “the four C’s.” They are capacity, capital, collateral and credit.

Before you buy a home, make sure you are well-versed on the status of or know where and how to check on these.

  • Capacity: This is your ability to take on a mortgage or pay back a loan. Income, savings and monthly debt payments are some of the factors that affect capacity.
  • Capital: This is the amount of money or savings you have readily available. Think of it as your personal reserves that are not tied to income. Closings cost funds and your down payment funds are types of capital!
  • Collateral: When you take out a loan, this is the monetary value of the property you’re securing against it.
  • Credit: This is based on your credit score and history. A lender wants to know if you have a history of paying other debts on time and in full.

#2: Who’s On Your Team?

When you’re ready to buy a home or begin planning for a purchase in the future, assemble a team of professionals who will have your back and provide expert counsel. They include:

  • A Lender
  • A Real Estate Attorney
  • An Inspector
  • A REALTOR®

#3: What’s Important To You In Your Home and Neighborhood?

Begin creating a list of home and neighborhood features you consider non-negotiables.

For your neighborhood, rank access to public transportation, parking, green space, retail and restaurant density and proximity to schools or hospitals. Depending on what you prefer, this will narrow down building types located in neighborhoods that include your must-haves.

For example, several neighborhoods in Chicago are known for specific architectural eras. Bungalows, two-flats, greystones and courtyard buildings all require different financial considerations when it comes to maintenance.

For your property, consider cost-associated expenses like central AC, laundry, elevators, private outdoor space like porches or backyards and parking garages. It’s easy to just think of the desired number of bedrooms or bathrooms, but these aren’t the only features that will influence the cost of the properties that will fit your needs!

Once you have your ideal neighborhood and home in mind, you can begin to get an idea of home prices in those areas.

#4: What if…?

Look at your financial ability to handle emergencies, life changes and other “what if” situations. Build an untouchable emergency fund with at least three to six months of monthly expenses shored up.

Not only will this give you a peace of mind when you buy your home, it will also boost your capital and likely positively influence your buying power.

Don’t wait to ask yourself what if! Take charge of your finances with these hypotheticals.

#5: Where Do You See Yourself Five Years From Now?

Take a zoomed out look at your professional and personal goals, then apply your housing needs to these milestones. Do you see career changes or promotions in the future?

It may be to your benefit to consider a property with more space than you presently need, because you anticipate having children or getting married. Does the neighborhood you like now sound like it will still be enjoyable to live in or fit your lifestyle growth?

It may also be to your financial benefit to wait at least five years for your home value to increase or for you to build equity or ROI on your investment. When in doubt, ask your REALTOR® what kinds of life milestones in their experience influence home purchase decisions.