Vivid recollections of your first job in downtown Chicago come racing back; on your own, living in that tiny apartment, and outside your door were a plethora of cool restaurants, clubs, theaters, and it was so exciting to be living in the city. Flash forward 30 years. Your youngest kid is still at home and starting college in the fall, and maybe one or two kids are finishing school at the beginning of summer.
This could be the perfect time to start looking for that city property. But where do you start? What neighborhood should you consider? Condo or Single Family Home? Or even Multi-unit investment building? With “Good Inventory” shrinking, prices still at 2003/2004 levels, and with rates at sub 3.75% (as of this article’s release), this may be that perfect storm. (Realtors consider “Good Inventory”, prime real estate located in desirable neighborhoods priced according to the most recent sold comparables)
The number of people moving back to the city or looking for a second home is expected to grow again since the real estate recession is moving to completion. Supply is withering down to less than four months in certain markets. Many buyers are now waiting on the sidelines until the right property hits the market. Additionally, buyers are making over ask price offers because they know other buyers will be forthcoming.
So what should you think about when looking for property? Here some helpful tips you should consider when purchasing that city home.
1. Find an experienced agent who knows the local market and knows neighborhood characteristics of the city. That knowledge will assist your agent in matching you to the right property and location.
2. When interviewing your real estate agent, make sure they tune in to all of your real estate needs and understand what exactly it is you are looking for in a home.
In addition, your real estate agent should assist you in gaining an understanding about the market, and be able to provide the most up-to-date property values within a given area.
3. Many buyers complain that when they search on some real estate websites, the property they are interested in has been under contract for days or has already been sold.
Have your agent set you up on an automatic Multiple Listing (MLS) search for a specific type of property you are interested in buying. You will receive the most up to date up-to-date property listings and any recent listing changes. Other real estate sites may not be as fast to update their listings since they are fed MLS information later.
4. Get pre-approved for a mortgage if you are not paying cash. The process of getting pre-approved is getting a bit more seamless since the housing bubble, but still requires some patience. Having that pre-approval in hand when you write an offer on a property is critical, especially if it’s a property that just came to the market and you want to buy it. Your real estate professional should be able to provide you with several mortgage broker contacts.
5. Don’t be afraid to ask any and all questions. Make sure you get as much information as possible about the property you are buying. For example, have your real estate agent find out what with the most recent budget and reserves are in condo buildings. This will assist you in determining whether or not the building is financially sound. Another thing to check on is whether any major work that’s been done has been completed with proper permits. If it is found out that the property you buy has inadequately performed permitted work, you as an owner of that property could be found liable and fined for that work if later inspected.
6. Remember that in the city of Chicago, there is a Transfer Tax fee due at closing by the purchaser. Currently, the fee is $7.50 for every $1000 of the property’s sales price. Factor this in when calculating your closing costs. Your lender will give you a Good Faith Estimate when you apply for a loan.
7. Talk with your trusted financial advisor or tax accountant about what you can afford to purchase, factoring in any additional assessments you may have to pay in a condo building, what additional real estate taxes there are and what, if any, tax benefits there are to having a second home. When you sell your primary residence, you will be able to switch your homeowners exemption over to your new residence.
Make it a great year for buying a city home and become an empty nester!