What Would An Agent Do? Long-Time Agent as First-Time Home Buyer

Guest post by Greg Whelan, Agent, Near North Side

Deciding It Was Time to Buy

After helping more than two hundred people buy and sell homes during my last decade as a real estate professional, I decided last spring that it was time to become a homeowner myself.  I had been quite content renting my very reasonably priced apartment for the last several years, but I was finally starting to crave more space. After reviewing available rentals, I realized that renting the type of apartment I wanted would cost nearly as much as a monthly mortgage payment on a comparable place.  It was a perfect storm: low interest rates and declining home prices combined to make home ownership an affordable option.  It just felt like right time for me to buy.

Touring and Negotiation Processes

I had my eye on a house in the Ukrainian Village that my friend had lived in a few years ago. It had been pulled from the market as a short sale and was in the process of becoming a foreclosure. When it was finally relisted as a foreclosure in September, I got in to see it right away.  After spending an hour and a half touring the house, I realized it just wasn’t what I remembered it to be. It had been pretty badly beaten up in the foreclosure process and needed new floors and windows among many other repairs. This was a lot more work than I wanted to do, and it made me realize I really wasn’t in the market for a fixer-upper.

I expanded my search a couple neighborhoods up the EL to Logan Square where I found the two-flat (a two story building with separate apartments on each floor) I eventually bought.  After touring the home, I wandered the neighborhood at various times of the day and night, on bike and on the EL. I took the advice I give my clients: I ate at the little café on the corner, walked to the EL, and had a drink at the neighborhood bar to make sure I really liked the location.

I did a Comparative Market Analysis (CMA) and found that the home was significantly overpriced, so I came in with what I deemed to be a fair offer at twenty percent below list price. I justified my offer with comparables, knowing that the seller might take offense at my “lowball” offer. Next ensued a week of fierce back-and-forth negotiations culminating with us agreeing to meet halfway at ten percent off the list price. The process taught me a lot about myself and my role as an agent. I repeatedly found myself becoming angry when the seller wouldn’t respond quickly or agree to my preferred terms (or simply accept my offer). When I’m representing a client, I know that to them, it’s way more than just a deal, but coping with my own feelings gave me a  greater understanding of how important my job is to not only represent my clients in a professional manner, but first and foremost to advocate for them and their feelings.

Inspection

I wish I could report that once we had settled on a price it was smooth sailing. To the contrary, the inspector uncovered several minor items that needed repair and one huge problem: the underground crawl space was not sealed off, leaving the house un-insulated and vulnerable to pest infestation.  For me, this was a deal breaker, but the seller refused to pay the cost of sealing it off.  I threatened to back out of the transaction using the inspection contingency and told the seller I’d be happy to watch the home sit on the market through the winter. The seller backed down and agreed to cover the cost of this major repair, and the deal moved forward to a successful closing.

What I Learned

As a Redfin agent, advocacy has always been a core value of mine, but the emotionally charged process of negotiating on my own behalf instilled in me a much greater appreciation for the fact that my role as an agent is not just to be a cool, calm and, when necessary, fierce negotiator. My most important task is to advocate for my clients to not only get them the best deal possible, but also to get them what they want out of the deal, whether it’s a fair price from which they can’t budge or a repair they can’t live without.

After devoting so much time and energy in helping others become homeowners, I’m proud that I can now call myself one too.  I called my mom as I was pulling into my new garage after closing and said to her, “Coolest thing about buying this place, I got a house for my car!”

Services and Service Providers I Used

Inspector: Larry Robbins
Lender: Erik Johansson
Attorney: Jason Schram
To List Rental Unit: Craigslist
Tenant Screening: TransUnion SmartMove

DuPage County Single Family Home Prices Up 6.8% in January; Home Tours Skyrocket

The news is pretty typical for the month of January: sale prices for single family homes (SFH) in almost every county across the area fell last month. This is what we expect to happen in the wake of the holidays and the season slowing down with the colder weather.  But in DuPage County, prices increased by 6.8% from December to January.  Inventory in DuPage hit its 2011 bottom in December when the number of SFH for sale dropped below 4,000.  Redfin’s DuPage Agent Patrick Lusk explains that “low supply caused fierce competition over the homes that were available, and the bidding wars that ensued drove prices up the following month when the transactions closed.”

Meanwhile, January was a huge month for Chicago area buyers.  The weather was mild, so people who have decided that this is the year they are going to buy skipped their winter hibernation and got a head start on the market.  “If demand continues on its current path,” Patrick said, “we can expect prices to take similar hikes, especially if inventory doesn’t pick up dramatically.”

For a complete picture of the local market’s most recent stats and trends, download the Redfin Market Report here: Redfin-Chicago-Real-Estate-Market-Report-January-2012. Want to know how the Chicago real estate market is doing compared with the rest of the country? Take a look at the Redfin Heat Index:

The Redfin Heat Index (Beta) uses listings, sales, and price changes to determine the relative “heat” of a given real estate market. We set a baseline Heat Index of 75.0 at 6.0 months of supply and +5 % price change year-over-year.
Every percentage point increase in prices above the 5% baseline will increase the heat index by two points, every percentage point decrease in prices below the 5% baseline will decrease the heat index by two points.
Every one month of supply increase above the 6.0 baseline will decrease the heat index by seven points, every one month of supply decrease below the 6.0 baseline will increase the heat index by seven points.
Here’s the formula:

• MOS = Months of Supply: End of Month Inventory / Closed Sales in the Month
• $YOY = Year-over-year change in the median price per square foot.
• Heat Index = ((MOS – 6.0) * 7) + (($YOY – 5%) * 2) + 75

Case-Shiller: Another Winter for Home Prices

It’s time for our monthly check-in of the S&P/Case-Shiller Home Price Indices (HPI). The Case-Shiller data is generally considered to be the most reliable measure of overall home price changes for a region, since they only consider repeat sales of homes when calculating their index, instead of looking at all the homes that sold in a given month.

For the full source data behind this post, hit the S&P/Case-Shiller website. For a more detailed explanation of how the Case-Shiller Home Price Index is calculated, check out their methodology pdf. Also remember that the data released on the last Tuesday of a given month is for the period two months prior (i.e. – November data is released in January).

Here are the basic Case-Shiller stats for the Chicago area* as of November:

Nineteen of the twenty metro areas tracked by Case-Shiller saw a decrease in their HPI between October and November (the same as between September and October): Only Phoenix saw an increase, for the second month in a row. This month Chicago bumped Atlanta out of the bottom spot, falling 3.4% in a single month.

Here’s a look at the latest local tiered data, back through 2000:

And here’s a closer look at the recent changes, with the vertical and horizontal axes zoomed in to show just the last year:

All three of Chicago’s tiers fell in November. Month to month, the low tier was down 4.9%, the middle tier fell 2.0%, and the high tier decreased 2.9%.

In this next chart, I’ve visualized the month to month trends of all twenty Case-Shiller-tracked cities. Green and above the horizontal axis if they were increasing in the month charted, red and below the axis if they were decreasing. I’ve excluded 2000 through 2004 since they looked largely the same as 2005 (mostly green).

Just five months ago, all twenty cities saw month to month gains. Now just one is not the red.

Read the rest of this entry »