RE-DIRECT

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Re-direct

Please visit barringtonlocal.com for current entries.

How Much Earnest Money Should We Offer?

This is a question clients frequently ask me. The general rule for our area is 1-2% of the list price. If you are low-balling, it is generally better to offer more earnest money so that the sellers understand that you have the financial resources to pay for the home (it is just that you disagree with the listing price).

If you have a strong pre-qualification letter or pre-approval letter with at least 10-20% down, you can offer less earnest money. However, if you are putting that much down, you might as well use a portion of that for earnest money and offer less in your purchase price. (Remember, your earnest money goes toward your payment at closing).

These are just a couple strategies. The amount of earnest money you offer is one variable among many when you’re putting an offer together. As you weigh different options and limitations, the appropriate amount of earnest money to be put forth becomes clear.

One more thing: I always recommend giving only a small percentage of the earnest money at contract acceptance, i.e., after the sellers sign. The larger balance of earnest money should be deposited with the listing office only after the home inspection and attorney review process has been completed. That way, in the unlikely event that the home inspection goes badly, the buyer has less money tied up in escrow. Sometimes it takes a week to get a refund of the earnest money. If the seller protests (which rarely, rarely happens) it could take much longer.

Laura Cannon

The Best French Toast in the Barrington Area

Life in the suburbs can be a little boring sometimes, but I am o.k. with that. I try to keep my life as drama-free as is reasonable. So, one of my favorite things is brunch. This is a low-pressure, low-expectation meal. And, after trying just about every place in the Barrington-Palatine metro area, I’ve settled on Egg Harbor in downtown Barrington.

Egg Harbor is one of those restaurants that’s always busy, so you know it’s good. But, the wait is usually no more than 10 or 15 minutes.

This weekend is a non-brunch-home-improvement-project-#52-kind-of-weekend for me and Jeff (God help us!). But, if you have time and are out exploring the area, I recommend the French Toast at Egg Harbor. They have good coffee, too.

Laura Cannon

Cook and Lake Counties: First Quarter Report, 2008

First quarter reports are out. Well, there are no huge surprises, but one little surprise. Sales were down from last year, way down: -29% in Cook County and -29% for Lake County. We all saw that coming. And, the average sale price in Lake County was down 2.5% from last year. Again, that was expected.

But, the average sale price in Cook County was up 5.9% over last year. –Not bad for a correction! Heck, that is nice appreciation! I imagine that appreciation will flatten out a little over the coming months, but it does demonstrate the strength of our market.

Once again, we are reminded of how localized real estate is. National headlines are only marginally helpful in gauging local market conditions. Our home values have been hanging tough.

On the other hand, one could argue that the volume of sales wouldn’t have been so low if prices had come down more, or “corrected” more. I don’t know; it is difficult to speculate on causes and effects here. Regardless, as a homeowner, I feel good about the value of my home. And as a buyer’s agent, I feel secure in telling my buyers that they are making a good investment in the Barrington-Palatine-Inverness area.

Laura Cannon

Getting a Feel for Barrington

I meet a lot of people at open houses from Chicago and from out of state. They’re in town to explore Barrington, and I often send them to my blog to find out more about real estate in the area. But, the best way to get to know Barrington is to drive around. Below are a few of my favorite places.

Ridge Road between Lake Cook and Plum Tree: Five minutes out of downtown Barrington and you feel like you’re in another world. This hilly, woody road hugs horse farms, prairie and ponds. It is my favorite road in Northern Illinois. If you’re feeling adventurous, turn off on Oak Knoll and follow it for a couple miles back toward Lake-Cook. Or, head deeper into horse farm territory on Spring Creek.

Another road I really like is Otis Road. From Dundee, head west on Otis. This road is especially beautiful in the winter.

In the summer, Cuba Road is in all of its glory. From Cuba Road and Northwest Highway, head east as far as it feels good.

Hungry? Stop for a hot dog at Kookers on Northwest Highway just west of 59/Hough Street.

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For a more urban, historical scene, take a quick jog from Hough and Hillside, east on Hillside. To see more Victorians, turn off on any of Hillside’s perpendicular streets; I like Cook Street.

For a longer ride, take Plum Tree west from the intersection of Plum Tree/Cuba/Northwest Hwy.

There is a lot more to see in Barrington, Barrington Hills, South Barrington, North Barrington, and Lake Barrington. But, this will get you started.

Laura Cannon

A Personal Note for Buyers Waiting for a Crash in the Real Estate Market

My husband and I bought our home in the fall, and we are just now finding out what master gardeners the previous homeowners were. Perennials are popping up everywhere. My little dachshunds are running up and down the yard and in and out of the flowers. This may be one of my favorite springs ever. Our new home, mostly our new backyard and patio, brings us a lot of joy.

But, now to the topic of money: Do you regret buying in the fall? Don’t you wish you had waited until the market crashed? A friend of mine asked me this the other day. I couldn’t be more certain that the answer is “no.” We got a good deal on our home, and we love it. We weren’t buying to flip or to make an immediate profit. For us, buying a home had a financial dimension to it, but it was only one of many factors we considered. The number one consideration for us above all others was the neighborhood. Heck, we bought a home with the ugliest brown exterior you’ve ever seen. Ick! It’s awful. But, we loved the location of the home, the neighborhood, and the possibilities it offered us for a long-term enjoyable investment. (But, we are calling painters to have the exterior re-painted!).

We are also glad we didn’t wait for a crash, because there is not going to be one, –at least not in the Barrington-Palatine-Inverness area and its immediate environs. What I expect is just more of the same: continued low appreciation for a couple years, then a return to normal appreciation.

There are misperceptions in the market today: people think that just because the volume of sales is way down, prices must be tumbling, i.e., down from previous years. However, so far, the median home sale price in the Chicago Metro area has been stable; for 2007, the median sale price increased 2.4% (cf. entry 2/24/08). And, even this March, when sales were down an abysmal 29% in the Chicago Metro area, the median sale price was still up 1.2% over last March.* There have been market crashes in different areas of the country and even in various areas of Illinois, but our pond-laden, berm-spotted neck of the prairie has been pretty stable.

This does not mean that there are no great deals in the market. There are! The inflated market of a few years ago is in a major correction, and this correction is causing a considerable amount of market flux and confusion that is not apparent in statistical averages. But, you have to be knowledgeable, lucky, and patient to get a great deal (cf. entry 1/18/08, Home Sale Anomalies in Barrington and Palatine). Regardless, however, some buyers care more about getting a coveted piece of property in an amazing neighborhood near their favorite schools than getting a bargain. “A good deal” is a very relative term.

Today, I estimate that my home is worth just a little more than what we paid for it in September. It may have gone up in value because of various remodeling projects we’ve undertaken, but for now that is the major force behind any substantial appreciation. Still, we feel fine about our investment. We don’t plan to move for a while. Life is good on the patio.

*All data from IAR News Release 4/22/08

askforlaura.com

Have the March Stats for Cook and Lake County Come Out Yet?

LC (Laura Cannon): Yes.

IP (Interlocuter): So, how were they?

LC: Eek. Not great. I think April numbers will be better.

IP: So, how bad were they?

LC: Well, let me start with the good news: In Cook County, sales were only down about 26% over last year.

IP: What kind of spring bounce is that?!

LC: I see your point, but keep in mind, this year March was more of a winter month than a spring month. So, that was pre-bounce. And, 26% down over last year was still better than the stats for the Chicago Metro Area for February and January of this year. So, indeed, we did see some pre-bounce momentum building.

IP: Did you just say “indeed”?

LC: Yes.

IP: Whatever. Anyway, what is the bad news?

LC: Lake County.

IP: Lake County. How so?

LC: Ugh. Do I have to tell you?

IP: Isn’t that the point of this charade?

LC: Fine. March Sales were down a cool 38% over last year.

IP: Ewww, that sounds bad.

LC: Yeah, that is bad. Good for buyers, but bad for sellers.

IP: Does that include Barrington?

LC: Yes, a large part of Barrington is in Lake County; however, the data is somewhat skewed by the more rural areas with low population density. Those areas have been hit harder than Cook County. Barrington, being on the edge of Lake County, has not suffered as much as areas further out.

IP: What’s so great about Cook County?

LC: Good point. Nothing with regard to congestion and county government. But, Cook County is where the jobs are. And, despite national economic concerns, the job market in Cook County is still o.k.. As long as there’s work, the housing market may be weak, but it is relatively stable long term.

IP: Are you implying that Lake County is unstable?

LC: Not at all. It is just taking a bigger hit right now. Long term it will be fine.

IP: What makes you think you know so much?

LC: Actually, I am not sure that I do know. This is just what seems to make sense. Besides, it is pretty basic economics.

IP: O.k., so what’s next for the local area?

LC: The numbers will be better for April; I can feel it. I’m busy; the office is busy. April and May should be better. After that, demand will recede again. And the uptick in demand for those two months is not sufficient to substantially reduce current inventories.

IP: Are you saying it’s a buyer’s market?

LC: Yes. Supply is high; demand is low. Could the economics be any simpler?

IP: So, it is a buyer’s market.

LC: Indeed.

IP: I guess I probably already knew that.

Laura Cannon

Barrington and Palatine: There is Still a Spring Market Bounce

There is no way to not make this entry lame. I am posting just to say I won’t be posting for a few more days. Sorry about that. I’ve been really busy. This spring market feels like a sale at Macy’s in December: confusion, but some great deals if you have the time and patience to sift through the inventory. Despite the economic news, our area is still having its annual spring market bounce.*

More soon, I promise!

cf. Mortgage Applications Up!

askforlaura.com

2008 Spring Market Report; Who is buying?

I haven’t been able to post for a while, and this one will have to be short. The spring market is now in full swing. After sales were down 34% and 27% in January and February respectively for the Chicago Metro area as compared to last year, we are on a rebound month.* Given sales trends in my office, I expect April sales to be up a little bit.

Who is buying? I can only speak for my slice of real estate reality, but I am seeing a lot of high IQ buyers right now. Gone are the heady days of speculative bidding where a buyer in a multiple offer writes that he will pay one dollar over whoever makes the highest bid, oblivious to the real consequences of such a bid, focusing only the idea of “winning” the home with the highest offer. Eek!

Instead, I am seeing a lot of quietly intelligent move-up buyers. I don’t want to over-generalize, but it seems like a lot of MBA/engineering/techy types are in the market, i.e., analytical thinkers. These Midwestern-Warren-Buffett-style buyers are quietly shopping on the internet and stopping by open houses. He or she, or frequently he and she (i.e. couples), tend to be more cautious, less impulsive, and very well-read about economic trends. This is not the aforementioned flashy-speculative type who would outbid anyone four years ago; it is a buyer who is more than happy to walk away from a deal if he or she does not get the right price. They’re not in a hurry, but they also know how to recognize an opportunity when they see one.

I like working with these buyers. They make negotiations tense, but rewarding. When I have a buyer who is truly willing to walk away, I know we can get a good deal. It may not be on the first home we make an offer on, but ultimately that buyer, as long as he or she has the emotional stamina, will do well. The key to getting your price as a buyer is the ability to say no and mean it. Sellers and listing agents can sense when a buyer is bluffing. On the other hand, they will give up more if the buyer is looking around the corner at an alternative purchase. This gives me a lot of power to wrangle out favorable terms.

I also enjoy my Buffettesque buyer because I can learn from him or her. They enjoy talking shop. I like to do research, and the savvy move-up buyer is interested in the data. Furthermore, this buyer will also bring her experience and perspective to the process in a manner that enriches my practice. They ask difficult questions. And, they understand what risk is. This makes my job easier because the concept of risk is almost impossible to explain. It seems easy enough, but a intellectual understanding is not as important as viscerally getting it.

So, that is my slice of real estate reality. The market is not crazy, but it is gaining momentum. It is hardly a time I would advise down-sizers to sell, but it is a good time for buyers with good credit profiles to benefit from low interest rates and low prices.

*data from Illinois Association of Realtors, Market Report, 4/4/08

Laura Cannon