Should I Buy or Should I Rent?

 

 

Ah, the age old question in real estate. Should I buy or should I rent? Well, if you ask any standard Realtor they will tell you BUY! But, if you haven’t figured it out yet I’m not your standard Realtor. I try not to drink the Kool-Aid and instead give you unbiased and practical advice. So in this quick blog I’d like to ask you some questions to help YOU figure out if you should Buy or Rent in Chicago.

Do you know where you want to live for the next 2 to 3 years?

This may sound like an obvious question, but it is a question most people don’t ask themselves. They may want to buy for the purpose of buying, but may focus more on what they can afford versus where they truly want to live in the next 2 to 3 years. So the question I ask you is, where do you want to be? Can you see yourself living there for the next 2 to 3 years? If so, then you’re at least one step closer to buying.

Can you afford home ownership?

Some sales people may say “You can’t afford NOT to buy!” Umm…yeah, whatever…that’s not the right answer. What I mean by, “Can you afford home ownership” is after purchasing the home will you at least have some sort of a financial cushion in the event there are any issues with your home. This can be small things like needing to replace an appliances to larger items such as roof repair on a single family home or a special assessment in a condo building. As long as you have some sort of cash cushion then you’re again one step closer to buying.

Is your family situation stable?

OK, this sounds like an odd question so let me explain what this means. Are you in the process of getting married and thinking of having kids in the next year? If so, then you might want to be looking to buy a place larger than a studio! Sounds like a silly question but you’d be amazed at how some people jump into things. Take your time to consider this. Let me give you good example of clients of mine who did the right thing.

I had a couple contact me off my blog about 4 years ago. They were an absolute delight to work with. We got along extremely well. They were looking at 2 Bedroom condos in River North / Streeterville for up to 375k. However, as we were looking over a month or so, they also started thinking more. They decided to put the search on hold for a bit to decide what they wanted and needed for themselves. A year later we were back on with our search and this time they were married and planning to have a child. Their search criteria now changed to a 3 Bedroom with lots of living space in the areas of Lincoln Park and Lakeview and now they upped their budget. They simply took some time to think about their situation and then they made a wonderful purchase where they will definitely be happy for at least 5 years.

What are you willing to do with your property in the future?

I’ve had some clients who have purchased a property knowing that in the next year they’ll likely move out of town. They still wanted to buy because they planned to rent out the property if they moved and planned to keep it as an investment. If you think you might be moving soon then buying might not be for you, or it might be if you have different goals for the property you are buying. However, if you are thinking of buying and renting out your property then you need to make sure you plan accordingly and purchase accordingly.

What tax laws will benefit me?

The interest deduction is a major factor for many buying today. The ability to write off interest (please consult your tax advisor as everyone’s situation is different!) on your home mortgage is a motivating factor for many. How much will you actually save if you buy? For many this could help make or break the decision in whether or not you should buy.

What is going to make you happy?

Making money on your home is a wonderful thing but focus on where you will be happy living. Look for the maximum value, but remember your happiness is a big part of that value consideration. Would you rather live in a property where you make only 1 to 2% appreciation a year and be extremely happy or would you rather live somewhere that is not your ideal location, but instead have a great chance of return down the road. Everyone is different, but only you can answer that question for yourself.

In some instances people can only be happy if they can remodel their kitchen and make their home exactly how they want it, which is something you cannot do if you rent. So again, if this is you, you’re one step closer to buying.

It is only a decision you can make

It is not a decision your Realtor can make for you, or your friends, or your mother. It is only a decision you can make for yourself. Take all of the above into consideration and make an informed decision.

 

Paul Blackburn is a licensed Real Estate Broker and Realtor with @properties in Chicago. Paul has been selling real estate since 2007 and is a broker and trainer for the Skowron Group which has sold in excess of $100 million in 2016 alone. For further information or questions please feel free to contact Paul directly at Paul@pkblackburn.com

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What to watch for in Real Estate in 2017

What should we expect in real estate in 2017 across the Chicagoland area? Will 2017 prove to be a year full of growth in Chicago or will rising interest rates temper growth? Will rent prices decrease due to excess multi-family building or will demand rise and keep up with supply? We all have our own thoughts and opinions; I’m sure you know I have mine. However, regardless of your opinions of the future of the economy, Chicago real estate or the real estate market as a whole, here are a few things to keep an eye on in 2017 in Chicago real estate.

1) Interest Rates

The Fed raised rates in the last quarter of 2016 and is expected to do so two to three more times in 2017. Sub 4% interest rates for a 30yr fixed is no longer in our vocabulary, but how high will interest rates go? Keep an eye out for how consumers react to rising rates. While the economy appears to be very robust and we are at what is considered full economic employment, it will be interesting to see how rising interest rates affects home buyer sentiment. In order to get a feel for the market talk to Realtors and talk to mortgage brokers to see how rising rates are influencing their clients decision making process.

2) Increased programs for low down-payment buyers

In the recent year we’ve seen several new programs come out that are what I call, FHA alternatives. They’re essentially low down-payment programs or programs that give rebates or closing cost credits that allow you to purchase a place with as little as 3% down. As these programs gain more momentum and awareness it will be interesting to see a couple things

a) How long will these programs last

b) How these programs are influencing demand in certain price ranges and areas

3) Keep an eye on how rental supply will influence both the rental and sales market

Increased supply on the rental market can greatly affect both the rental market and the sales market. Rent prices have increased drastically in the past 5 years in Chicago but they’re currently peaking and vacancy rates have increased in multi-family. New buildings are offering concessions as high as 2 months free. With more than 4500 units coming to the market in 2017, will people put off buying in favor of taking advantage of rent concessions? What happens if not only concessions increase but rent prices decrease as well? This coupled with rising interest rates could have first time home buyers thinking twice.

4) Supply….

Depending on the price range you’re looking in, supply is still low relative to the amount of buyers in the market place. We’re seeing increased supply of new construction in areas such as Ukrainian Village and increased high end supply in the Near North area but besides this supply has remained low which has help prices increase over recent years. Keep an eye on two things

a) New construction has been selling at a huge premium. Watch it’s market time in 2017

b) Will we see more existing construction come on the market to compete with new construction in 2017? Existing construction has been selling much cheaper than brand new construction. With rising interest rates existing construction may be more appealing given its lower price point.

5) Everything is wonderful…keep an eye on everything wonderful

Unemployment is at all time lows. Interest rates are still at all time lows despite recent rises. Property values in prime neighborhoods are at 2006 levels. The equities markets are booming. Startups are everywhere. Getting VC funding for new companies is like taking candy from a baby. Everything is going well. Keep an eye on leading indicators in all sectors of the economy that may signal a slow down. In real estate I am specifically watching the following in Chicago

A. Market Time of both existing and new construction

B. Absorption rate (How long does it take to sell all properties on the market if no new ones come on the market).

C. Price to rent versus the price to buy the same property. Currently it makes sense to buy given the increased rental prices. If rent prices decrease this could become a slippery slope.

 

The above is not meant to be a negative outlook or a “debbie-downer” of the real estate market. Personally, I think there are some areas that are a bit over valued but others that are very much under valued. I think the Chicago real estate market is strong, however, I do believe we’re now in a normalization of the market where prices will increase minimally to moderately each year and I think we will see rent prices decrease in the coming years.

Does this mean I shouldn’t buy? No, it doesn’t mean that. In some situations some people maybe should not buy. In others they definitely should. Each persons situation is different and that is why working with a Realtor that is completely transparent and honest with you is always the best policy. Anyone who tells you that buying is always the best option is nothing more than a salesman.

 

Paul Blackburn is a licensed Real Estate Broker and Realtor with @properties in Chicago. Paul has been selling real estate since 2007 and is part of the Skowron Group which has sold in excess of $100 million in 2016 alone. For further information or questions please feel free to contact Paul directly at Paul@pblackburn.com

TRUMP TOWER IN CHICAGO -Now that Trump is President-Elect…

There have been many questions regarding Trump Tower in Chicago from the start of the 2016 presidential campaign and even more now that Donald Trump is the President-Elect. Since our group does a great deal of business in Trump International Hotel & Tower in Chicago I thought I would take the time to answer the real estate questions many people have asked in recent months.

Does Trump actually own Trump Tower (401 N Wabash Ave) in Chicago? 

Not completely. The building is broken up into two portions. The hotel portion, which Trump does own (although some hotel rooms are owned by individual investors) ends at the 28th floor.

The residential portion are individually owned condos and Trump no longer has any interest in the residential condos. These units start at 29 and run up to 89.

In short, Trump currently owns the majority of hotel rooms, the management company / brand that manages the hotel as well as all the convention and retail space in the building.

Will the name of Trump Tower in Chicago ever change?

Probably not. Trump has naming rights to the building and I don’t see him changing the name on his building.

Has the Trump election and presidency affected the pricing of condos in Trump?

It is too early to tell. The one thing we have seen is traffic drastically slow down on condos listed for sale in Trump. Most selling in the building at the current time do not NEED to sell (at least financially) so we haven’t seen any major price drops. Showing traffic before the election was very very slow. I think many buyers were concerned about values in the building so potential buyers wanted to wait on the sidelines to see what would happen to values.

Since the election traffic has picked up slightly for condos listed for sale in the building, but traffic is still slow overall.

Rentals are sitting on the market longer than usual, especially 1 Bedroom rentals which we’ve seen drop in price in the past 6 months. 1 Bedrooms would typically rent for at least $3,400 or higher (many in the $3,700 to $4,000 range). We’ve seen one unit rent for only $3,000 and another drop the price to $3,150 and still sit on the market.

Overall prices have not declined drastically, but there is apprehension among buyers regarding the future value of units in the building. On the rental end I think there are some people who simply do not want to be in the building because of the name (this is also true for some owners too). But, this is not the sole reason for 1 bedrooms having a difficult time renting. New construction rental buildings are giving Trump Tower a run for their money with excellent amenities and even hotel amenities such as my building, North Water Apartments, which is connected to the Loews Hotel.

Has hotel business declined?

I can’t speak for the hotel as a whole, but the hotel-condos that we represent are seeing the same or slightly better occupancy and room rates year over year (from 2015 to 2016). I do not know the numbers for November of this year yet, but November is historically a slower month for conventional style hotels.

Is there increased security at Trump Tower?

Yes. The increased security is nothing like you’ll see at Trump Tower in New York, but increased protests has caused the hotel and residential tower in Chicago to increase security and even close the garage to the public that is connected to the building. I haven’t had any major issues accessing the building with clients in recent weeks. However one of my clients actually got locked in the garage by accident due to the increased security measures.

 

 

Paul Blackburn is a licensed Real Estate Broker and Realtor with @properties in Chicago. Paul has been selling real estate since 2007 and is part of the Skowron Group which has sold in excess of $100 million in 2016 alone. For further information or questions please feel free to contact Paul directly at Paul@pblackburn.com

CHICAGO RENTAL BUBBLE ABOUT TO BURST?

The Chicago rental market has been on an upward swing since 2010. Downtown Class A rents are up 36% (on a per square foot basis) since 2009 according to Appraisal Research Counselors. But is the end near? I don’t know about you, but every time I speak with someone in multi-family or read an article regarding an apartment sale, I am feeling reminiscent of the 2005 and 2006 sales market. Before I go into a rant regarding the current state of the market, let us back up and discuss the rental market in Chicago over the past decade.

Rental prices sharply declined toward the tail end of the first decade in the 2000s for several reasons. When the economy was still ticking along rental prices remained flat or only saw nominal increases (in some cases decreases) due to the fact that mortgages were not only easy to come by, but cheap to get. Factor in increasing property values and the ability to gain quick equity and everyone and their dog was buying a condo. It made more sense to buy at the time and home ownership in Chicago was at an all time high (71.2% in 2006). Less renters and more buyers meant lower or flat rents and more vacancy in rental buildings. Once the economy started to soften at the end of 2007 and then drastically so in 2008 and 2009, we saw rents decline even further. The other item to remember is during the 2000s very little new construction apartment buildings were built. ALL developers were focused on condo buildings. In addition, some existing supply of apartment buildings were converted into condos (10 E. Ontario, 440 N. Wabash…think American Invsco and Crescent Heights). Now the year is the end of 2009 and 2010. People either 1) cannot afford to buy, 2) cannot get a mortgage or 3) are still hungover from the crash of the market and are afraid to buy. These people then are forced to rent. Remember what I just said about no new construction of apartment buildings in the past 10 years? Remember what I just said about apartment buildings converted into condos? Well, it doesn’t take a genius to figure out what happened – supply on apartments were low but demand was now high. Home ownership was dropping for the first time in decades and therefore rents started spiking.

Rent prices in 2007 and 2008 were quite low in Chicago. The rent increases of 2009 and 2010 and even 2011 were simply making up for lost time. Recovering back to where they should have been had the mortgage market not been flooded with such toxic mortgages that ended up contributing to not only the decline in rental prices but the collapse of the entire financial system. But then something strange happened…rents continued to increase and developers took note. Developers could not get a construction loan to save their lives to build a condo building, but if they wanted to build a 500 unit apartment building backed by secure rents…it was like stealing candy from a baby. Financial institutions could not wait to lend money to developers and developers could not wait to get back in the game.

Why would developers want to become landlords you ask? Are they not in the condo game? Don’t they want to sell? Well, here is a secret – developers are not in the landlord business. They have ZERO interest in being so. Once developers saw the increase in rents and what institutional investors were paying for these apartment buildings they knew they could build a building, with cheap money, partially fill it and then sell it off. Guess what – that is what almost all have done in Chicago. EnV (161 W. Kinzie), 111 W. Wacker, North Water Apartments…just to name a few, were all flipped for a big profit. Developers simply went back to what they knew how to do: build and sell.

The Chicago market LOVED it. After all there had not been any high end rental buildings built in quite some time and renters craved new construction. Each building that opened up after the next had better amenities and better finishes. Renters hopped from building to building and had no problem paying the exorbitant rents. Prices were increasing double digits year after year. Then more developers rushed in and we are sitting where we are today. The question we must now ask ourselves is “Is this market sustainable?”

Is this market sustainable? That is a good question to ask don’t you think? This was a question asked to developers in 2005 in which nearly 100% responded with “Yes….” and then gave some bullshit answer derived from misconstrued facts and skewed data. But, what about now? Will we see a market crash in rentals like we did before? Well…lets check out some facts.

Here is a list provided by Appraisal Research Counselors of new rental units added in downtown Chicago. Keep in mind we are only talking about downtown Chicago and only talking about top tier buildings.

2013: 2,750 units     2014: 2,000 units    2015: 3,100 units and projected in 2016 an additional 3,500 units and in 20017 an additional 4,500. 

This is only downtown Chicago. This does not count north side markets and this certainly does not count any suburbs.

Rents have continued to increase even as new supply has come on the market. There are many reasons for this. Millennials continue to rent as opposed to buy. Baby boomers are coming into the city and renting second homes or selling their home in the burbs and making their rental in the city their primary residence. Job growth in Chicago is steady (it is doing well, but not amazingly well) and lets face it, people love new construction. Home ownership has declined back to 1999 levels in the city of Chicago as well. These are all great factors and reasons why the market has done well, but this is not the only data that we should consider. The most important item to consider is the following: VACANCY. Vacancy is the ultimate determining factor. During the real estate boom of the 2000s the major factor that would have let you known the market was cooling off way ahead of a decline in prices was market time and number of homes on the market. We saw market time increase and number of homes on the market start to increase 1 year before pricing actually peaked. 1 full year…it goes to show you how slow the real estate market is to react to change. There are many reasons for this but the main reason is because most investors and many of us brokers in sales love to have blinders on and simply focus on only the good and not the bad. No one likes the bear in the room.

So, here is a fun fact for you. Apartment occupancy rates on a national level decreased for the first time since 2009 last quarter. Specifically in Chicago Class A (top tier luxury rental buildings) occupancy rates went from 94.2% in the 3rd quarter of 2014 to 93.7% in 2015. This may not seem like much of a change, only half a percent but it is drastic. In 2006 for instance, due to many apartment buildings being converted to condos, occupancy was at 97%. In 2007 and 2008 we saw occupancy dip to 91%. We are really only dealing with a small percentage range of occupancy between the lowest occupancy we’ve seen in a while and the highest. Therefore, a half a percent year over year is something to take note of.

So we have looked at occupancy and we saw it decline a nominal amount. What else should we be considering? Well, let us consider new units projected. Perhaps, if not many new units are coming online then the market will be fine.

Well, in 2016 and 2017 a total of 8,000 new units will be coming to market. This is more than 2013, 2014, and 2015.

During this winter I’ve seen more buildings offer concessions than I have in several years. I’ve seen rent prices at some buildings in downtown down 20% from their summer prices PLUS 1 month or 2 month concessions offered. Some will say “but prices always decrease in the winter.” While this may be true; what I would like to note is the amount prices have decreased this winter is more than years prior and the level of concessions have increased more than years prior.

Continue to bear with me here!

Restaurant Theory:  Pretend a new hot restaurant has opened up. During the “Hot” time of 6:30pm to 9:30pm getting a table is impossible. But you really want to try this restaurant so you go at an off peak time, maybe 5pm or 4pm or 10pm. You walk in and you notice how crowded the restaurant is during that off-peak time. You think wow, this restaurant is doing very well! Once that restaurant starts to loose its luster and is no longer as desirable any more, the first sign would be 4pm diners will stop dining. People will no longer wait until 10pm to eat dinner or want to start at 4pm because either 1) They don’t feel that inconvenient time is worth it or 2) They’re able to snag  reservations during peak times. Now, if you were just looking at the number of tables full between 6:30pm and 9:30pm you might think that restaurant is doing very well. You might think that the sky is the limit and this restaurant needs to expand! But what you’ve failed to realize is that there is already a sign right in front of you that demand is starting to taper off and that would be the fact that less diners are there during the less desirable times. If you only looked at the peak times then your understanding of the restaurant would be mistaken.

Obviously the rental market is very different from the restaurant business, but basic observations of supply and demand can be looked at in the same way. It is important to understand the leading indicators in the rental market. These leading indicators are occupancy rates (vacancy rates) and rent prices and concessions during the slow months of the year.

My Thoughts

If you’ve made it this far thank you for reading through my long winded blog. I’ll keep my thoughts short. The rental market party is over, plain and simply. It may take another 3 quarters for us to start to see price adjustments in the downtown market, but we will see price adjustments eventually. As occupancy rates continue to slide, especially among buildings that are now owned by institutional investors, they will have no choice but to lower rents or increase concessions to attract renters. I believe this will be most prevalent at the end of 2016 / beginning of 2017 as we head into next winter and see the new 2016 supply hit the market. Overall, I do not see a CRASH in rental pricing, but I do see a decrease on the horizon and I would not be surprised if we see rents decrease in Class A buildings by 10% over the next 2 years.

NORTH WATER APARTMENTS AT THE LOEWS HOTEL IN CHICAGO

North Water Apartments is located in Chicago’s Streeterville neighborhood; east of Michigan avenue and just north of the river at 340 E. North Water. North Water is connected to Chicago’s Loews Hotel which makes North Water Apartments Chicago’s first building to have only rentals and a hotel in one (The Aqua has rentals and condo). What makes North Water unique is residents enjoy private amenities and do not need to share their amenities with the hotel guests. However, you have many benefits from being connected to the Loews hotel which I will explain shortly.

North Water Apartments & Loews Chicago

North Water Apartments & Loews Chicago

I am going to give my review of North Water Apartments from my perspective of not only a Realtor, but also a resident in the building. I moved into the building at the end of April, 2015 only a few weeks after the building opened.

North Water Apartments is a fully amenity building. We have a phenomenal gym, cycle room, outdoor heated pool (they always keep it at 85 degrees) with sun deck, outdoor grills with eating area and outdoor TV.  We have a free coffee bar 24/7 and business area / conference room. There are two indoor lounges, both complete with kitchens, TVs and fireplaces. The lounge on the 50th floor can be reserved and the 50th floor also has a roof deck. Door staff is 24/7, dry cleaners / tailors are in the building and additional storage and bike storage is available as well. All of the above amenities are for residents only and hotel guests have zero access to them. That is the best part and is what differentiates this building from other hotel / apartment concepts not only in Chicago but in the country.

As the building fills up we will soon be able to order from the hotel’s room service…this can get addicting! You can access the hotel without walking outside which means you have access to 3 bars and a restaurant. Trust me, this can get quite addicting as well!

The units themselves are outfitted with what you’d expect from a higher end rental building. Wood Flooring, Quartz Countertops, SS Appliances. A few nice pluses: All the cabinet drawers and doors are self close. There are more outlets than you will know what to do with, including in the hallway closet! I am in an 08 tier which is the “J” unit. My unit has a HUGE walk in closet which is one reason we were attracted to this unit. We were moving from a condo with a 6 x 10 walk in closet and I’m happy to say this closet fits everything we have and then some.

I’m a big fan of the hallways in this building. Even though you are not in a hotel, the hallways make you feel like you are. It is always as disappointing feeling when I step into what looks like a nice building from the lobby, but the hallways disappoint. Here, no expense was spared.

Views, Views, Views!

There are 2 “main” views in the building as the building runs length wise north and south, meaning the majority of the units face either East or West. If you face east you get perfectly clear lake views no matter what floor you are on. Watching the fireworks at Navy Pier is not a problem at all, nor is watching the sunrise in the wee hours of the morning. The west views offer incredible city, river and sunset views. What is important to note, however, is that this IS A VIEW BUILDING! LITERALLY ALL THE UNITS have a great view. We opted for the west view. I love looking down the river early in the morning when I wake up and the view is even more stunning at night. See below!

North Water Apartments

                     North Water Apartments

Service

Service, in my opinion, is just as important as the aesthetics of the building or the amenities inside. The door staff at North Water Apartments goes above and beyond to take care of anything you need. From packages brought up and put inside your unit while you’re away, to hailing a cab in the rain to helping you get stuff out of your car…the list goes on.

Our building manager has also arranged to many different events in the building. We’ve had “Move in the Pool” night when management arranged to have a giant blow up screen and movie play at the pool (complete with popcorn, cotton candy and floating pool chairs). We’ve had brunches and cocktail hours so we can get to know our neighbors and we’ve even had cooking classes.

About Me

If you’ve read any of my blogs in the past about rental buildings or renting in Condo Buildings versus Apartment Buildings, you know I have ALWAYS been biased toward renting in condo buildings. I’ve recommended them for a multitude of reasons including better finishes, better kept building, etc. However, in this case, I personally have moved into North Water Apartments because for the money I have yet to find a condo building that can compare or another rental building that can compare. Now I know there are many new rental buildings opening up in 2016 and 2017, but at the current time, in my humble opinion, North Water Apartments is one of the best places to rent in the city.

FOR MORE INFORMATION ON NORTH WATER APARTMENTS FEEL FREE TO REACH OUT TO ME!

PAUL BLACKBURN IS AN ILLINOIS LICENSED REALTOR AND BROKER WITH @properties IN CHICAGO. HE CAN BE REACHED VIA HIS CELL OR E-MAIL PAUL@PKBLACKBURN.COM 

LUXURY RENTALS IN ROGERS PARK?

Luxurious Gourmet Kitchen

Luxurious Gourmet Kitchen

The above photo may look like a property in Chicago’s River North or hip Wicker Park / Bucktown neighborhoods, but it is not; it is located at 6900 N. Sheridan in Chicago’s Rogers Park community. 6900 Sheridan was purchased a few years ago by a developer that did an extensive luxury renovation on the property. The developer attempted to sell the units as condos but had no luck. Instead, he ended up selling the building off a whole, to my client who has decided to rent out the units. The building is comprised of a total of 6 units. Four 2 Bedroom / 2 Bathroom, One 3 Bedroom / 2.1 Bathroom and One large 4 Bedroom / 2.1 Bathroom Penthouse unit.

Exterior of 6900 Sheridan

The building is located in a great area of Rogers Park. It is a short walk to Loyola, only steps from the lake (literally only steps) and a short drive to Evanston / Northwester University.

Living Room Inside 6900 Sheridan

Living Room Inside 6900 Sheridan

The finishes of these apartments cannot compare to anything on the north side of Chicago. The quality is truly astounding and would shock and awe anyone regardless of where they are looking; from a high rise in Chicago’s Gold Coast to a sleek modern building in Bucktown.

Some Features Include:

– Skyora Cabinetry

– Quartz Countertops

– Exotic Porcelain and Marble Baths

– Freestanding Soaking Tubs

– Steam Showers

– Heated Bathroom Floors

– Thermador / Wolf / Miele Appliances

– Modern Fireplaces in all units

– Full Size Front Loading Washer / Dryer

The list goes on!

So, now the real question, what about pricing? Well, prices start at $2,600 for our 1250sf 2 Bedroom units and go all the way up to $5,500 for our penthouse unit. Parking is available as well. The property is fully complete and move ins can start right away. We are currently holding units for 60 days, meaning we can accommodate a September 1 lease start date.

 

FOR MORE INFORMATION VISIT WWW.6900SHERIDAN.COM AND/OR CONTACT PAUL BLACKBURN WITH @properties. 773.771.7502 Paul@PKBlackburn.com

Competing Against Multiple Offers in Chicago’s Spring Market!

Competing against multiple offers is nothing new, but for inexperienced agents and new buyers it can be quite a challenge, especially as the competition heats up to snag some of Chicago’s most desirable listings. Multiple offers will continue to dominate the spring market especially in Chicago’s most desirable areas. Crain’s recently posted an article “Four things you might need to do to get that house.” While the article gave a few ideas, I thought I would give my own opinion on their suggestions and provide you with the advise I provide my clients when competing against multiple offers or when trying to get a property taken off the market before multiple offers can be submitted!

Let us pretend you’ve found the perfect home and you are seeing the property the first day it is on the market. Let us say that day is Tuesday. The agent informs you they are planning an open house for the weekend and expect to wait until then to review all offers. This is not just a sales tactic, but it is now becoming more common place in Chicago. So if this is your scenario, what can you do?

Price: Don’t BS on the price. Have your agent evaluate comps in the area to make sure the asking price is fair. When you submit your offer you better be submitting at list price OR HIGHER! Have your agent guide you so you don’t overpay for the property.

Earnest Money: Earnest Money is typically turned over in two stages: Initial stage, when the offer is accepted and the final stage, once inspection and attorney review are complete. INCREASE YOUR EARNEST MONEY! A greater amount of initial earnest money and a greater amount of final earnest money shows you are serious and have confidence in your current financial situation and in the property as a whole.

Shorten Attorney Review and Inspection Periods: The Inspection and Attorney review period can range anywhere from 5 to 10 business days or whatever the buyer and seller agree upon. Shorten these days if you can. 5 Days at the absolute most if you are in a multiple offer situation or trying to snag the property off the market.

Quick Deadline: If your offer is strong with the above points then put the nail in the coffin and don’t allow them to wait until the weekend. Give a 12hour deadline in your offer. Tell them its a take it or leave it situation.

Other items to consider:

Flexible Closing Date: Many sellers want a quick close date, but some may want some flexibility so give them that in your offer. Offer to close quickly but mention you can extend the closing if needed.  You never know the seller’s situation…they may need more time to find their next home.

Quick Mortgage Contingency: If you have a mortgage contingency in your contract, end it is as soon as possible. The quicker you can get a clear to close the quicker the contract “goes hard” and is ready to close. Move up your mortgage contingency date (Commitment Date) to the soonest date your lender says is possible.

Escalation Clause: This is one of my favorites. This is a very simplistic way of explaining it, but the clause is quite simple….”Our Highest & Best offer is $2,000 above the price of any other offer you receive up to $500,000 with proof of other offer.” It is called an escalation clause because as other offers come in your price escalates up to a certain point. If you ever bid for things on eBay you may remember there are similar systems in place on that auction site that allow you to do something similar.

 

Paul Blackburn is an Illinois licensed realtor and broker with @properties in Chicago. For information about buying or selling in Chicago he can be reached at Paul@PKBlackburn.com