But buyers who want a home in excellent condition probably will be happier purchasing an owner-occupied home. Those usually aren't as sharply priced as distressed properties, but there still are excellent values to be found.
Chicago, IL (PRWEB) July 23, 2009
The Chicago real estate market is an attractive one right now, especially for first-time buyers, according to RE/MAX real estate in northern Illinois. Mortgage interest rates are extremely low even though they've risen slightly of late. The selection of homes in most areas of the Illinois real estate market is large, and prices have declined generally, though more significantly in some areas than in others. Best of all, the federal government is offering first-time buyers an income tax credit of up to $8,000 for homes purchased before Dec. 1.
Another motivating factor is the large number of distressed properties, including homes in foreclosure and those offered as "short sales" (where the likely sales price won't cover the outstanding mortgage balance). Stories abound of homes selling for 25, 35 or even 50 percent less than their market value a year or two ago.
While average home prices have fallen considerably in that time, much of that decline reflects the fact that distressed properties, including foreclosures and short sales, now account for nearly half of total sales, according to Jim Merrion, regional director of the RE/MAX real estate network in northern Illinois.
"It is the best time in a decade or more to buy a home, but buyers must align their expectations with the new realities of this marketplace," Merrion said. "That is especially true for first-time buyers, whose knowledge of the home buying process is limited. Fortunately, there is now a great deal of valuable, up-to-date information available on the Internet at sites like our own http://www.illinoisproperty.com.
According to Vicki Geiger of RE/MAX Top Properties in Morris, Ill., a big part of an agent's job these days in working with first-time buyers is educating them about the tradeoffs in this market.
"Many young buyers are eager to look at foreclosures because they think they can get a great bargain, and, yes, there are real deals out there," she said, "But buyers who want a home in excellent condition probably will be happier purchasing an owner-occupied home. Those usually aren't as sharply priced as distressed properties, but there still are excellent values to be found."
Foreclosures and short sales are often viewed as two sides of the same coin, but there are important differences between them that buyers need to consider, according to Jay Reid, an agent with the Jane Lee Team at RE/MAX Top Performers in Lake Bluff, Ill.
"Foreclosed properties are owned by the lender, and those transactions usually can move ahead expeditiously," Reid said. "On the other hand, short sales are more complex. If a buyer wants to pursue a home that involves a short sale, retaining the services of experienced professionals, both a real estate agent and real estate attorney, is essential."
The attractive prices of foreclosed homes can make it possible for a first-time buyer to afford a larger home or better neighborhood than might otherwise be the case, but foreclosures often have been vacant for months and may not have been carefully maintained, according to Armando Zires of RE/MAX Northwest in Des Plaines, Ill.
"That's why many buyers of foreclosures are experienced investors. They're prepared for the fix-up costs that may be involved," he said.
Getting a great deal on a foreclosure might be right for one buyer but not for others, according to Sandra Black of RE/MAX Signature in Chicago. She says that first-time buyers are well served if they take a long-term view of their home purchase, noting that a majority of first-time buyers sell in 5 years or less, while only 25 percent stay in that first home long term.
"Buyers who will move in a few years shouldn't get too caught up in trying to find a home at the lowest possible price," she said. For those buyers, it is more important, in Black's view, to choose a home that will be relatively easy to resell. In the city, she says, that means a home fairly close to transportation, with adequate space and in good physical condition.
When it comes to finding the best financing for a home purchase, Armando Zires typically advises buyers to talk directly with several banks in addition to a mortgage broker.
"Right now, many banks have special programs for first-time buyers that a mortgage broker may or may not know about," he said.
Mortgage interest rates are still below the 6 percent level, making them extremely attractive, but lenders have tightened up some of the other loan terms, according to Lydia Memeti of RE/MAX City in Chicago. For example, first-time buyers almost always need a minimum of a 3 percent down payment these days, as well as a good credit history, she said.
"Lenders also are a bit more conservative about the size of loan they will make," Memeti said. "But that can actually benefit the buyer. It will help them avoid going beyond their means and ending up in trouble."
One major challenge for buyers in the current market is deciding when a property is priced realistically and when it isn't, particularly because the inventory of homes for sale is so large. It's an area where a good real estate agent can provide vital assistance.
"I will sit my clients down with a spreadsheet that compares all the homes they want to buy so they can look at the features, space and prices side by side," said Jay Reid. "The buyers then end up with perhaps 10 homes that meet their needs and are realistically price."
The bottom line for buyers, says Sandra Black, is that there are many attractive properties out there right now at good prices, but the buying process isn't as simple as it was three or four years ago.
"You'll get through the process more smoothly and with better results if you have a good team working for you. Buyers will benefit from an experienced agent and a detail-oriented lender with strong follow through who moves the process forward," she said. "They'll also want an attorney who will protect their interest, is good with details and is reasonably communicative. To get things done right now, all parties really need to talk."