Ahhh...those lovely buyer incentives...they just want to reel you in, don't they? Don't get me wrong buyers incentives can be great...hey, who won't take a year free assessments or a free car? Yes, a free car. Take a drive down the Kennedy expressway and check out the screaming banner that say "Buy a condo, get a car." I'm half tempted just to call to see what kind of car they're "giving" away. I would have taken a picture, but driving and taking a picture at the same time could present some motor vehicle issues, if you know what I mean. The sign has been up for months and months, so it just got me wondering, what would drive a developer to offer a car to a potential buyer. And apparently they're not the only ones....I just saw an ad on craigslist with the same come on, but certain "conditions" have to be met to get the car. Never mind that whoever is holding the mortgage is really going to hate trying to value the property given the unusual addition of a car!
Before I get too far into this discussion, let me say, not all incentives are bad, nor all they all acts of desperation. Incentives whether you're looking at a resale or new construction, can just be used as a tool to distinguish yourself from the competition. For example, pre-construction pricing is just an incentive to get you to buy early in the construction process, and developers will partner with lenders for discounted rates. Or for a resale you might see a year paid assessments or some other sort of closing credit.
Ok, now back to this car deal. Let's be realistic, they're not going to be giving you a Lexus or a BMW, but it's certainly a hell of a way to distinguish yourself from the competition. So, let's say that the car is worth $18,000, sounds like a good number right? And let's assume that they developer is actually paying $18,000 for the car. So that could be construed as an $18,000 discount right? Well, kind of. In this case, I would want to raise the question of why is the developer offering such a "large" incentive. A plasma tv is one thing, but a car? As an agent the first thing I would be doing is checking the comps to make sure that the unit is priced in line with other new construction in the area. If it's not, that's a red flag. Next, does the property have a major flaw that is hindering it's current sale? If so, that's another red flag. Incentives, especially substantial ones, can become tricky and red flags in and of themselves. Which leads to the next question, is the developer artificially inflating the price on the home to offer the incentive? If the price is in line with the comps, then probably not, but buyer beware. They could be and all this means for the buyer is a potential train wreck down the road when they try to resell. Welcome to the legally gray area of buyer incentives.
So you ask, why not just take the dollar amount of the incentive off the price? Sure that would make sense, and that's what many developers do, but that also eliminates the wow factor of it all. And sometimes people just feel like they're getting a better deal if there is some type of incentive, period.
Ultimately, when it comes to the bottom line, the incentive should work for the you, the buyer. Paid assessments, a discounted mortgage rate, a closing credit, all those kind of things clearly work for the buyer, but if there are any red flags, it's time to do some digging. Be careful not to be drawn in by the "deal" because in the long run it might not be such a great deal after all.
Image from businessweek.com
Monday, May 21, 2007
Tuesday, April 24, 2007
And though some might disagree with me, relative to other big cities, Chicago is pretty affordable. Check this out....the estimated average single family/condo price for some of the "big" cities....
San Francisco - $602,000
And to all those people that are wondering how all these new construction projects popping up everywhere are going to sell, well there's your answer.
Image from destination360.com
Monday, April 16, 2007
Since Chicago was a finalist for getting the U.S. Olympic bid I've talked to many buyers who suddenly have a renewed interest in the South Loop and other neighborhoods on the south side of the city. Or my favorite..."I was talking to my friend and they said I should look in the South Loop because Chicago might get the Olympics." Hey guys....we just got the bid and still have 2 years to see if we actually have the good or bad fortune, depending on which side of the fence you're on, of hosting the Olympics. But if and when Chicago does get the Olympics, not only will it make a profound impact on the city as a whole and the south side in particular, but it's bound to also have an impact on real estate. This impact will certainly be felt potentially as individuals buy property in the area, but the largest impact could be created by the Olympic Village that will be built to house the athletes. The proposed plan for the Village would create somewhere in the ballpark of 5000 units that post-Olympics fervor would most likely be converted into market rate and affordable housing. It would be quite the project and some developers are quite excited about its possibilities. The creation a new "neighborhood" is too much for some developers to pass up, while others are a little sceptical. While no one developer would be taking on the project alone, I think its still somewhat daunting for most....the prospect of selling 5000 units that are part of a single, though multi-faceted project. For a little added perspective, that's nearly 25% of all the condos that were sold citywide in 2006. The whole idea and what it would take for all of this to come together is not for the faint of heart that's for sure.
One can only begin to image how it would change the real estate landscape in the near South Side and for the very near future there will be many more questions then answers. When Barcelona hosted the Olympics in 1992 they did many of the same things that Chicago is planning and turned into a once "blighted" area (not my words as I've never been to Barcelona, but that of another author) into a thriving and vibrant community. If that was to happen purchasing in the "Village" could be a great all around option for homeowners and investors alike. Anything is better then the truck parking lot that currently exists on the site. On the downside, if all that is hoped for doesn't happen, will resale values tank? Will these condos sit on the market like white elephants?
I think Chicago has an amazing future, real estate and otherwise. I'd love to see the Olympics come to Chicago in 2016 and see the "Village" thrive. I don't have a magic wand or crystal ball (though sometimes I wish I did), but I'm just betting there are a lot of people out there who would like to own their own piece of great Chicago history, and a condo in the "Village" might be that piece....time will only tell.
For full details on all the Olympic happenings check out Chicago 2016.
Photo courtesy of Chicago 2016
Tuesday, April 10, 2007
So you think you have it all figured out right? You know exactly what you want in your new home....vintage, garage parking, wood-burning fireplace, balcony and the list goes on. You've been all over the internet and yep, that's the complete package. What if I told you that many buyers that I've worked with and am currently working with have started out with one picture in their head only to have the picture change once they start getting into properties. Sometimes priorities change like "I'd rather have a little more space/better location and forget the fireplace" or "I'd rather have less space and live in my ideal location." You name it, I've heard it. And is that a bad thing, no way, I'd rather see you end up with a home that really suits you and your lifestyle. Sometimes its the property that you least expect to interest you is the one that sends your home search in a tailspin or maybe after seeing a few homes with a particular "desired" characteristic, that characteristic loses its charm. The reason I mention this is that I think buyers feel like they have to have it all figured out before they start looking for a home, and that is so not the case. The internet is a great tool and puts all this information at your fingertips, which is great, but why add the additional pressure of having to have it all figured out to your already busy life. Also, sometimes going in with all these preconceived notions, buyers might miss a property that might be ideal except it doesn't have the fireplace or the parking is a space instead of a garage. If it had everything else that you wanted, wouldn't it be at least worth checking out? I think so. The other thing I find that comes up are the things that you don't necessarily think off right of the bat. I was out with a buyer last night that didn't realize how important being on a tree-lined street was to her until she started seeing properties. The first time I'm out with a buyer I always ask them to tell me how they feel about the places we saw....what they liked, didn't like, etc. There is always a point in the conversation where the sentence starts with, "I thought I was going to like ........... and I didn't" generally followed by a reason why. What's interesting is the reason is not always what one would expect and it could be anything under the sun, but more often than not its how something feels. Despite all of our rational thoughts about our needs, feel or some other emotion creates the bottom line. Like I always tell myself, don't over think it....it all works out for the best in the end.
Monday, February 19, 2007
Sunday, January 21, 2007
Wednesday, January 17, 2007
With the wide availability of all sorts of real estate information on the web, from listings to how-to guides, I can see why people would try to navigate a purchase themselves. While that didn't answer the why in my head, it was answered for me this weekend when I was out with a first-time buyer. They loved the properties I showed them and wanted to continue working with me. Then here came the question, "how much do you ask for commission and what kind of agreement do we need to sign." Despite the vast amount of information out there, these were two basic items that are clearly misunderstood. As a buyer, you do not pay your buyers agent a commission, that is taken care of for you courtesy of the seller. As far as a buyer agreement goes, I stand with my broker on this one, I don't have my client's sign them. Period. My relationship with my clients are built on mutual trust. Call me idealistic, but if my client's don't trust that I am doing the best possible job in their interest then the agreement is meaningless anyway.
Another point that comes to mind is the potential dollar signs that seem to spring into people's heads. The "if I don't have an agent then the seller might give me a better deal because they don't have to pay a commission to the buyers agent." This scenario gets a little trickier because the agreement on commission is between seller and the listing agent and both would need to agree to a reduction in commission. And whose to say that the seller is willing to give up their potential savings to a complete stranger.
That's not it...we realtors make it look so easy, sign a couple documents and you're all done right? While sometimes transactions do go very smoothly, others seemed destined to hit every bump in the road. Let's back up a minute though, before you ever get to signing contracts, you need to determine what to offer for the property. You offer too much, you get a quick acceptance and seller willing to give you a break because they're getting what they want and then some, or you offer too low, the seller is insulted and won't even counter. It's easy to say that you take x% off the price, but even a blanket statement like that can be inaccurate depending on the neighborhood. Market time and motivation are only some of the factors that come into play when making an offer.
Everyone is entitled to do their own thing, and I respect that. One of the things I always ask a buyer or selling thinking of going it alone is, "how much is your time worth?" Who isn't busy these days? We all have our jobs and other responsibilities that we need to meet. Do you want to spend your free time going to open house after open house not really knowing if that particular property really meets your needs or trying to hammer out difficulties that arise? In the beginning it's always a lot of fun, but after a while it's burn out time. Remember that "weekend" project that turned into weekends. Yeah, it's kind of like that. Study after study has shown that we have less and less free time compared to previous generations, so my thought it why not make the most of it.
The resources available on the web for buyers is astounding and I think it will continue to be a great resource for buyers and sellers alike. And if you start hearing the term BUBBA, don't blame me, it wasn't my idea.