Glossary

Home Buying Buying a home may be the biggest financial decision of your life. Make sure you're informed. The home buying process is unlike any other purchases you've made in your life. It is important to understand the complexity of such a large transaction so that you know all of the costs, benefits, and risks associated with owning real estate. Home Buying Steps Step 1: Pre-Approval Professional Involved: Mortgage professional ​ The first step to the home search process is to be pre-approved by a mortgage lender. The pre-approval will help you determine your financial situation. There are different types of mortgage loans. Learn why it is the first step: Pre-Approval Step 2: Buyer Interview Professional Involved: Realtor ​ The 2nd step in the home search process is to work with a Realtor to talk about your wish list and your financial situation. In this conversation with your Realtor, you will work together to determine what are realistic goals when looking for your next home. You may also enter into a Buyer's Agreement with your Realtor. Steps 3: Home Search Professional Involved: Realtor ​ The 3rd step involves you and your Realtor searching for available properties and scheduling showings to view properties. You might also be attending Open Houses during the home search process. Step 4: Make an Offer Professionals Involved: Realtor ​ The 4th Step is when you've found the property you wish to purchase and you work with your Realtor to send an offer to the Seller for the price you'd like to purchase it for. An offer is a legal document used to outline a potential real estate transaction between a buyer and seller. Step 5: Negotiate Professionals Involved: Realtor ​ The 5th Step occurs after you submit an offer to the Seller. The Seller can decide to Counter Your Offer , Accept Your Offer , or Reject Your Offer . If there are multiple offers, the Seller may counter by asking for your Highest and Best Offer . Step 6: Contract to Close Professionals Involved: Realtor Mortgage Professional Real Estate Attorney Appraiser Home Inspector Title Company ​ The 6th Step occurs after your offer is Accepted. The Attorney Review , Home Inspection and Mortgage Approval are occurring simultaneously. Step 7: Closing Professionals Involved: Realtor Mortgage Professional Real Estate Attorney Title Company ​ The 7th Step occurs after the financing is confirmed. The property's utility will be switched over to you, the final walk-through is conducted, the title is transferred , closing costs paid and closing documents completed.

Marketing Plan The most basic strategy in the real estate marketing plan is ensuring that a property has professional pictures taken of the home, priced correctly in the market, and listed on the Multiple Listing Service (MLS). Once it is listed in the MLS, the listing should be syndicated to all of the major marketing websites such as Zillow.com, Realtor.com, etc. Most homes are found by buyers through these real estate websites. The MLS also allows local Realtors to be notified of the availability of a local property. Listing a property onto the MLS is the crucial first step to selling a property. ​ A good listing agent will present a concise marketing strategy to you. They will show you examples such as listing on the MLS, hosting open houses, and sending out targeted campaigns. However, sellers should participate in the marketing process. Here are some examples of how sellers can participate in the process: opting for professional photography and virtual tours, or tapping into their personal networks to find interested buyers. It’s impossible to prepare a marketing plan that targets every buyer. But, in order to improve the chances of selling your property, it is necessary to understand the buyers in your market. Each market is different so this page will only attempt to speak to the macro national trends in the market, which is to market towards millennials (the current generation that is actively purchasing real estate). ​ Real Estate Marketing For Millennials: 5 Tips For Success ​ Those who hope to successfully sell to today’s buyers must actively take part in real estate marketing for millennials. Traditional marketing tactics may not work on these digital natives, and real estate professionals who take the initiative to understand this generation’s consumer preferences and behavior will develop an advantage. The following are 5 unique tips to find success in selling to the millennial home buyer: Help them each step of the way: 90% of home buyers aged 37 and younger worked with a real estate agent, and many of them cited that they wanted help in understanding the home buying process. Understand that guidance is extremely important to this consumer segment, and take advantage by marketing your emphasis in assisting clients. Know that price matters: A majority of millennials use their savings to pay their down payment, more so than other generations, signaling limitations in financial options. Help these buyers by suggesting how to save money or use their funds in the most impactful way during the home buying process. Pay attention to visual representation: Visually-based social media platforms such as Instagram and Pinterest are popular amongst young home buyers. In addition, many of them cite staging as an important factor filtering through properties online. Do not hesitate to market your property in a visually-compelling manner, such as through Instagram or Pinterest. Specify your competitive advantage: Millennials know that each real estate agent has something unique to offer, so be ready to stand out from a group of candidates by clearly specifying what you have to offer to them. Go digital: Is should go without saying that the best way to appeal to this generation of digital natives is through digital marketing. 93% of home buyers aged 37 and younger use the internet for their home buying process. There are a variety of trends associated with the millennial home buyer, and as a seller or real estate professional, it is important to keep up with the latest statistics and information. Each generation has its own unique tastes and preferences, and furthermore, there are divergences within each of those home buyer segments. Those who make an effort to keep up with these preferences, and take the extra step to understand why consumers have these preferences, are best able to serve these home buyers’ needs.

Showings Showings are scheduled between buyers and sellers so that a prospective buyer can tour the property. The coordination for the showings is generally coordinated between the respective Realtors, with the input of the buyer and seller of course. ​ For the Seller: The Realtor will usually provide a Lockbox where a key for the property will be placed. Either your Realtor or the Buyer’s Realtor will escort the Buyer through your home Make sure to prepare your property for a showing and to also secure your valuables. It is recommended that Sellers do not leave anything out. Although a Realtor will be present during the showing, it is always better to be safe and secure your items. When a Buyer and the Buyer’s Realtor has coordinated a showing with a Seller, the Realtor will receive a Lockbox code to open the Lockbox to receive the key and gain access to the property. ​ For the Buyer: Your Realtor can either coordinate an individual property showing or schedule multiple properties in one day. It is usually a lot more efficient to see multiple properties in a day. Only a Realtor is able to receive a Lockbox code from the Seller’s Lockbox per the Illinois regulations. ​ ​

Title Companies A title company makes sure that the title to a piece of real estate is legitimate by conducting a title search and then issues title insurance for that property. Title insurance protects the lender and/or owner against lawsuits or claims against the property that result from disputes over the title. Title companies also often maintain escrow accounts — these contain the funds needed to close on the home — to ensure that this money is used only for settlement and closing costs , and may conduct the formal closing on the home. At the closing, a settlement agent from the title company will bring all the necessary documentation, explain it to the parties, collect closing costs and distribute monies. Finally, the title company will ensure that the new titles, deeds and other documents are filed with the appropriate entities. How much does a title company's services cost? The cost of title insurance depends on the size of the loan and varies greatly depending on the state. The good news is that the premium is a one-time fee you pay at closing, not an ongoing expense. According to the Federal Reserve, “a lender’s policy on a $100,000 loan can range from $175 in one state to $900 in another.” You’ll typically pay an additional amount — usually a few hundred dollars or more, depending on the size of the loan and your state of residence — for a buyer’s policy. Note that you may be able to get a discounted rate on your title insurance if the property was sold within the previous five years; just call and ask.

Mortgage Professionals There are four main types of mortgage companies where you can apply and receive a mortgage loan, and the one that works best for you will depend on your situation: ​ Banks and Mortgage Bankers - This is a great option if you prefer to have all of your financial accounts in one place; however, it may take longer to close your loan. Additionally, they may not offer government-backed loans (for example, FHA, VA, or USDA home loans). Perhaps the most common of all financial institutions are banks. Banks get their money from investors and its own customers. In addition to offering checking and savings and investment options, banks will often offer different types of mortgage loans for qualified borrowers. For many people, their local bank is the first and possibly only financial institution they will ever do business with. ​ Credit Unions - Credit unions usually offer loans only to their members. They may have lower costs and interest rates, but like banks, they may take longer to close. Like banks, they may not offer government-backed loans. Credit unions are very similar to banks, except that they are owned by their account holders, known as members. These institutions usually require membership and get funds from their members. Similar to their bank counterparts, credit unions offer a range of services to their members such as depository accounts for checking, savings, and retirement. As with banks, credit union members will often utilize their institution as a one-stop shop, obtaining their mortgage loan, as well as all their other banking needs at the same place. ​ Mortgage Lenders - Unlike banks and credit unions, which offer a variety of financial services, mortgage lenders exist for the sole purpose of real estate loans. Unlike banks and credit unions, most mortgage lenders can take care of the entire process “in-house.” This can shorten the time frame involved with obtaining a mortgage. A mortgage lender is a financial institution, similar to a bank, that originates and funds loans in their own name. Unlike banks and credit unions, mortgage lenders exist for the sole purpose of making loans against real estate. Most mortgage lenders do not service, or “keep”, their loans. Instead, lenders sell their loans to banks or servicing companies. These servicers then take on the job of collecting payments on a monthly basis. Mortgage lenders get their money from banks, also known as investors. Unlike banks and credit unions, most lenders do all their own loan processing, underwriting and closing functions “in-house.” They can take care of the entire process with internal staff. In-house operations shorten the time frame involved with obtaining a mortgage loan. ​ Mortgage Brokers - Mortgage brokers do not lend money directly; rather they have access to many different lenders and loan programs. This can give you access to more options. But they do not have as much control over the speed of a loan approval as a bank or mortgage lender. A mortgage broker is essentially a “middleman” between the homeowner and bank. Mortgage brokers do not lend money directly. Brokers have access to many lenders, as well as many different loan programs. In some cases, especially when your credit isn’t perfect, a mortgage broker can shop around to find a home loan that isn’t offered by a bank, credit union, or even a lender. Home buyers with special income types, lower credit, or are looking at a unique property might inquire at a broker first. Or, if your home bank or credit union can’t approve you, your next step is to talk to mortgage companies and brokers.

Offer Rejection Sellers are able to reject any offers or counter offers presented by a buyer. The rejection, however, cannot come after a Seller has accepted an offer. ​ Similar to Sellers, Buyers are able to reject any counter offers they receive from a Seller. Anytime a Buyer receives a counter offer , they may reject the offer and walk away from the deal. ​ ​

Title Search A buyer should always obtain a title search from a title company before purchasing a home. The company searches public records and other sources for any liens, easements (such as the utility company’s right to access part of the property), or other encumbrances or title restrictions that may affect ownership or use of the property. ​ Under the Illinois purchase contract, the seller is expected to correct those problems as a condition to closing. ​ If your mortgage lender doesn’t already require it, you should also consider purchasing a title insurance policy to protect your title to the property against adverse claims by third parties, or any clouds on the title missed by the title search.

Title Insurance Once the title is found to be valid, the title company will likely issue a title insurance policy, which protects lenders or owners against claims or legal fees that may arise from disputes over the ownership of the property. ​ There are two main types of title insurance: owner’s title insurance, which protects the property owner from title issues, and lender’s title insurance, which protects the mortgage company. ​ You, the home buyer, will pay for the lender’s title insurance when you close on the house, but it’s also a good idea to make sure you have an owner’s title insurance policy as well (in some areas of the country, sellers pay for these policies; in others, the buyer must purchase it). ​ For example: You buy a home and get both lender’s and buyer’s title insurance, but then someone comes forward claiming they are the rightful owner of the home. If, in fact, the title was wrong and they are the rightful owner of the home, your title insurance policy will likely pay you the value of the home and the lender the amount they lent you to buy the home.

Closing Documents These are the documents finalized at closing:​​​ ​ The deed – This is filed with the Recorded of Deeds office. It transfers title from the buyer to the seller. The Affidavit of Title – A statement by the seller about any known legal issues with the property or encumbrances on the seller’s title. Bill of Sale – A receipt-like document that shows the seller received all payments for the sale of the property. ALTA Settlement Statement – An itemized list of all the money and credits during the exchange. Transfer Tax Forms – Tax forms that show the amount of consideration paid for by buyer for the purposes of evaluating the transfer tax costs. ​ At least three business days before your closing, the lender should give you Closing Disclosure statement, which outlines closing fees. Compare this to your Loan Estimate and ask the lender to explain what each line item on your closing costs is and why it is needed. There are limitations on the amount a number of fees can increase from the Loan Estimate to the Closing Disclosure so there really shouldn’t be any surprises on closing day. But if there are, you can still walk away at closing.

Title In property law, a title is a bundle of rights in a piece of property in which a party may own either a legal interest or equitable interest. The rights in the bundle may be separated and held by different parties. This bundle of rights is represented by a formal document, such as a deed of title , that serves as evidence of ownership. Conveyance of the document may be required in order to transfer ownership in the property to another person. ​ Title is distinct from possession, a right that often accompanies ownership but is not necessarily sufficient to prove it. In many cases, possession and title may each be transferred independently of the other. For real property, land registration and recording provide public notice of ownership information.

Mortgage Discount Points Mortgage points are fees you pay a lender to reduce the interest rate on a mortgage. Paying for discount points is often called “buying down the rate” and is totally optional for the borrower. ​ How much does one mortgage point reduce the rate? ​ When you buy one discount point, you’ll pay a fee of 1% of the mortgage amount. As a result, the lender typically cuts the interest rate by 0.25%. ​ But one point can reduce the rate more or less than that. There’s no set amount for how much a discount point will reduce the rate. The effect of a discount point varies by the lender, type of loan and prevailing rates, as mortgage rates fluctuate daily. ​ “Buying points” doesn’t always mean paying exactly 1% of the loan amount. For example, you might be able to pay half a point, or 0.5% of the loan amount. That typically would reduce the interest rate by 0.125%. Or you might be given the option of paying one-and-a-half points or two points to cut the interest rate more. ​ How do mortgage points work? ​ Paying discount points reduces the interest rate and therefore the monthly payments. Your monthly savings depends on the interest rate, the amount borrowed and the loan’s term (30-year vs 15-year loan, etc). ​ Should you buy points? ​ If you can afford them, then the decision whether to pay points comes down to whether you will keep the mortgage past the “break-even point.” ​ The concept of the break-even point is simple: When the accumulated monthly savings equal the upfront fee, you’ve hit the break-even point. After that, you come out ahead. But if you sell the home or refinance the mortgage before hitting break-even, you lose money on the discount points you paid. ​ The break-even point varies, depending on loan size, interest rate and term. It’s usually more than just a few years. Once you guess how long you’ll live in the home, you can calculate when you’ll break even. ​

Prepare Home For Sale Of course, every home buyer is different. So, it’s impossible to prepare a home that is acceptable to every buyer. But, in order to improve the chances of selling your property, it is necessary to understand the buyers in your market. Each market is different so this page will only attempt to speak to the macro national trends in the market. ​ Although you may love your property the way it is, new buyers will be looking for a fresh face. Spend time preparing your home for sale by conducting a deep cleaning, and refresh its appearance by providing a fresh coat of paint. Your agent can also help provide guidelines, such as decluttering, removing overly personalized effects and getting rid of pet odors. ​ Millennial Home Buying Statistics It’s no secret millennials continue to make up the majority of today’s home buyer demographics. Millennials make up 66% of first-time home buyers, and 34% of the home buying market overall, so if you plan to sell a property, it is in your best interest to familiarize yourself with some millennial home buying statistics. According to Inc.com, only 11% of millennial home buyers consider their first home as permanent, yet they have specific wishlists. Because down payments are so hard to save up for, today’s young home buyers tend to prefer turn-key properties. Some home buying trends stay the same regardless of the generation. Over half of Millennials prefer to purchase homes in the suburbs, with only 25% opting for urban areas. Current Home Buying TrendsWhether you position yourself as a real estate agent for millennials or as an investor looking to target millennial housing trends, it is still important to keep in touch with current home buying trends overall. Although millennial real estate trends are dominating the industry landscape, it is important to keep in mind that other generations still make up a significant proportion of potential buyers. Here are some key highlights on current home buying trends from the National Association of Realtors’ 2018 Generational Trends report: Previously owned homes prevail: In 2017, 85% of home buyers purchased previously owned homes, while the rest purchased new homes. The most common type of home purchased was the single-family home. However, interestingly, the majority of home buyers under the age of 37 who purchased a new home did so in order to avoid renovations and having to pay to remedy problems. Online presence is key: A vast majority of today’s home buyers first find their property online. Nine out of ten buyers stated that real estate photos were the most important feature on online listings. In addition, buyers between the ages of 53 and 71 felt that virtual tours were the most important, as this generation tends to move the longest distances. Financing remains a necessity: Although 88% of home buyers finance their home purchase, the statistic increased to 98% when it comes to buyers under the age of 37. Although most consumers use their savings for a down payment, the proportion increases for millennials, while older generations to use proceeds from a previous sale. Most buyers across all generations still view buying a home as a good investment. Agents are more needed than ever: 87% of all home buyers worked with an agent, but the share increased to 90% for buyers aged 37 and younger. Buyers who worked with an agent cited that they wanted help finding the right home, negotiating the purchase price and terms of sale, as well as help in understanding the purchase process. ​ ​ ​ Selling To The Millennial Home Buyer: What Do Millennials Want In A Home? ​ When devising a strategy on selling to millennial home buyers, it is important to ask yourself, “what do millenials want in a home?” Selling real estate to millennials is no easy feat, as they have a unique set of preferences and demands that set them apart from buyers of other generations. Check out the following list of “must-have” features for today’s youthful buyers: Updated kitchen and bathroom: Brand new fixtures in kitchens and bathrooms are important for budget-conscious millennials. Because of their limited budgets, most millennials’ savings will go towards a down payment and furniture, and not updates. Open floor concept: Although formal dining rooms used to be popular, today’s buyers prefer an open concept where the kitchen, dining and living areas all flow together. All rooms are used as hangout spaces. Home office space: The number of Americans who work remotely continues to grow each year, making a home office an important factor for home buyers. Having a dedicated space will help them focus on the task at hand. Proximity: It could be attributed to high gas prices and traffic, or to eco-consciousness, but young buyers tend to emphasize the property’s location. Proximity to work or public transportation, as well as walkability, are all important considerations. Low maintenance features: Today’s “weekend warriors” tend to not want to spend their weekends carrying out chores and honey-do lists. Instead, millennials are showing a preference for low-maintenance, low-upkeep features. Home technology: Technology has taken center stage in real estate for millennials, as these digital natives have saturated the home buying landscape. Prepare to talk to potential buyers about wireless service providers, carrier signal strength, and smart home features. Energy efficient: Energy efficiency features such as solar panels help millennial buyers kill two birds with one stone. Increased efficiency allows them to protect their budgets while satisfying their environmental consciousness. Online photography: Mentioned earlier, the vast majority of home buyers find their property online. Setting up a real estate website for millennials is essential, which should include photographs and virtual tours of the property after it has been professionally staged.