Glossary

Attorney Review Although Illinois does not require buyers to use a lawyer to prepare the purchase agreement, Illinois is considered an attorney-review state. This means that it is customary for both parties to have a real estate lawyer look over the purchase agreement before it is finalized. The purchase agreement will have terms regarding how many days each party has for the attorney review (typically five days) and what happens if the attorneys fail to reach an agreement during this time. Ordinarily, both parties can walk away from the purchase agreement with no penalty during this review period. The attorneys will review the entire agreement and can propose modifications to any part of the agreement except the purchase price and the broker's fees. The attorneys are likely to propose modifications after the house has been inspected, so the attorney review period and the house inspection tend to happen during the same time frame. When there is an attorney review period clause in a real estate contract, the initial contract that you sign will only be conditional. In most cases, you are only signing to confirm the agreed upon price and that there will be an attorney review period. The typical attorney review period is 5 business days after signing the initial contract. During the 5-day period, your attorney will need to decide whether to: Approve the contract; Reject the contract; or Entering into negotiations to modify the contract. The attorney review period allows either the buyer or the seller to modify the contract to meet their particular needs. Your attorney will review the contract and suggest modifications to the contract that would be in your best interest. If the contract is not expressly rejecting or approved, your attorney will make an initial request for modification of the original contract terms within the 5-days allowed for attorney review. Maybe you want to add real estate tax provisions to the contract. You might also want to make the contract contingent on certain terms as well. The attorney review period is the time to make sure all of these terms are added to the contract. The other party has the right to accept or reject the proposed changes. The other party may also want to counter the proposed changes and make additional proposals. During these negotiations, either party may walk away from the transaction without penalty if there is a failure to agree upon mutually acceptable terms. If the 5-day attorney review period passes without anyone making proposed changes, then no changes will be made to the initial contract terms. Both parties will be bound by the terms of the initial contract. ​ ​

What Is Escrow? Escrow is when a neutral third party holds on to funds during a transaction. In real estate, it’s used as a way to protect both the buyer and seller during the home purchasing process. After a property is purchased, the new homeowner continues to put money into escrow as a means of paying mortgage and insurance payments. ​ For example, earnest money is an amount paid in to escrow early in the home purchase process to essentially put a “hold” on the property for the buyer. It’s a way of showing serious intent that the buyer is going to stay true to their offer, and protects sellers from having to deal with buyers putting out multiple offers or going into negotiations on multiple properties. At closing, the earnest money payment is generally taken out of escrow and put toward the buyer’s down payment. ​ The purpose of escrow is two-fold. It guarantees the seller that the buyer has the funds needed for the purchase and that the money will be handed over once the title is transferred, and it guarantees the buyer that they won’t be scammed by a fraudulent seller who actually holds no claim to a title. Ultimately, escrow helps ensure trust in a high-stakes transaction where neither party may be familiar with each other and where both have a lot to lose. ​ Escrow vs Escrow Account ​ Here’s a set of terms that are closely related but not to be confused with each other. Many people have trouble understanding real estate escrow because they mistake it for an escrow account, so it’s important to know the difference. ​ An escrow account is a separate account managed by a lender to collect advance insurance payments and tax payments from a homeowner. Usually, a lender will add up the total amount due for these payments in a year, divide it by 12, and tack on that extra amount to each mortgage payment. When those payments are due to either a homeowners insurance agency or the IRS, the lender pays them for the homeowner out of the escrow account. Many states, but not all, require lenders to pay interest to homeowners on their escrow account. ​ The simplest way to think of the difference is Escrow happens during the process of buying/selling the home. After the house is sold or purchased, Escrow Accounts are where your mortgage payments are partially paid to in order to pay for your PMI payments and property taxes . ​ ​

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. ​

Deed of Title A deed of title, or title deed, is a specific legal document that transfers the title of real estate from one person to another. Full ownership to a piece of real estate is given to the new owner. Usually, such a transfer would happen through a traditional real estate sale; however, a title may be transferred in other ways. An example of this would be when someone gifts a piece of property to another person. ​ In most cases, the deed of title is classified as a general warranty deed. This is a specific type of deed in which the current owner guarantees that they hold a clear title to a piece of real estate. This means that they are not only guaranteeing that they received a clear title from the previous owner of the property, but that no other individuals retain any interest in the property. ​ A general warranty deed is utilized for most real estate deed transfers due to the fact that it provides the greatest amount of protection of any deed. It may be known as a grant deed in some states. ​ Deeds of title should not be confused with a deed of trust. A deed of trust simply grants a lender or mortgage lender a lien on the property if a debt is owed.

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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.

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.

Dual Agency Dual Agency is when a licensed Realtor represents both the Buyer and the Seller in a transaction. This is not legal in all States so it is important to ask check your State laws to see if it is legal, if your Realtor finds themselves in that situation. ​ In Illinois, Dual Agency is legal as long as both the Buyer and the Seller consents to the dual representation. This is performed through Dual Agency disclosures. An example of such a disclosure can be seen in this Listing Agreement . ​ Complexities with Dual Agency ​ Communication Dual agents are restricted in releasing confidential information about either client, and they cannot give preferential treatment to either party to the transaction. Client’s of dual agents sometimes become frustrated that the agent will not communicate with them beyond relaying information to and from the other client ​ Pricing Advice Real estate agents often have a better idea of a property’s true market value than the seller or buyer. In most cases, they also know the lowest price a seller is willing to accept or the highest the buyer is willing to offer. However, a dual agent is restricted in using this knowledge to complete the transaction. Discussions with either client about the price to offer or accept can lead to violations of the dual agency agreement and possibly result in the revocation of the agent’s license. For this reason, their knowledge of the market and experience in selling property is of limited value to either party.

Listing Agreement (Illinois)

REALTOR (R) Seller's Agent A REALTOR (R) is real estate professional that is both a licensed real estate agent or broker AND a member of the National Realtor's Association. They are experts in the residential real estate process and help represent Sellers and Buyers during their real estate transaction. ​ On this page, we will discuss the role, duties, and responsibilities of the Buyer's Agent: ​ Role Showings: Sellers's Agents will coordinate with you and the prospective buyers to schedule time and access for property showings. Negotiations: Seller's Agents will assist the Seller in the Offer Negotiation process when the Seller receives offers to purchase their home. These include individual offers, multiple bids, and other offer situations. Management: Seller's Agents will assist the Seller in managing the entire buying process by organizing all of the requisite documents and ensuring all parties involved in the transaction are active in ensuring the selling process is being executed properly and in a timely fashion. ​ Benefits - You do not need a real estate agent to sell a home; in fact, some home sellers leave the Seller's Agent out of the equation. However, you might benefit from hiring one. ​ To save time. Agents are professionals who are active in the market and will have a pulse on the general market conditions in your area. Pricing a home properly on the market is important so that Sellers can receive the highest payment for their property and to sell quickly. Mispriced homes can end up staying on the market longer than desired by Sellers and may impair the Sellers ability to purchase another home and/or move on time. To get information and help with negotiations. Good agents should have wealth of information to help you make a decision. And, they’ll handle a lot of complex paperwork on your behalf. Offer Contract Contingency Negotiations Home Inspection Reports Appraisal Reports Earnest Money Escrow Extension Requests Another plus is that your agent will handle a ton of paperwork on your behalf. Unless you love filling out forms – and have experience in real estate transactions – this is a chore best left to the professionals, who should ensure that everything is done by the book. You could easily make a mistake with these documents. Mistakes can cause deals to fall apart or (worse) make you liable for an inadvertent breach of contract. (Licensed agent will have errors and omissions insurance to limit this risk.) An experienced agent will make sure that everything that needs to take place — counter-offers, extensions, appraisal, inspection, walk-through, loan approval — happens when it’s supposed to and how it’s supposed to.​ ​ ​​

Your Real Estate Resource Helping home buyers and sellers in the Chicagoland area with all their real estate needs! Home Buying Process One-Stop Resource PadScouts' Real Estate Resource is here to tell you about all of the steps involved in the home buying and selling process. Our goal is to give you information about the processes so you can make informed choices for your real estate decisions. Personalized Consultation Home Buying Process Learn every step of the home buying process from start to finish. There are a lot of steps and many people involved. We want to make sure you're fully informed! Lease-To-Own Opportunities Not ready to buy a home? There are resources available that can help you secure the property before you can buy. Home Selling Process Learn every step of the home selling process and all of the costs associated so that you can make the best decisions when selling your home. Glossary There is a lot of terminology in real estate. Look them up here to learn about them before a real estate transaction. Reviews Our real estate experts are here to help you if the site doesn't have the answers you're looking for. See how they've helped others who've requested a free consultation. “This was a great resource to look up information about selling my home! I had a complex inheritance deal so I scheduled a personal consultation and spoke with Robin. He was amazing to work with and helped us navigate the resources available to help us buy the property! ” Gloria M. Contact