According to ABC7 Chicago, the housing market in the state is hotter than it’s been since before the Great Recession of 2008—only this time the market is more stable. That is to say, if you are looking to sell, the market is on fire, but if you are looking to buy, you may encounter certain challenges! In fact, according to Illinois Realtors, the nine-county Chicago metro area reported an 18 percent increase in sales in January and February 2021, over the same months in 2020.
The median sale price increased about 15 percent, from $235,000 to $270,000. Bidding wars are becoming the norm with properties remaining on the market for just 18 days, and two-thirds of offers facing stiff competition. Let’s delve a little deeper into the current housing market in Illinois.
Are Appraisals Matching Purchase Price?
Having appraisals match purchase price has always been an issue—and one that causes anxiety among sellers. Today’s appraisals, however, simply may routinely be coming in lower than home prices in certain areas. The question becomes whether the appraisal truly represents market value. Appraisers typically look at “comps,” which are nearby properties with similar characteristics that sold within the last six months.
Because of the pandemic, appraisers have struggled to find really solid comps. Further, as the housing market becomes hotter, appraisals simply can’t keep up with market value. Buyers should expect an appraisal to be lower than the asking price of an Illinois home, at least for now. With so many buyers lined up to purchase a home, sellers are unlikely to have to come down on their price, even when the appraisal comes in lower.
Should You Offer More Than the Appraisal Amount?
While a low appraisal may not be much of an issue for the seller in this market, buyers may be hesitant to pay more than the house appraises for. The difference between the offer and the appraised amount the bank will lend on is known as the appraisal gap. Buyers should know that when the appraisal is significantly lower than the sales price, they may be required to make up the difference in their down payment. It is also possible to ask for another appraisal since home appraisals are not an exact science—and may not be quick enough to catch up with market value. You may also use a low appraisal to negotiate a lower price once the home is under contract.
Are Sellers Less Inclined to Deal with Inspection Issues in This Market?
For buyers, because the market is so hot and homes are getting harder and harder to find, they may be forced to buy a home in an “as-is” condition—where sellers are not required to make repairs or improvements. Sellers are also more likely to be able to dictate closing dates and conditions in this market. To really make their offer stand out, buyers may go over asking price, increase their down payment amount, and agree to waive a home inspection.
Or, if there is a home inspection, buyers are more willing to overlook smaller issues—and possibly even larger issues. Skipping a home inspection—even during this market—is rarely a good idea. A home inspection can increase your confidence about the overall condition of the property before you sign on the dotted line and it’s too late.
How Important is Having an Attorney When Purchasing an Illinois Home?
Buyers may find themselves giving up many important considerations just to ensure they get the home they want. Make sure you are protected by having a real estate attorney by your side during the entire home buying process. Buying a home can be complex under normal circumstances but can be particularly intricate in the current market.
Having an Illinois real estate attorney by your side ensures you are protected, the deal is fair to you, and can potentially save you money as well. When a real estate attorney is involved, it is much less likely the deal will fall through, and you can be sure there will be no title issues after the sale. Finally, a real estate attorney can save you significant amounts of time, ensuring a smooth transaction all the way around.
Real estate law is an especially unique area; at Vaclavek Hartman Vaclavek, P.C., we work hard to safeguard buyers, sellers, and real estate professionals during real estate transactions. Contact our firm to help with your next real estate transaction.
