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New Construction Negotiation

Having worked with many Chicago buyers in the purchase of new construction properties (from condo to single family), I decided to outline some thoughts.

We heard developers do not negotiate, do they? - This is one of the most commonly asked questions from my buyer clients. In short, the answer (or non-answer) is some do ... and some don't. A developer is just a person or group of individuals with a big mortgage and financial objectives just like a homeowner. You never know until you ask but some indicators are as follows:

• Project Phase - Projects getting off the ground are often priced at pre-construction levels. A price increase pattern could be to have a pre-construction price (hole in ground), increase price when sales center is established, increase price when 25%/50%/75% sold, increase price when building is built and first unit is available. If any units are left then create the perception of value with a developer closeout. At any phase, determine whether the price being asked is truly an incentve or just hype.
• Percent Sold/Market Time - In many cases, developments that are in the initial phases or are not selling well with high market time will be more open to negotiation on price and upgrades. Projects in close-out phase often will have close-out specials.
• Project Size - Larger projects represented by huge developers are often less flexible. Smaller developers tend to be more flexible.
• Developer Size - Again, smaller developers will often be more open to negotiation. They are often more accessible and human than large developers.
• Marketability - Hot projects are just that, hot. They have great finishes, location, and are priced well resulting in less developer flexibility.

Ask your agent for advice on all of the above. They can assist in differentiating between hype and real value.

Even though the listing agent says the developer will not negotiate, can we still negotiate? - Yes, and taking some of the factors above into account, you should. In many cases the listing agent is a real estate agent for the developer and not employed by the developer directly. All offers must be presented, and the developer must make the decision ... not the agent.

If asking for upgrades, what should we ask for? - Fortunately, in the Chicago area, the trend has been to deliver units with high-end upgrades as a standard package. In many cases such things as crown molding, steam showers, 1 3/4 inch granite, Grohe fixtures, Toto toilets, Brazillian Cherry floors, etc. all come standard. In situations where this is not the case, the developer should provide a list of standard finishes and a list of potential upgrades to choose from. Working from the list is a safe bet as the developer often can get things done at lower cost. Use your buyer agent to work through the upgrade list and provide suggestions as to things that may be best for resale. If no upgrade list is provided, at a bare minumum ask for a list of standard finishes (and appliances) delivered with the unit. Again, use your agent to request upgrades. Bottom line in all cases is to be realistic as a buyer.

Can we visit sales centers on our own without an agent? - You can, but if you want representation, be sure to work with your buyer agent on this. In most cases, the agent needs to accompany on the first visit, or at a bare minimum, the sales center needs to be notified you are visiting and are represented. The full commission will be paid regardless of whether you have an agent. Remember, even tough the listing agent gets you coffee and makes you comfy, they represent the seller, not the buyer, so why enter into the situation unrepresented.

We have been asked to sign a contract different from the Chicago Association of Realtors contract, why? - New developments are typically under the control of the developer until a certain percent has been sold/closed. As a result, new construction is subject to a developer contract. As might be expected, the contract is written to protect the developer. The contract is typically subject to an attorney revie period.

What if things are not completed when we move in? - In new construction they never are. There are always odds and ends that need to be completed. Prior to move-in we will have a formal walkthrough and develop a punch list of items the developer needs to addess. I always recommend having a licensed inspector accompany during the walkthrough and assist in the punch list creation. If you want an inspection at every construction stage, many inspectors can conduct a pre-drywall and post-drywall inspection. Make sure the contact allows accesss for this. It is typical to have items on the punch list completed within an agreed upon time period from close.

Many more items to address, but hopefully my ramblings above will be of help. If interested in purchasing new construction and need some advice please don't hesitate to contact me so we can discuss the details.

Dual Agency, All Tied Up in Knots

Dual agency is one of those terms that is thrown around quite often and can tie all involved up in knots unless fully understood. In many cases, the pitfalls of dual agency are never truly understood by clients and inexperienced agents alike, until fully immersed in a dual agency situation. The sterile definition of dual agency is as follows...

Dual agency occurs when an agent represents two
principals (both buyer and seller) in the same transaction.

But what does this really mean? At the outset of any client relationship, an agent takes a listing, or begins working with buyers, and forms a fiduciary relationship. In this relationship, the agent has the duties of reasonable skill and care, obedience, accounting, loyalty, and full disclosure. So how is this fiduciary relationship honored if the agent represents both parties in the transaction? The answer is that it can't be, and in fact, the relationship must be limited. This limited dual agency relationship can only be entered into if fully disclosed, agreed to, and I will include understood by both parties (buyer and seller) in writing.

The agent can:

• Treat all clients honestly.
• Provide information about the property to the buyer or tenant.
• Disclose all latent defects in the property that are known to the agent.
• Explain real estate terms.
• Help the buyer or tenant to arrange for property inspections.
• Explain closing cost procedures.
• Help the buyer compare financing alternatives.
• Provide information about comparable properties that have sold so both clients may make educated decisions on what price to accept or offer.

The agent can not disclose:

• Confidential information that agent may know about the clients, without the client's permission.
• The price the seller or landlord will take other than the listing price without permission of the seller or landlord.
• The price the buyer or landlord is willing to pay without permission of the buyer or tenant.
• A recommended or suggested price the buyer or tenant should offer.
• A recommended or suggested price the seller or landlord should counter with or sccept.

* info above taken from the Coldwell Banker Residential Brokerage Consent to Dual Agency form.

So let's look at a couple scenarios.

Buyer Scenario: A buyer's agent has been working with clients for six months to find a unique West Loop loft. The agent takes a new listing that he/she feels is perfect and as it turns out it is perfect and the buyer clients want to write an offer. Both buyer and seller agree to a fully disclosed dual agency relationship. The buyers ask for comps to come up with a starting offer price and then ask the agent for their opinion on analyzing the comps to come up with a negotiation strategy. After all, they have spent the last six months driving aound Chicago looking for the perfect place. What can the agent do? Under this limited fiduciary relationship, the agent can pull comps for the clients but that is it. No assistance can be given (unless agreed to by the seller) with regard to interpreting the comps or coming up with a negotian strategy.

Seller Scenario: A listing agent brings newly acquired buyer clients over to one of their new Lincoln Park townhome listings. The buyer clients love it and want to write an offer. Both buyer and seller agree to a fully disclosed dual agency relationship. The listing agent knows that the sellers have purchased a new single family home in Evanston and are closing in a month. The sellers are motivated. Can this information be disclosed to the buyer? The answer is no unless disclosure is agreed to by the seller.

After an agent spends weeks, months, and sometimes years with both buyer and/or seller and building a strong client relationship, it is sometimes tough for clients to accept this new limited fiduciary relationship the agent is bound to. As an agent it is imperative that dual agency is disclosed, consented to in writing, and most importantly understood.

Hire an agent who knows the full meaning of not only dual agency, but agency in general.

Big Mary

One of the reasons I love real estate is that it gives me the ability to get out and about and experience Chicago's fantastic community areas and neighborhoods. Today brought me to Hyde Park while collecting information for a new listing in a popular 56th Street high rise.

While there I had to pay a visit to the Statue of the Republic ("Big Mary") and snap a few photos. Located in Hayes-Richards Circle, the statue standing today is a replica of the original 111 foot statue constructed to greet visitors to the World's Columbian Exposition held in Jackson Park in 1893.

For a fantastic tale of the exposition, the individuals who brought it to life, and the killer that stalked it's grounds, be sure to read The Devil in the White City by Erik Larson. It will make your trip to visit "Big Mary" all that more memorable.

MEN "RECLAIMING" SPACE IN THE HOME

MEN RECLAIMING SPACE IN THE HOME ... that's the title of an article in the latest buyer representative HotSheet (email newsletter) I get from Real Estate Buyer's Agent Council (REBAC). Having just taken the REBAC, Accredited Buyer Representative (ABR) course and receiving the ABR designation I now am fortunate to receive yet another newsletter filled with info. Here is an excerpt of the article ...

A century ago, male-centered rooms were common household
features among the well-to-do. Billiards rooms and so-called "snuggeries"
were a man's respite from domestic life. Since then, the male space has been
absorbed into the rest of the home. However, more American males seem to be
responding by making a concerted effort to reclaim their space. "Ninety-eight
percent of men want a space of their own, and the other 2% lie about it,"
says Sam Martin, author of the forthcoming book, Manspace: A Primal Guide to
Marking Your Territory. (Source: MSN Real Estate) Visit MSN for the full story.

I read the article and I love the concept. But in my house I have a manspace with rules. While I got (was allowed to get) a plasma TV and nice surround sound system, my wife gave me rules.

First, all the cables had to be hidden. Huh? This meant that I had to drill many holes in our cabinetry to hide the front left and right channel speakers. This also meant that I would have had to go into the ceiling, under the floor, or under the rug (god forbid) for rear left and right speakers, so alas, no rear speakers.

Second, the speakers can not be too visible. Huh again? I have two small bookshelf speakers for front left and right. Needless to say, the center channel would have been way too visible so no center channel. I do have a subwoofer though, however, when we have a movie playing with a great soundtrack my wife always thinks the house is falling down.

Third, no blinky lights visible. All stereo components must be hidden. Bummer, as half the fun showing off the system is to have a full cabinet of glowing stereo components. I had to hide all behind cabinets.

Fourth, never turn the volume up past 2, which is barely audible to the human ear ... except to my wife who thinks it is too loud, always too loud. Wierd.

Love to kid my wife about this stuff but seriously I do need a manroom to call my own. As king of my castle, I declair my next house will have a manroom ... now if only I had a say in the matter. I'll need to run it by the boss.

You've Got Mail

I'm addicted to spam, and I'm not talking about the mystery meat that comes in a tin can. In the Chicago real estate market we are all being spammed. As a real estate agent, it used to be that just our clients complained of spam. Going onto one of our agent websites to do a simple property search was a guarantee of receiving countless emails without the opportunity to initially opt out. This trend has picked up dramatically within the last year and now includes real estate agents spamming other real estate agents.

Now real estate agents are spamming real estate agents as never before in order to increase a listing's exposure. I can trace the trend back to one innocent email sent from an agent in a small Chicago brokerage to market a very "unique" 1 bed/1 bath condo in a downtown highrise. The service they used was Email Flyers. For a one time fee you can create an online flyer and blast it out to an email distribution list ... say the entire Chicago Association of Realtors (CAR) email distribution list. I could envision the light bulbs going on in real estate agent's heads across the Chicago area. Other email marketing services such as eCampaignPro were soon to follow. Soon my inbox was filled daily with such info as new listings, price changes, open houses, broker open houses, [fill in the blank], etc. I thought we had the local MLSNI listing system to handle these events but I guess you can never communicate too much.

The problem I have is that I am addicted to these things. I open every one of them ... that's right, I open them but I don't read most. I often hit the delete key before I even get a chance to read the subject line. There is so much noise out there that the urgent and news worthy email notifications are in danger of being treated as non-events. Kind of like screaming fire one too many times in a crowded movie theatre. This is a real shame.

That's it. I am off the soapbox so spam away.

Chicago Events in August

Take part in one or more of these great Chicago events in August.

• Gold Coast River North Art Fair, Aug 4-6, 10:00AM-6:00PM
• Retro on Roscoe, Aug 5, 12:00-10:00PM
• Northalsted Market Days, Aug 5-6, 11:00AM-10:00PM
• West Fest 2006, Aug 12-13, 12:00-10:00PM
• Air and Water Show, Aug 19-20, 11:00AM-4:00PM
• Ukranian Fest 2006, Aug 19-20, 12:00-10:00PM
• Bucktown Arts Fest, 21st Annual, Aug 26-27, 11:00AM-7:00PM
• Taste of Greece 2006, Aug 26-27, 12:00-11:00PM
• Chicago Antique Market, Aug 27, 8:00AM-4:00PM
• Chicago Jazz Festival, Aug 31-Sept 3, Begins at 11:00AM

For more events and complete event details visit the City of Chicago Special Events site.

What’s the Deal with Hotel/Condo’s Anyway?

In Chicago hotel-condos seem to be popping up daily. A rendering of the new Solis Hotel Chicago Condominiums appears to the right.

Exactly what is a hotel-condo anyway? The new hybrid housing phenomenon is hitting Chicago hard! Currently with 10 projects going up containing around 2,274 units you will soon be seeing condo/hotels throughout the city. This concept is better known in places like Florida and New York but expanded when developers found obtaining loans for new hotel projects more difficult. So they began selling hotel condos as a means of building equity.

Basically, it’s the same game as owning a hi-rise condo. You have a deed to the property, you pay taxes and monthly assessments. However, when you are not in your residence you can place your home in a rental pool and generate income. At some hotels, limits are placed on the number of nights owners can use their condos and in others, condo owners can stay in their units an unlimited number of night’s per year.

As you can guess, 60% of the buyers of these new hotel condos are empty nesters from the surrounding suburbs using their condos as weekend homes. Another 20% are from out of state while the remaining 20% are business looking for corporate suites or companies that operate vacation clubs. The prices tend to be higher on a per-square foot basis but there is a lot of variety, ranging from a 350 square foot king room for $220,000 upwards to $9 million for the deluxe. Remember, these are already furnished hotel rooms-many come with plasma TV and MP3 hook up stations.

So, is this a good way to make money? Due to heavy regulations from the SEC, developers can’t provide formulas or even talk about a units investment potential. Based on the dynamic nature of the hotel industry it makes it almost impossible to guess monthly costs. In some hotels, owners will never see the income in the form of a check, rather in credits that go towards monthly assessments or using hotel amenities, like the spa, restaurant, etc..

Those who use their hotel condo as a vacation home might find that it’s a worthwhile investment when they factor in lifestyle benefits, tax benefits and the likely appreciation of the unit when it comes time to sell.

The question I get the most is- “What happens to my stuff when I want to rent out my condo” Well, the hotel has a staff that comes in and stores it all in lockers and will return all the belongings to their original positions, when you come back. But don’t forget, this is still a hotel so everything costs extra!!

Some Chicago Hotel Condos to check out:

Solis
Waterview Tower: Shangri-La Hotel
Raffaello
Trump International Hotel & Tower
Elysian
Amalfi Hotel Chicago
Hotel Blake

Hope this helps increase dinner conversation!!

Chicago Events in July

Take part in one or more of these great Chicago events in July.

• Wrigleyville Summerfest, July 8, 12:00-10:00PM
• Lake View Music Festival, July 8-9, 12:00-10:00PM
• Ben Fest, July 14-16, 2:00-11:00PM
• Rock Around the Block, July 15-16, 12:00-10:00PM
• Chinatown Summer Fair, July 16, 10:00AM-8:00PM
• Dearborn Garden Walk, July 16, 12:00-5:00PM
• Sheffield Garden Walk, July 22-23, 12:00-10:00PM
• Summer on Southport, July 22-23, 10:00AM-10:00PM
• Venetian Night, July 29, Begins 8:30PM
• Taste of Lincoln Avenue, July 29-30, 12:00-10:00PM

For more events and complete event details visit the City of Chicago Special Events site.

Your Credit Score

Ever wondered what is behind your credit score? Download this Credit Score Guide to unravel the mystery behind the score and explain it's importance during the home buying process. For other home buying tools and tips visit our Buyer Resource page.

Complimentary Chicago Buyer Toolkit

Need assistance during the Chicagoland home buying process? Our team can help. Request our free Chicago Buyer Toolkit. Include your full mailing address.

Metro on Melrose - 4+1 East Lake View Conversion

Love this "new" development by R.E.M. Homes. Located at 519 W. Melrose, Metro on Melrose is a conversion of a typical 4+1 so prevalent in Chicago's, East Lake View neighborhood. Full gut rehab conversion to include the facade. The development, targeted at first time buyers, features studios, 1 beds, and 1 bed + den configurations. Parking is essential in this area and they have it for sale from $27,000 to $33,000. So popular they only have 12 units left. R.E.M. Homes also just Completed Barry by the Lake located around the at 515 W. Barry.

Chicago Events in June

Take part in one or more of these great Chicago events in June.

• Belmont-Sheffield Music Fest, June 3-4, 12:00-10:00PM
• Ribfest Chicago, June 10-11, 12:00-10:00PM
• Old Town Art Fair, June 10-11, 10:00AM-6:00PM
• Wells Street Art Festival, June 10-11, 10:00AM-10:00PM
• Taste of Randolph Street, June 16-18, 5:00-10:00PM
• Lincoln Park Summerfest, June 17-18, 12:00-10:00PM
• Pride Fest, June 24, 11:00AM-9:00PM
• Chicago Antique Market, June 25, 8:00AM-4:00PM
• Taste of Chicago, June 30-July 9, Begins 11:00AM

For more events and complete event details visit the City of Chicago Special Events site.

7% Tax Measure Does Not Pass

May 27, 2006

Dear friends, neighbors and community leaders:

The Triennial Reassessment has begun. This newsletter from TRAC will bring you up to date on what happened in Springfield. The 7% tax measure did not pass. Please read the account from Springfield because it will give you some insight on the politics that went on. We have some well-financed opposition for the renewal of the 7%. We must all come together over the coming months and make our voices heard. Our elected officials are waiting to see how much noise everyone is going to make before they do something.

TRAC will keep you posted on any new developments. TRAC urges you to make phone calls to the Mayor, Speaker Madigan and Governor Blagojevich. The phone numbers are in the newsletter. If you are having any meetings that you would like us to come out to - just give us a call!

You can reach us through our web site at www.trac-il.org. Pass the TRAC newsletter around to your friends. Make copies of it and hand it out at your meetings or over the backyard fence! TRAC will also be sending the newsletter out to our members that don't have access to the Internet. We need an army of angry citizens in order to affect change! Thank you for your continued support.

Sincerely,


Barb HeadPresident
Tax Reform Action Coalition

New Lincoln Park, Near North Side Condos

Since this is south of North Avenue, why are they calling this Lincoln Park? Kind of like West Lake View.

SoNo, developed by Smithfield Properties and designed by Booth Hansen Associates features 28 floors of residences priced from the $275's to $$440's.

New West Loop Condos

R+D659, developed by Meisrow Financial and designed by Brininstool + Lynch is one of the West Loop's newest condo offerings. Note to self, The name is R+D659. The contemporary 15 story structure will feature residences from the $200's to $500's.

Now if I could only remember the name, R+D659, that would be fantastic. Who came up with this? Every time I hear the name it reminds me of some science fiction movie like Ray Bradbury's Farenheit 451 (yes, i know it was a book first) or George Lucas' Star Wars. Not sure why but I expect R2D2 or Storm troopers to greet me in the sales center whenever I bring a client through. I love the West Loop so I'll get over it.

Condos, PUDS, and Co-ops

Looks like a duck, acts like a duck, but it isn't a duck. Think you are buying a condo but it is really a co-op? Think you are buying a single family but it is really a PUD? Three types of common interest developments ...

• Condos - You purchase the inner surface of the walls, ceilings and floors. The building structure and land are defined as a common elements and owned by the homeowner association (HOA) which is made up of the condo owners. Each unit is assigned a % ownership in the common elements.
• Planned Unit Development (PUD) - A variation on a condo, you purchase the structure and the land beneath. The HOA owns the common areas and is responsible for maintenance etc.
• Cooperatives (Co-op) - You purchase personal property in the form a stock certificate which entitles you to a proprietary lease of the apartment. The building is owned by a non-profit corporation.

To avoid surprises, know exactly what you are purchasing well ahead of time.

New Lincoln Park Lofts

Love Lofts ... especially in areas where you don't expect to find new loft projects.

LG Development Group just announced TRU Lofts, a new project at 2525 N. Sheffield. The project features 28 unique floorplans. 1200 square foot simplexes are being offered from $319,000; first floor duplex ups from $419,990, and penthouse duplexes featuring rooftop decks from $439,990.

New Lincoln Park Condos on Columbus Hospital Site

The three acre site of the former Columbus Hospital located at 2520 N. Lakeview could soon become the location for a 325-unit condo development. MB Real Estate appears to be on the verge of acquiring the site and sarting construction. The architect is expected to be Lucien Lagrange.