Need advice on home buying process, PLEASE HELP!

I'm interested in buying a home in IL, first time home buyer. There is a home came out as fair condition and is priced $195000. My realtor said it is 'a bit under priced' didn't exactly mention how much.
My realtor wants me to put as much earnest money as possible to get it closed as quickly as possible. He also believes that will help him for negotiation process.
In this market condition - I heard it is buyers market, what is the reasonal amount for earnest money? I was thinking that I can put $5000. Should I put more or less? Also, my realtor is thinking about making initial offer for $180,000, expecting to close the deal around $190,000. My realtor explains that though it is buyers' market and for some houses, those come out as discounted as much as 20 - 30%, however that would be rare for the housing market that I am interested in, under $200,000. In usual situation, I would agree with my realter 100%, however, in this given market condition, I'm not so sure, feeling that I could demand lower price; however, on the other hand I wouldn't want to scare off sellers that I'm getting a bit tired of home buying process.
well, this pretty much sums up my situation. Do you think that I could demand lower than or around $180,000?
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snipped-for-privacy@gmail.com wrote:

Hi, Is that 5 grand a down payment or deposit? You can make an offer with several conditions like passing house inspection, etc. I never lived in a pre-owned house. You can do some of your own research regarding price trend in the area. Location is most important and price per square foot plus/minus extras, work to be done, etc., etc.
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Lot of unknowns that we can't make many specific suggestions.
First off, a house is worth what someone is willing to pay for it. The realtor is saying it is underpriced already and he wants you to make an even lower offer. There are two possible outcomes. The buyer may be desperate and grab your offer. The buyer may think you are one cheap SOB trying to steal a properly priced house and tell you to screw off and won't talk anything less than the full listed price. If you are prepared to walk and find another place, go with the low bid. If you are crazy about the place and surely want to live there, offer very close to asking price.
Second, never trust a realtor. They make money on sales. He is working to sell the house and any warm and fuzzy felling he has for you goes away after the commissions are divvied up.
If you are pre-approved for a mortgage you have more bargaining power as the seller will have confidence of a completed sale. He may be willing to go lower compared to another buyer. When you get down to the end of negotiations, don't let a $1000 difference blow the deal. In the scheme of a 20 or 30 year mortgage, it is not worth the hassle.Makes for a better closing and better relations with the seller. When a good deal goes down, the seller often leaves a small gift or celebratory bottle of wine for the new buyers. When a deal is bad, they remove the light bulbs and toilet paper just to piss you off.
Do some research on other sales around and make you best offer.
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I'm interested in buying a home in IL, first time home buyer. There is a home came out as fair condition and is priced $195000. My realtor said it is 'a bit under priced' didn't exactly mention how much.
My realtor adviced me to put as much earnest money as possible to get it closed as quickly as possible and help through negotiation process.
In this market condition - I heard it is buyers market, what is the reasonal amount for earnest money? I was thinking that I can put $5000. Should I put more or less? Also, my realtor is thinking about making initial offer for $180,000, expecting to close the deal around $190,000.
He explains that though it is buyers' market and knows that for some houses, those come out as discounted as much as 20 - 30%, however that would be rare for the housing market that I am interested in, under $200,000. In usual situation, I would agree with my realter 100%, that I don't know too much about home buying process anyway, and 2nd, I respect his opinion that he's the expert and the one who coordinates the whole thing. however, in this given market condition, I'm not so sure, feeling that I could demand lower price; and want some 2nd opinion. however, on the other hand I wouldn't want to scare off sellers that I'm getting a bit tired of home buying process.
well, this pretty much sums up my situation. Do you think that I could demand lower than or around $180,000? Thank you in advance.
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On Mar 14, 8:42 pm, snipped-for-privacy@gmail.com wrote:

Oh, so many things to say and so little time to type them.
First and foremost, it ain't "your real estate agent" unles IL law is VERY different from everywhere else. So the first thing is "have you signed a "buyer/broker" contract". If not, it's the SELLER's agent. Hello. The agent has a fidutiary responsibility to the seller, not you. It is also illegal for the seller to communicate information to you if it is detrimental to the seller but MUST communicate info about you to the seller. So if the seller know that the seller will sell for $175m and you are talking $190m for the house, the agent can't/ won't tell you that.
Without saying other things to scare you, all I'll say is that there are HUD certified housing-counseling agencies all across the country. Go find one in your neighborhood/area and go talk to them. Even an informal discussion with them for an hour or two will give you a lot of information.
Good luck with it.
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I always found the best houses by looking for a pia seller that required 24 hour notice before showing house. Usually that meant that they kept the house ultra clean and in good shape and realtors never showed houses requiring appointments so often the house was unsold on the market for a long time and the price had been lowered significantly. Just a hint from experience.

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One time I went with a friend to look at land. We looked at a 100 acre parcel that the owner wanted $200,000 for ,and according to the realtor, would only come down slightly. As my friend wasn't particularly interested in this parcel, he played both the realtor and the owner, like a deck of cards, at the point that he walked away from the deal, she was down to $50,000. A house is worth whatever someone is willing to pay. You need to be your own advocate. You need to see what comparable houses in that area are selling for, not what they're asking for them, but what they're actually selling for. Rule number one. Your realtor works for the seller. Unless you've hired a buyers realtor, the realtor works for the seller. In some states, they actually have to have you sign a form, so you understand this. Your realtor will say anything, do anything, hopefully within the law, to make a sale. Get all your information independent of the realtor,and just use them to get you into houses you want to look at
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snipped-for-privacy@gmail.com wrote:

I suppose he wouldn't since his commission is a percentage... :)
You _do_ have legal representation, right?

Earnest money isn't required to make a bona fide offer of whatever level you should choose. That can be arranged during the negotiations as part of the seller's acceptance/rejection process.
There are too many variables to be able to say anything at all other than you're way too green going here -- you should at a minimum research what other houses in the area have sold recently and for what price. How long has this particular property been listed? How long did comparable properties take to sell?
W/O knowing anything at all about the area you're in, it's impossible for anybody here to even hazard a guess as to how depressed the housing market is there at whatever price range. Some areas are in the dumper, others have seen very little impact.

You can't "demand" anything -- you can make an offer of whatever you choose and the broker has to tender it. They can reject it outright, counter-offer or accept. Your move again.
Ever hear of Bruce Williams on evening talk radio? He's great at fleshing out the details and the pitfalls. He's got a book altho I've not seen it--if you can find the show, call and ask your questions--but have a reasonably thick skin; he doesn't suffer fools easily! :)
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Wow, so many feedbacks with great insights.. This is certainly more than I expected. Thank you so much all of you for sharing your thoughts on my somewhat 'vague' question.. I thought this group posting works like a thread that I could post my message that everyone can see at the same time, but doesn't seem that it works that way, so I'll just write up one message and make it as reply for everyone who answered my question.
first of all, i think i somehow delivered negative impression on my realtor (after revising the initial post, i kinda felt it and deleted right away and posted another one after this, and there were some people who already answered on my questions.. Thank you so much! )
My realtor is actually my friend since college.. I think he wouldn't do anything fishy to take advantage over me or this situation. He even let me use his search engine for realtors, so I could search houses in my flavors - that website showed a lot more info that wouldn't be available in the public, including the realtors' cut or extra bonus upon closing certain houses - I tried not to pay attention on those 'secretive' info since that was either none of my intention or business..One thing I want to double check though is that even if he wants to deliver best deal to me, what if he couldn't deliever it due to his lack of knowledge or experience, OR the way he practices isn't something that is widly accepted.. So, I decided to post a question here before making any major move.
I've seen around 35 to 40 houses.. mostly town houses. (it is difficult to buy a single house with under 200000 around the town I am at) The house came out is a Duplex (town house with two units) that I don't have to pay association fee (which is attractive feature to me) This house I am thinking about submitting proposal in fits my situation in many aspects, it is closer to my work than other houses that i've seen..(if i move close to my work, houses become too expensive, difficult for me to afford; if I move farther away, I tend to get more square footage and newer and nicer houses, however I will have to drive 3 to 4 extra miles) also, there are many strip malls and stores nearby..if i go up further north, there are more farm lands than stores.. I looked around the house today, and it was the house that was owned by the original buyer for 17 years. My friend explained that if one person owns a house for long time, we wouldn't find much update or renovation inside and that sounded true. roofing appeared to be fair condition though. the house overall was neatly kept and clean. It didn't appear that it requires any major work..
a month ago, there was a house came out a block away from this one I am now interested. The house was a second away to go through foreclosure..was taken by bank, not the owner. the price was $179900. The house was in really good shape (which was hard to believe; a house in pre-foreclosure status was usually in very bad shape, after few occassions of seeing several houses with big holes in the wall and with ceiling falling down, this came as big surprise) though the owner or someone took away refregerator and washer and dryer..even with that the house seems so attractive with its square footage and overall condition. My realtor pulled out CMA report on that house and it was sold at $260000 2 or 3 years ago, initially came out as $270000 a year and a half ago, and now it was captivated by a bank and priced $179900. I put my proposal in with 181000 with putting down $1000 as earnest money. My friend was doubtful about this move since there was already competition on that house (when we arrieved, there was already one agent showing that house around and saw another family coming in though it's been out only 5 days), earnest money is too little, (according to my friend, banks wouldn't bother to review the offers when a house that was captured is in good condition and earnest money is too little, they would look for $5000 as minimum) Later I read this artical which says that if you are going to put more than 3% as downpayment, there is no reason not to put more for earnest money because the amount of money stands out and make you as a serious buyer and put you in better position on negotiation process. My question was more like If $5000 large enough to make my position as committed buyer when my purchasing property is about 200000, so a little more than 2.5%.
My offer was rejected and later I was told from my friend that the house is going through contract with another guy. (my friend told me 10 people including me made an offer and i don't know at how much it was sold, my friend thinks it must be sold at way more than 180000, probably over 200000).
Now, this house came out, from a block away, is priced 195000. compared to the other one, the overall condition for this one is worse. Still my friend thinks that this house is a bit under priced. my friend sent me an email hours ago with the info of the houses in the neighborhood which are still active in listing or the ones that were sold in last 12 months. There were about 10 houses and mostly were sold higher than this one or still priced more expensive than 195000, so I think my friend is right. However, my concern is that what if this bear housing market's overall discount rate wasn't really reflected on this neighborhood? I overheard it is common pratice to buy a house with 5% discounted rate when the market is OK. Right now, everyone knows that it is rock bottom for housing industry and I was hoping maybe I could buy a house with at least 10 to 15% discount.. I definitely want to take advantage of this interest rate, thinking about wait until FRB's new rate cut, which is expected on 18th this month..by making my rate float even after making a offer. That's one of the reason why I want to put this process an end asap.
wow, this is such a long email, as i was writing this reply, i was able to sum up my situation and partially was able to answer my own question..Overall, I guess doing this was worth it. Thank you so much all of you for sharing your thought and reading this long message!
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snipped-for-privacy@gmail.com wrote: ...

Not to impugn your friend, but...
The point is it his job is to represent the seller, _NOT_ you. Friend or no, you need somebody on your nickel who's fundamental and fiduciary duty is to look out for _your_ interests to make sure you don't get stuck w/ some hidden fault in a title, undisclosed defect, any of a multitude of things that can (and do) go wrong...
...

Inspection? Who pays? If the seller, there's an incentive (and often a sweetheart kickback deal) to let stuff go buy to close the sale...I repeat, who's looking after _your_ side of the transaction?
...

What it sold for back then is almost immaterial to its value in the market today...again, you need to be looking at what similar properties in the same neighborhood of roughly same condition are _closing_ for _NOW_ (or at least within 6-months to a year at the outside depending on how fast stuff is moving). In a volatile market, historic prices are just of no use in actually assessing value.

I think that article is bullshit -- dealing w/ a bank in foreclosure is somewhat different than a homeowner, but the offer is required to be submitted and the lender will look at the overall gain to them -- earnest money is a trifling amount and of really no value to them unless the market is slow--on this particular property obviously there was a lot of interest.

The offer was rejected because they got better offers, _not_ because of lower earnest money.
This earnest money thing is a red herring. It could only possibly be of major significance if you are not already qualified by a lender for the size of mortgage you're going to need for the range of properties that you're looking at and/or don't have the upfront cash besides. If you are pre-qualified, you're earnest enough.
I again recommend highly you find Bruce Williams on the radio tonight or his book and bone up on real estate purchasing in a hurry...
--
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Byun.kevin, the realtor let you search the MLS for your area. In many areas, you can do this free because many realtors offer online access to it in exchange for minimal information about you.
On the MLS you can see general descriptions of houses and their prices. (Selling prices if that is public info in your state; else only asking prices.) But, from the list you generate on MLS you can pick 3 or 4 most comparable and have a licensed appraiser do a full comp workup. Then, separately, you should get an inspection done by a licensed house inspector. The appraiser works from the assumption that everything is in good working order, meets code, and does not require repair. The inspector looks at those issues.
Offer only as much earnest money as you feel comfortable losing. Make the offer conditional on your own approval of appraisal and inspection results. One strategy is to use the appraisal to set the initial price then subtract for the cost of repairs of problems found by inspection. To get those costs you ask the relevant trades (roofer etc) to look at the house and give you a written estimate of the work to be done.
A house for sale should look like nothing is wrong, but this one has a number of red flags. It is in foreclosure after being owned 17 years; that could mean just 1 year of tight money, or many years, hence a lot of deferred maintenance. A roof in (to you) "fair" condition suggests deferred maintenance has been going on a long time.
    Una
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Dump the realtor. It's apparent, he finds you as naive, as a first time buyer. Public records will show exactly how much the house is being taxed, when it was purchased, how many owner's it's been through, and so much more.
It's not surprising, the realtor hasn't shown you any of this information. As someone else pointed out, they are working on commission, and this one wants to fatten their pockets, as much as possible. Remind them, they are suppose to be working for you.

Dump this idiot. "If" you find you really want to make an offer, you put down little earnest money. If you decide to back out for some reason or another, you might find the money tied up. Legally, they can't force you to buy the house, but they can make it hard for you to get your earnest money back.
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snipped-for-privacy@gmail.com wrote in

Ask the realtor to pull the CMA's (comparative market analysis) aka Comps on 3 homes that have CLOSED in the SAME AREA within the last 6 MONTHS. I say CLOSED and not "active listings". People can list the price at anything. What they get is a different story. If the market is changing rapidly there you may want to ask for 3 months.
The realtor may mention that the comps do not reflect and sale contingencies on the price it sold for. For example: seller to put new roof on, seller paid some closing costs, seller agreed to have driveway resurfaced, seller paid an upcoming assessment which technically he did not have to.
If the realtor discourages you from doing this I would get another realtor.
As far as what you put down there should be a customary percentage for your area. There is no need to put down more.
Couple of more realtor questions: How long has the house been on the market? What is the typical time on the market for they level home you are looking at.
One of the standard items you can put in the contract offer is that the house must appraise at or above the offering price. This gives you an out or renegotiation justification. If you will have a loan the bank will require an appraisal. Soe banks actually have someone come out. Some do nothing more than pull Comps. If you get a private licensed appraiser then they work for you. You would get a written appraisal.
Especially being a first time buyer SPEND THE $ AND GET A HOME INSPECTION. A satisfactory home inspection should be part of the contract offer. Be there when they do the home inspection. They encourage it. They'll show you the things they find (as well as a written report) and they'll teach you stuff about houses.
Some states require a home inspector be licensed by the state. In some states, believe it or not, any jabonee can set up shop and call themself a home inspector. Either way, if you want a warm fuzzy on the quality of your inspector get one that is a member of ASHI http:\\\\www.ashi.org or NACHI http://www.nachi.org
Everything has to be put in the offer. The offer may go back and forth a few times but when it's accepted by buyer & seller, you can't add stuff later.
Keep in mind that the commission of both the buy and selling realtors is paid by the seller. Both realtors work for the seller (there are exceptions) but they do have a code of ethics. Your realtor is not necessairly out to put the screws to you.
This is not an an all inclusive home buying post. There are many things, important things, not mentioned. If you have a family member or very good friend who has done it a few times that can be invaluable.
Red...
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On Fri, 14 Mar 2008 17:25:20 -0700 (PDT), snipped-for-privacy@gmail.com wrote:

Write a check for $1000.00 when the contract is signed. That is earnest money. It implies you intend to complete the deal.
You can loose earnest money if the deal falls through.
Don't confuse this with the money - 20% applied towards the loan or mortgage. They are not the same...down payment... Now, the earnest money applies towards the percentage you put down when you close the deal.
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This is a good topic for misc.consumers.house.
Personally, I would avoid this agent like the plague. She still may get a cut of the commission, but she is doing you no favors.
Giving a lot of earnest money does NOTHING to reach closing quickly. All it does is lock you in. Do not give more earnest money than you are prepared to kiss goodbye.
    Una
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On Fri, 14 Mar 2008 17:25:20 -0700 (PDT), snipped-for-privacy@gmail.com wrote:

If you are willing to offer 180 and go up to 190, and you take the advice not to let 1000 get in the way (or maybe 2000) and you probably will take that advice because once someone, almost anyone, has made up his mind he wants something, it's hard to change his mind, so you will almost certainly get the house.
So the first thing hyou have to decide is if you want it. Are you in a hurry to buy? How many houses have you looked at. How many did you like. How many did you like more than this one, less than this one. When you describe it as in fair condition, is that only the amount of work it needs? You haven't said you actually like the house, or that you would like it a lot when it is fixed up. I don't know how many choices you have in your price range, because I don't know where you are.
Now my townhouse in suburban Baltimoire is probably worth 195 or 190 now, based on the postcards I get from one realtor telling me how much houses in my n'hood sold for (and I verified this when my next door n'bor sold (Here they have all the prices on the net, based on address), and I like it a lot except for 3 of the neighbors. I don't know how much more it would have cost me to buy a free-standing house (I planned to get married and let my wife pick out the house) but I think only 10, 20 or 30K. Not sure.

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On Fri, 14 Mar 2008 17:25:20 -0700 (PDT), snipped-for-privacy@gmail.com wrote:

Of course! There are so many factors involved. If you can walk away from the deal or you have this attitude, you have much more negotiation power. If the seller needs to refinance soon or needs the money desperately, you have a better chance at a lower price. About 1% earnest sounds right, but you need to ask the real estate agent.
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snipped-for-privacy@gmail.com wrote:

It is a buyer's market. If a tract house, i.e there are a lot of similar ones, ask to see the realtor's comps and only pay attention to the recent ones as market is declining. If you are a qualified buyer, have no property to sell first, and put up $5,000 you are in a very strong position to put in the lowest possible offer. Also get an itemized list of buying costs and property taxes and property transfer taxes. I hear horror stories of high taxes in certain places.
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I'd stop worrying about the earnest money as if it were the main factor in someone accepting an offer. Are you pre-qualified for a conventional mortgage with 20% down? Someone making an offer under those conditions with $500 earnest money is going to impress me a lot more than someone that puts more down, but wants to get a 5% down mortgage. Or worse yet, someone that wants to make the purchase contigent on them selling their own house.
You say the first deal was under priced according to the realtor friend of yours. If you've looked at so many houses and have access to his MLS data, you should know what similar houses have actually sold for. Meaning you should also know if the house is priced right.
Make sure you have an inspection contigency in the contract and get a reputable inspector. Usually, that winds up free, because most inspections on an existing home will find enough squaks that you can get then get the seller to agree to lower the price by an amount to fix them. And that is what you should do, as opposed to having the seller ffix them, because then you can control what's done. For example, if there is a dishwasher and on the inspection it shows up as leaking, I'd rather get a credit of a couple hundred bucks, then get the new one of my choice.
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snipped-for-privacy@optonline.net wrote: ...

...
<Note I'm commenting here to OP altho he seems to have left the scene, it's just convenient to reiterate the point I've previously made>
From the seller's viewpoint I couldn't agree more. OTOH, from OP's viewpoint as a buyer, it could be absolutely _critical_ to have such a contingency clause (altho in this case of a first-time buyer that's not likely an issue).
_BUT_, it's only one example of the sort of thing that arises and the reason OP should have somebody (preferably imo a legal-beagle) on his nickel to ensure that this or whatever contingency it is that is appropriate for his particular situation is addressed--and only that person will be the one looking out for his interests in the transaction, friend or no...
It's that competing issue of whose interests are at stake that the particular example is good at illustrating that hopefully OP will read (and take to heart altho I have my doubts of the latter even if the former were to happen, unfortunately).
--
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