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The MLS System: How it Works

mls system

Most Illinois real estate agents are members of an MLS system, or “Multiple Listing Service.” Updated daily, this system is used exclusively by agents to look up properties for sale, pending, sold, expired, or withdrawn and to post the properties that they may have for sale. They then subscribe to that data, and send feeds to their website or access it through a personalized portal.

It is estimated that over 80% of listed homes are sold through agents using the MLS system.  When a seller lists their property for sale, they typically agree to a standard brokerage fee to expound their resources to sell the property.  The agent who lists the property for sale and puts the sign in the front yard is called the “listing agent”. This agent typically offers a “fee” to any agent that brings them a buyer.

Normally, another real estate agent, who usually works for an entirely different company finds the property for their buyer via the MLS system.  The agent that has the buyers and sells the property is generally referred to as the “selling agent.”  Even though these two agents work for different companies, they can both use the MLS to the advantage of their esteemed clients.

Typically, if there are two agents, a listing agent and a selling agent, each agent will respectively represent their individual client.  On the other hand, there are certain situations where a listing agent is also the selling agent. This simply means that the person who listed the property for sale is also the person who found the buyer(s) for it.   

You need only one agent for MLS system listings

It may seem obvious, but the biggest reason why you need just one agent is that if your agent is doing the job for you, they will have almost exactly the same information that all of the other agents have because of the MLS system.  It is, therefore, not necessary to call every agent on every sign on every house that is of interest to you, as you drive through all of the neighborhoods in your city. 

Just jot down the address, give it to your agent and he or she will be able to get you all of the information that you need and arrange for you to personally view the inside of the home.  You will soon find that calling just one number is much better than trying to get in touch with several different, busy, on the go agents.

At this point, it is worth addressing the possibility of your finding a property that is not in the MLS system.  A little known fact in this business is that your agent can assist you even if you happen to find a property that is for sale by owner.

For further consideration

To get the most from your relationship, let your agent know that you understand how the system works and let them know that you will be using them exclusively as your resource.  If you don’t feel the comfort level to do this, you may be working with the wrong person.

By understanding the tools that your agent has, you’ll be better positioned to realize the full benefits of what your agent can do for you.  When you use just one agent, you’ll most likely do yourself a great favor and have a smoother time looking for and completing your desired transaction.         

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How Your Property Is Appraised

how your property is appraised

Ever look around the inside and outside of your property and wondered how your property is appraised? Or what an appraisal is, and how it ties into finding out how much your home is worth?

An appraisal is an opinion of value and does not necessarily reflect a “set in stone” true valuation of your residential or commercial property. Primarily used in making sale price decisions, individuals or a trusted advisor usually orders an appraisal, which can take anywhere from mere hours to several days to compute.

Methods of Computing Value

Three different methods of appraising property exist; each has a different function and may be used for taxation, zoning or transaction purposes:

  • Cost Approach, which leverages cost data so appraisers can develop cost manuals and depreciation schedules;
  • Direct Sales Approach, which uses sales data so appraisers may establish “benchmark” properties for comparison purposes and develop appropriate adjustments used in the sales comparison analysis; and,
  • Income Approach, which the appraiser can use to help develop economic rents, expense allowances. It can also be used to establish discount and recapture rates.

The reconciliation process attempts to resolve differences in the results of the three approaches based on the reliability and credibility of the data, and tie into how your property is appraised. The reconciliation of the three approaches tends to be different depending on the type of property being appraised and helps to define (down the road) what your home may be worth on the open market.

Data appraisers collect

Illinois residential appraisers collect data to be used in their final valuations.  Some of the collected data includes:

  • Actual construction cost data
  • Market data publications and informational data bases
  • Mapping changes and surveys
  • Aerial photographs
  • Protest hearings & informal interviews with property owners
  • Deed activity (including mechanic liens)
  • Verified sales of properties
  • Information obtained from on-site inspections
  • Building permits
  • Discovery forms
  • Survey letters sent to buyers and sellers 
  • Fee appraisals
  • Closing statements
  • Aerial photography  

Will County and Cook County can aggregate MLS data which can provide information on sold properties as well as properties listed for sale. District staff collects information from other sources including neighbors, the internet, real estate agents, property owners, brokers, and their websites, construction professionals.

Once all data is collected, most appraisers will feed the data into a specialized software program. From there, a figure is outputted. An explanation as to how the program arrived at their figure is generally given, too.

That is a general breakdown of how your property is appraised, although it is not the “be all, end all” of the appraisal process.

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Prepping Credit For Your First Mortgage

your first mortgage

When you finally locate the home of your dreams, realtors will often ask if you’ve been prequalified for a mortgage. Prequalification involves filling out a credit application, and along with submitting your income information, determining how much home you can afford as dictated by the underwriting process. A large component of getting approved is having acceptable credit scores.

If you’re one of thousands applying for home loans daily, prepping your credit and understanding what the three main credit bureaus are reporting is monumental in proving you’re responsible when it comes to paying other unsecured debts. Home loans are considered secured as the title is held by the bank until the home is paid for fully, which often takes between 15 and 30 years.

Here’s how to prep your credit for your first mortgage:

Get copy of tri-merge report

Mortgage companies pull all three bureaus, but often will not share the information contained with applicants. So, it makes sense to get a copy of all three Bureau reports before applying so you have a complete credit picture before the underwriter does.

Companies offer three Bureau reports between $20 and $40, a wise investment for individuals who may not know what their credit file looks like. Scores are often included free of charge.

Look for inconsistencies

As you’ve read online, credit reporting agencies are only obligated to report what information is given. So ultimately any errors that are found must be disputed with whomever furnished the data. Print out a copy of your credit report and, with a pen, note any errors in data being reported by companies who you’ve opened accounts with.

Although TransUnion, Equifax and Experian offer online disputing, it’s vital you submit disputes by first-class certified mail, return receipt requested. Whereas online disputes get passed to an offshore computer, receive a code, sent to the data furnisher and investigated, many believe this process doesn’t work, or works unnecessarily slow.

Submitting disputes by mail ensures someone will read them, respond within 30 days as required by law, and not treat your dispute like a number.

Pay bills – even to collection agencies

If your credit report lists bills that are owed within the last 1 to 5 years, pay them off and either ask for removal, or simply have the item updated as “paid collection”. The fact you made the effort shows a mortgage underwriter responsibility, tipping the approval odds back in your favor. Even if the collection agency isn’t willing to remove or update items listed, pay them and maintain records that you’ve done so successfully.

If you have any items listed as being 30-90 days late, you can write a goodwill letter to the creditor and request they remove that notation, provided you haven’t been consistently late since account opening.

Conflicting stories online will suggest fighting tooth and nail to remove legitimate collection accounts, however just know it’s illegal to remove an account because you don’t like it – proof must be presented that you’re under no obligation to pay the account, or the account is genuinely not yours. Besides, the longer you fiddle around with your credit report and arguing baseless assumptions, the longer it will take to get the underwriting process completed – which means your dream home could be sold to a cash buyer if didn’t put down earnest money.

Establish credit responsibly

Mortgage officers like to see a diverse selection of credit before approving home loans. Paying these credit accounts over a period of one to two years shows you’re responsible when extended unsecured credit, and can handle multiple obligations at once.

Open 1 to 2 credit card accounts, a local store account, make sure you have secured at least one personal loan (even if small), and it certainly couldn’t hurt to have an auto loan either paid off or current. Student loans, provided they are either rehabilitated or being paid successfully, are another added incentive for mortgage underwriting purposes.

Remember, never use more credit than you’re able to pay back. General rule of thumb is never charge what you can’t pay for in cash.

Finally, don’t go on credit applications sprees before applying for a mortgage. Underwriters who see an abnormal number of credit inquiries feel the consumer is desperate, which elevates borrower risk.

Monitor progress

Once you’ve ordered your three-bureau report, have corrected errors and are consistently using credit in a responsible manner, it’s a good idea to monitor ongoing progress. This can easily be done using Credit Karma, myFico or similar products that offer a monthly monitoring service for either free or a nominal fee.

One small error could cost you unneeded interest rate hikes. Stay abreast of credit, folks, and monitor the files being used against you.

Keep your credit in tiptop shape by paying bills responsibly and not asking for more credit than you need, and the underwriting process will go smoothly provided you have all the information requested in good order.