Common Myths in Buying/Selling a Home
in Buying or Selling Real Estate
Myth #1: You have to engage the services of a real estate agent to buy or sell a home. No, you don’t. A real estate agent is a salesperson who lists the house for sale on the MLS and/or shows homes listed on the MLS to potential buyers. There are many sellers who have sold their home without the assistance of a real estate agent, however, sellers choosing a “for sale by owner,” approach for their home sale will not have access to the MLS. Those sellers who do not contract the services of a real estate agent may save on paying a real estate agent’s commission, however, the real estate agent’s commission can often pay for itself in marketing the property to a larger group of potential buyers, cutting down on the time it takes to sell the property, and assisting the seller in negotiating a price that the market will bear at that time. If you choose to sell your home without an agent, you may contact our Oak Brook Real Estate Attorneys and have us draft the final agreement between yourself and the buyer. You will not need the services of a real estate agent to have a contract prepared and the subsequent closing of the deal.
Myth #2: A real estate agent has authority to draft a contract. No, they don’t. Illinois law provides that a real estate agent can fill in blank lines on a boilerplate contract which was prepared by an attorney or group of attorneys. If you choose to sell your home without a real estate agent, you may contact our Oak Brook Real Estate Attorneys and we will draft the final agreement between yourself and the buyer. You will not need the services of a real estate agent to have a contract prepared and the subsequent closing of the deal.
Myth #3: When the buyer and seller have a fully signed contract, then the house is deemed, “sold.” No, it’s not. The property is not officially deemed “sold,” until the closing is completed, when the ownership has been conveyed by the deed and the buyer has paid in full.
Myth #4:Earnest money is the buyer’s down payment toward the house in order to show the buyer’s lender that the buyer is serious about buying the house. No, it’s not. The purpose of earnest money from the buyer is to show the Seller, not the buyer’s lender, that the buyer is earnest in their intentions to buy the house.
Myth #5: A mortgage broker is objectively looking out for your best interests and is unswayed by any monetary influences. No, they are not. A mortgage broker is supposed to shop around to find the best loan for your individual needs and circumstances. Often, a mortgage broker will have a relationship with one or two lenders and continually refer their clients to those lenders rather than shopping around. The mortgage broker is typically paid through a commission and often the amount of their commission sways them towards referring one lender over another. To learn more, read the article, “Mortgage Brokers and Fiduciary Relationships,” as well as item number 2 from the Federal Reserve Board’s website article entitled, “5 Tips for Shopping for a Mortgage.”
Myth #6: If a buyer receives a pre-approval letter or a pre-qualification letter from a lender, then the buyer is fully approved for a loan and the seller doesn’t have to worry about the buyer’s ability to get financing. This is a common misunderstanding. There are several steps to the final approval of a home loan, and there is always a chance that a lender may deny your loan at any time during the loan application process for any number of reasons raised by the lender’s underwriters.
Myth #7: If a buyer is denied for a loan at any time before the closing, then the buyer always has the right to cancel the deal and get their earnest money back. Not always. The buyer’s right to cancel the contract is determined by the contract language, and your attorney, not your real estate agent, is the only one who can assist you in enforcing the contract or canceling the deal.
Myth #8: At closing, the buyer’s lender (or bank) becomes the legal title holder (owner) of the real estate until the buyer has paid off the entire loan. This is a commonly held false belief. Buying real estate is different from purchasing an automobile. At the time of the real estate closing, the borrower of the loan becomes the owner of the real estate and the buyer’s lender places a mortgage against the house which, in the event of a default of the loan by the borrower, will allow the lender to begin proceedings to foreclose on the property and take possession.
Myth #9: A lender gives a mortgage to the buyer; a buyer does not give a mortgage to the lender. Just the opposite is true. You may often hear the term, “mortgage,” used interchangeably with the term, “loan,” but technically they do not mean the same thing. A mortgage is when a creditor takes only a lien on the property, and not ownership or possession of it. The debtor is called the mortgagor, and the creditor is called the mortgagee. The party borrowing the money is the mortgagor and the party lending the money is the mortgagee.
Myth #10: The closing takes place at the location of the buyer’s lending bank. Typically not. Closings in Chicagoland take place at a title company or an office where a representative from the title company facilitates the closing.
If you have questions about the application of the law in a particular case, consult your lawyer. The law is constantly changing. Information on this site or any site to which we link does not constitute legal advice.