I met Shawn from a sign call in September of 2009. He called on a condo. Sean came to the office and we hit it off. I used to be a teacher and he is now a hardworking teacher. He is looking to build equity and I understood how to help him–and I passionately wanted him to get a great deal and be secure. Every teach I help stay in the city–improves hundreds of kids lives I figure and Sean is a gift to CPS. He is a very bright guy. As I interviewed him as a buyer that first day he was thinking of buying a condo. He liked East Pilsen but was interested in what he could secure in the West loop for under 200,000.
As a teacher he has his grant coming from the city, on top of the tax break from being a first time buyer. Once we talked about his larger goals–beyond 5 years–the issues of having outdoor space, and room for a family came up. This inital interview proved to shift my perspective of him — and I saw that I could challenge him. I always challenge my clients–that’s my job. To ask probing questions. “Why a condo?” “Why not a house?” Why a two flat, why not a 4 unit?” I figure you have to get to someones “essence” by being a mirror and just asking the questions throughout the process. Let them hear themselves as they visit properties and throw options at them and test them–they find their way to their path.
What I heard from Sean on a deeper level was. He really wanted to settle in–plant roots. And he was frugal. Smartly so. He asked the right questions. He noticed things like the taxes were $400 high on one listing than another and wanted to know why. He wanted to know why things like why a 5th floor unit was $20,000 more than a 3rd floor unit–and questioned the logic of it.
Sean already lived in an apartment in Pilsen and he liked East Pilsen. We didn’t narrow out condos… but as we looked at the first 10 or so in Pilsen and then the South loop and Kenwood I ran the monthly payments for him, against two units in East Pilsen and showed him how not paying assessments and having a renter covering half his mortgage put him in a property of his own, with a yard, garage, and a tennant, with more square footage for the same payment as a two bed condo. I showed him a few houses and he liked what $200,000 could buy in a house in Pilsen.
Then we opened it up to two units and we quickly found a 2 flat on Morgan, very near Simone’s (the new hot spot in Pilsen and 18th) that was under $180,000. It needed work. He loved the block, and… ever testing him… I threw out that he could do a rehab loan. Not sure what he would say….
Now Sean, not having rehab experience, was very open to doing rehab to my surprise. He amazed me with his openness to learn about it. I have many years of rehab experience so I talked him through the process. He had an unusual courage to try something new. He is very unique for buyer in this way–as a buyer you have plenty of other issues to worrry about let alone taking on a construction loan and trusting a General Contractor.
So here you have a first time buyer, who started with a condo search… going to a multi unit where he would pay less… and now taking on a rehab project. But….it was all driven by the end goal. He is getting a home he can stay in for ten to twenty years in the n’hood of his choice at a great price with a low monthly payment that gives him freedom. The rehab can use non-toxic paints, green aspects and it’s all customized to what he wants in the property.
Sean was a great student of the process. He jumpred right in, did his research, interviewed many contractors, etc. I was very impressed with him and asked him if I could please share his story… and ask him some questions to benefit other buyers we work with.
Graciously… he said yes. And, he supplied his email below… so you can email him questions as you process of buying heats up.
So here you go.. and interview with Sean Lawler. A courageous, pioneer and new property owner who has earned a Masters degree in Buying a property in the last 4 months.
Phil : This is your first purchase and you decided to do a remodel loan “203k” — isn’t it alot to jump into being a homeowner and doing construction all in one fell swoop?
Sean: Since it’s all new it seems like a lot to jump into at the beginning. But I found that the government has the 203k loan set up so that the borrower won’t be taken advantage of. In fact, it’s set up so that the borrower can’t make bad financial decisions. You can’t get the loan if the bank finds out that the work you plan on doing does not meet market value.
The jargon regarding financing, mortgages and home construction work was all new to me. I didn’t really need to know much about what the jargon meant, I just needed to know how to compare prices as I shopped for different mortgage brokers and general contractors. In fact, I didn’t really need to shop around for different general contractors, I just needed to find a general contractor that would agree to do the work at the price determined by me and my 203k loan consultant. This consultant is on your side, itemizing all the work you want done on the property and placing a market value price on each item. He’s got your back.
I suppose the biggest risk I took was deciding which realtor I wanted to hire. Phil Buoscio impressed me not just because of his knowledge of the industry and the neighborhoods and the market, but because he challenged my thinking about what to buy based on what I could really afford. This is a much better business method than just agreeing to do whatever the client/buyer/me thinks is best.
Phil(as we get to the next question let it be know I didn’t ask to be complimented like that). Question: In starting to search you were thinking about buying a condo, and then you decided after weighing options to buy a 2 flat that you could remodel. What items did you weigh in making this decision?
Sean: As I became more familiar with what’s involved in owning a home instead of a condo, I realized that owning a home wouldn’t be a time-consuming headache. So much is straight-forward. It didn’t take long for me to realize that owning a 2-flat and renting out a unit makes financial sense. Getting that additional income from rent is a smart move.
I was also drawn to how by owning a home you become more connected to the neighborhood. You have more of a stake in community programs, environmental issues, political development, etc. It’s about time for me to settle in a neighborhood and be involved in this way: to develop relationships and help the community grow.
Phil: How does the 203k loan process work – once you find a property and get it under contract?
Sean: Well, first your bank (mortgage broker) has you hire a 203k loan consultant. This consultant will visit your property with you and help you decided what work you want done, what work will be mandatory to obtain the 203k loan, and what work you can afford. He will draft a Specifications of Repairs document that itemizes all this work.
Then you’re ready to shop for a general contractor (a GC). This GC will be hired by you to get all the work specified, done. The GC hires subcontractors to do the labor. She/He will hire a plumber to do the plumbing, a roofer to do the roofing, etc. But that’s all his responsibility. You just want to feel comfortable that the GC will make sure the job is done well.
In the meantime, you will attend a First Time Homebuyers training session conducted by the Rogers Park Community Center. This is a requirement for the loan. It was also quite informative. They cover all your bases, answer all your questions and make sure you have all the resources you need in making your home safe & sound and the people living in it happy.
That’s really about it. You want to be sure to spend a good amount of time with your 203k loan consultant determining what work you want done on the place; what kind of wood floor you want, what bathroom fixtures you want, if you want to demolish and rebuild a garage, etc. He/She will help you figure out what is best for you based on your budget. Then your GC has to just match your Specifications of Repairs doc. Many people have horror stories about GCs. That they end up doing crappy work, or jack up the price tag after they start working on the place. Well, you’re safeguarded against suck shady practices with the 203k loan.
Sean Lawler.. (open to answering questions by email)
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