Another More Personal Barometer of the Real Estate Market

Just wanted to post a quick nugget about a personal experience that might say something about the health of our Northwest Suburban real estate market. So one of the non-profits I'm affiliated with had a fundraising event over the weekend. A nice event with raffles, silent auctions, ect. and with some 250 attendees. Myself, a local Realtor, and a certified home stager had a package of lawyer representation in a residential transaction, a comparative market analysis, and a free home staging as an auction item which probably retails for $1,000 or so. Well, the allowable opening allowable bid was $50.

0 bids. Not too scientific but I did find it surprising.

Another Reason NOT to Buy a New Build

There are many reasons NOT to buy a new-build home whether condo, townhome, or single family home...unknown property tax liability (no credit at closing), very limited warranty protection from developer, well-protected Seller (from liability that is), house settling (i.e. smallish repairs), and under-funded associations. At various home buying speaking engagements I'll often share my opinion that a new-build condo is the WORST type of home to buy. Because of all the above reasons with the under-funded association issue underlined. When you read of the $20k special assessment horror stories it's nearly always a new-build condo where the developer sold everything off quick, it was crappy, and the association was hardly funded.

Just to add another log to the fire, I see Kimball Hill filed for Chapter 11 protection last week following many other local builders, including Neumann Homes. ANOTHER REASON not to buy a new-build. If your Seller/Developer files bankruptcy while you're under contract with them to build a home, get ready for a lot of delays and possibly a quick refresher on the US Bankruptcy Code so you can get your earnest money back.

The Long Term Impact of Foreclosure

Here's the full piece from Ken Harney (He's syndicated but usually appears in the Sunday Trib...the best real estate finance writer going). But he brings up some facts that are new to me about the length of time that foreclosure or "walkaway" will impact you.

On March 31, Fannie Mae sent out new guidelines to lenders aimed at walkaways and other foreclosure situations. Fannie will prohibit foreclosed borrowers from getting another mortgage through it for five years, unless there are "documented extenuating circumstances." In those cases, the prohibition is three years.

Even after five years, borrowers with foreclosures in their files will have to put at least 10 percent down and need minimum FICO credit scores of 680.

Freddie Mac, Fannie's rival, counts foreclosures as major blots for seven years, and a senior official said the company is aggressively pursuing walkaways "to preserve our deficiency rights" where permitted by state law.

PowerPoint from IL Housing Development Authority

It's from their series of Homeowner Outreach Days that they've been holding of late.

IL Statewide Foreclosure Prevention Network

A statewide resource of 15 non-profit housing groups...888-995-HOPE.

The Illinois Statewide Foreclosure Prevention Network is a coalition of 15 non-profit
housing groups providing default and foreclosure counseling to families at danger of
losing their homes across the state of Illinois. The group, organized by NHS of Chicago,
first came together in May of 2007 to identify ways to work together and to garner
additional resources to support these important services.

BofA to Drop Option ARMs

Probably a good move as Bank of America tries to spiff up its image as they try to get regulatory approval for their Countrywide buyout.

A House of Many Colors

Or just make sure you choose the right ones...at least if you're looking to sell your home. Here's the piece and the list:

•Yellows, overall, are not selling.

•Orange is popular outside the U.S. but isn't selling well here. An exception: deep corals as accents.

•Purple isn't a big seller, either, but our tastes in the color have shifted dramatically, from "Grandmother's soft lavenders" to wine and true purple, used in small amounts.

Other trends to keep in mind as you decorate to court your home's next resident:

•Granite in the kitchen isn't going away, but Turner sees a preference toward granite on the more subtle side.

•"Case goods" is industry jargon for big-furniture cabinetry, but what happens there also influences what's on the walls in your kitchen. Recently, dark-chocolate colors have dominated, but she says wood is lightening up toward a warm, medium brown. Cherry remains the favorite, Turner said.

•"Black and white is emerging big in the marketplace, and it will be huge in 2009 and 2010," she said. Throw in accents of red, and you'll have a combination with a strong influence in the European design market, she said. Another driver of all things red: the Olympics in China this summer, she said.

•Blue has always made us feel "safe," Turner said, and it's not going away. "Combined with brown, we expect it to be around a few years, and browns are huge right now."

Question: Cook County Evictions

Do they ever answer their telephone? Anybody ever been to their window in Daley 702? You have to go there in-person to give them the Order of Possession to move forward with scheduling an eviction. Of course at least in regards to Cook County the word used shouldn't even be "eviction" any longer because that's no longer what is done. Now it's a "Change of Locks case."

A Fading Legal Precedent: The Merger Doctrine

Alright so the Cliff Notes definition of The Merger Doctrine (that doesn't do justice to my first year Property professor) is that in the context of a real estate transaction, all of the pre-closing agreements (generally the various contractual terms) "merge" into the deed at closing thereby extinguishing a parties right to sue based on a contractual term post-closing. Thus creating some sense of closure at closing.

However, our IL Supremes have cracked open the door a bit in Czarobski v. Lata. The case dealt with your plain old 105% tax proration. The buyers were to get a 105% prorated credit at closing of the last ascertainable tax bill, UNLESS, the bill was based on a partial assessment. So at closing sellers gave buyers the 105% credit but the bill was based only on a partial assessment. When the real bills came out the buyers were some $10,000 short.

So buyer sues seller based on mutual mistake of fact and misrepresentation. The Supremes ruled that the "merger doctrine" did not apply here and here the buyers suit was remanded for further action at the trial level.

Those Evil Mortgage Brokers

Well, lets not over-generalize...I mean I don't like all those lawyer jokes.

But, new research by the Center for Responsible Lending shows that subprime borrowers with brokered loans pay significantly more than their counterparts who deal directly with lenders.

In the first four years of a mortgage, a typical subprime borrower who has gone through a broker pays $5,222 more than if he or she obtains the loan directly from a lender.

Here's the full report & an Executive Summary, plus a Sun-Times overview.

So How Many Disclosures Must a Title Agent Make in a Real Estate Transaction??

I can't totally do this topic justice here, but a must-read for real estate practitioners is in the March '08 IL Bar Journal entitled "Ethics and the Attorney/Title Agent" (password protected) by Attorney Michael J. Rooney. Essentially he runs through the various conflicts of interest that exist in the typical real estate transaction where a Seller's attorney is representing a client but also acting as an agent of a title insurance company. He also talks about a scenario where an attorney would actually be representing the title company as client.

First, he reminds us that the IL Title Insurance Act requires the lawyer acting as a title agent to complete and distribute a "Disclosure Statement Controlled Business Arrangement." OK, I do see these disclosed in most transactions.

But he talks about other disclosures that frankly I've never seen before...have you?

Essentially one disclosure discloses to the Seller what you're doing as a title agent, the cost, and their right to seek title insurance from another provider (See IL Rules of Professional Conduct 1.7(b), 1.8(a) and 2.3). The other again to your Seller is an "Adverse Client" Disclosure and Consent, essentially warning of a potential conflict of interest between a Seller and a title company (IRPC 1.7(a)).

Well, add another couple of forms to the closing pile.

Property Values Do Go UP TOO!

I saw our friends down in Springfield passed legislation that would put Cook County on an annual reassessment schedule rather than our little triennials that I so now enjoy. Sounds like a tax grab and more expense for the Cook Assessors office.

Here's the quote from the bill's sponsor:

Rep. Kevin Joyce (D-Chicago), the legislation's sponsor, said the current three-year reassessment cycle is "not fair and equitable."

"We need to make sure that . . . people aren't paying an undue burden," Joyce said.

Or how 'bout having our taxes RAISED every year instead of just every three years. Rep. Joyce, yeah we are in the throes of some real estate strain but the value of real estate has only dropped like twice in the last 25 years so lets not overreact.

Top 50 Markets by Affordability

Interesting list from Bizjournals...we check-in at 33/50 with 50 being MOST expensive. I'm a big San Antonio fan...nice climate, golf courses and not too far from the Gulf...here's to a second home there.

The Value of Home Staging

Here's the recent Tribune article. The premise of home staging is logical...something akin to appearance matters; of course. But a quote from the piece:

Ninety-three percent of staged homes in the U.S. sell 31 days or less, according to Barb Schwarz, of International Home Staging, which offers a home-staging accreditation program.

Come on.

Chicago "CTA Portion" Transfer Tax Refund?

Alright I'm confused already and it's only been effective 9 days...so we don't just have a real estate transfer tax in Chicago any longer now we have the "City's portion of the tax" and the "CTA's portion." Okay, the old tax (City portion) is the same old $7.50 per $1,000 to the Buyer. The new tax (CTA portion) is $3.00 per $1,000. We've reported on this subject several times before in this space.

However, now I've gotten this "CTA Portion of the Real Property Transfer Tax Refund Application" form and I'm totally stumped. Here's the language:

Section 3-33-060 (O) includes a refund for the CTA portion of tax for transfers to transferees who are age 65 years or older, who occupy purchased property as their personal dwelling for at least one year following the transfer, if the transfer price is $250,000 or less. This exemption is administered through a refund administered by the Chicago Tax Assistance Center of the city's Budget Office located at 121 N. LaSalle, City Hall, room 604. Application forms are also available online by clicking here.

What does this mean, i.e., who's eligible for the refund? 65 years and old and a transfer price $250k or less...ok, I understand that. But the refund relates to the CTA portion of the tax and the person must "occupy the property as the principal dwelling place for at least one year following the transfer." So we're refunding the Seller paid tax but in order to get the refund you must live in the property at least one year following the transfer (the property that you've just sold?).

So, who is eligible for this refund???

Is it like some suburbs where if you've paid a Seller transfer tax upon sale but then buy again in the same community, then you're eligible for some sort of refund of that Seller transfer tax? I haven't got a clue.

Lawyers: Single-Handedly Keeping the Chicago Real Estate Market Afloat

And we're leaping tall buildings in a single bound...

Hey I'm just re-reporting from another source here:

A study by Jones Lang LaSalle Inc.'s Law Firm Group has found that lawyers take up a healthy chunk of downtown Class A office space.

It found that 14.2 percent of the 25.4 million square feet of Class A office space in the West Loop is occupied by law firms. For the nearly 14 million square feet of Class A in the Central Loop the figure is 25.1 percent.

"Demand from law firms … has driven the development of seven of the last eleven projects built in the Central Business District," says Jones Lang LaSalle.

We Buy Ugly Homes

HomeVestors' top 10 cities for real estate investment:

DALLAS - (April 3, 2008) - HomeVestors® of America, Inc., the company famous for its "We Buy Ugly Houses"® billboards and America’s #1 Home Buyer, has named the top 10 markets for real estate investing in the first quarter of 2008. They are as follows:

1. Dallas, Texas

2. Houston, Texas

3. Atlanta, Georgia

4. Fort Worth, Texas

5. St. Louis, Missouri

6. Philadelphia, Pennsylvania

7. San Antonio, Texas

8. Denver, Colorado

9. Minneapolis, Minnesota

10. Phoenix, Arizona

Anyone ever sold property to them? I've got a couple clients looking to dump properties quick.

Tax Day is Coming...

So we all know the rule that if you've used a home as your primary residence for at least 2 of the last 5 years then you know $250k/$500k (single/married) in profit is exempt from capital gains tax upon sale. But even if you don't meet the two year rule, you might be able to shield some of those profits from taxes...here's when.

House Swap

or you might try HomeExchange.com.

Buyer's Incentive Idea

Saw this one advertised at a local Metra station...Seller offering to pay 6 months of Buyer's condo assessments. Only likely $1,200 to $1,800...but it's something.

Hillary and this Blog

Finally Senator Clinton's legitimate tie to this blog. Here's today's story about Clinton owing more than $3,000 to her alma mater, Maine South in Park Ridge as she starts to feel the financial strings tightening.

And the tie to this blog...

Well, I'm a resident of Maine Township and if Ms. Clinton keeps stiffing us I'm expecting my property tax bill to take a hit.