Sue Fox, @Properties. Direct 773.816.1788
Subscribe to Site
- FHA loans
- Market conditions
- Tax credits
Real Estate radio
Archive for the 'Foreclosures' Category
If you are considering a condo, I would say: Probably not. Unless you can afford a cash deal — in other words, you do not need a mortgage — buying a foreclosed condo can be a huge headache. I was talking to a Chicago real estate attorney today who often deals with foreclosures, and he said that 2 out of 3 such deals do not close.
Here are some of the problems you will likely encounter:
* A seller (the bank who foreclosed and now owns the condo) who knows ABSOLUTELY NOTHING about the property
* A seller who is unwilling to do any repairs, provide any disclosures about the property, or cough up any of the condo documents (bylaws, rules and regulations, budgets etc.) that are supposed to be given to the buyer
* A condo association, perhaps in disarray, who is unwilling or unable to provide any of the above documents OR a condo questionnaire that your lender will require
How can you buy a condo if the seller won’t lift even a pinky finger to provide the information that you and your lender NEED to close the deal?
My short answer is: You can’t. Save yourself the trouble. Unless you are rich enough to pay cash, forget about foreclosures and short sales when it comes to buying a condo.
A single-family house is another story. But condos are part of a larger building, a building with a condo association, condo dues, a condo budget and other collective efforts. You lender will require information from the condo association — and in this tough lending climate, they will typically require that most of the units are owner-occupied. Condos that have been foreclosed are often owned by faceless banks, often represented by clueless real estate companies and attorneys, who have no information about the property and take forever to respond to the simplest request.
If you have endless patience, and are not trying to close soon in order to qualify for a tax credit, perhaps you have the time and energy to try to close a deal on a foreclosed condo. But if you’re like most of my buyers — i.e., a regular person who needs a mortgage — at this point I would advise steering clear of foreclosed condos until the banks that own them get their acts together.
As I’ve noted in past posts, we are now seeing more short sales and foreclosures in areas like Edgewater, Andersonville, Uptown, Lakeview and Lincon Park. While this has been the norm for more than a year in some distressed South side and West side neighborhoods, it’s a recent — and growing — problem in the more affluent neighborhoods up north.
WBEZ, the Chicago public radio station, interviewed me about the trend and broadcast the story this morning. As I tried to point out, buyers should be careful about buying in condo projects where prices have been deeply slashed. I used Catalpa Gardens in Edgewater as an example; there are already 14 short sales and 6 foreclosure filings underway at this nearly new 126-unit building.
Unfortunately, dramatic price cuts by a desperate developer often spell financial ruin for the existing owners. These folks who bought the first units in the building end up so deeply underwater — having paid perhaps 50-100% more than the units now cost — that most of them will be forced into short sales or foreclosures if they need to sell anytime soon. They simply won’t have any other way to repay their loan, with prices so decimated.
That’s not going to be pretty for the newer buyers either, the ones who thought they got a great deal when the developer cut prices. Short sales and foreclosures throughout the building can lead to even lower sales prices if too many units are distressed, and the condo association may also run into trouble if some cash-strapped owners stop paying their monthly assessments.
So be careful out there, all you hungry condo buyers! And call me before you make a move, so we can check out the health of the building first.
In what has become a seller’s nightmare — and a buyer’s dream — the median price of a Chicago two-flat has continued to plummet. And more buyers are taking notice, picking up these stalwart Chicago homes for a fraction of what they were worth a few years back.
I’ve written about this phenomenon before (see my Sept. 30, 2009 post, “The collapse of the Chicago two-flat”), but I keep seeing more sales data showing major price declines. Of the 47 multi-unit properties (mostly two-flats and three-flats) that closed last week in Chicago, the median price was just $80,100, according to Midwest Real Estate Data LLC. Two years ago that same week, 25 of these multi-unit buildings closed at a median price of $310,000.
That is a 75% price drop over just two years!!! Of course, the number of Chicago two-flats changing hands appears to have roughly doubled during that time, but that’s to be expected when prices have fallen so dramatically. What sane buyer wouldn’t want to own two units for $80,000?
Unfortunately for owners who bought their two-flats two to six years ago, they are now in very deep trouble. I’m seeing more and more of these buildings offered as short sales as they slide towards foreclosure, with owners who paid upwards of $500,000 now so far underwater that defaulting on their mortgage may be the only way out.
In Edgewater, 1672 W Edgewater Avenue is a fairly typical example. The owners bought it for $550,000 in June 2006. It looks like they intended to convert it to a single-family home (according to the MLS description) and they gutted the first floor and upgraded the heating and electric systems. A year ago, they put it on the market for $415,000 but it didn’t sell. It’s now listed as a short sale — which requires the lender’s approval — for $240,000.
This sad story has a flip side: It is now an excellent time to buy a Chicago two-flat. In Edgewater alone, I just counted 13 two-flats that are either foreclosures or short sales for $400,000 or less. In Andersonville, there are at least four that fit this description. Even in pricey Lakeview there are three, including a graystone two-flat in foreclosure, now priced at $284,000.
I woke up today to 6-degree weather and a front-page, above-the-fold, New York Times story warning that the government’s Making Home Affordable program is not, in fact, making homes affordable and is actually prolonging the foreclosure crisis. Welcome to 2010!
Despite pressuring and cajoling lenders for almost a year, the government has not managed to find a permanent fix for millions of floundering homeowners. More than 2 million homes were lost to foreclosures or short sales in 2009, the Times reported, and at least 2.4 million more are expected this year.
Chicago is hardly immune. While we may have escaped the exaggerated boom and bust cycles that wracked many coastal states like California and Florida, Illinois is right up there in the nation’s Top 10 list for foreclosures. Our foreclosure rate doubled over the past year.
I know that sometimes there’s a disconnect between what buyers are reading in the newspapers and seeing on the streets. Buyers in some of Chicago’s most popular neighborhoods like Lincoln Park, Lakeview, Bucktown and River North may not see many foreclosures for sale, but the overall trend still benefits them. If dozens of foreclosures and short sales are roiling the market and driving down prices in Albany Park, for example, that holds down home values in nearby Lincoln Square. Prices citywide could easily slip again in 2010, because the increasing supply will clamp the lid on any recovery. The Illinois Association of Realtors is forecasting a 4.4% price decline throughout the Chicago area.
Is it finally time to buy? I see a short window from now until April, when many buyers can still claim either the $6,500 or $8,000 tax credit, and while interest rates are still hovering around the 5% mark. Borrowing money is extraordinarily cheap right now, but that won’t always be the case. Interest rates are expected to rise this spring, as the government stops propping up the market by buying mortgage-backed securities.
It’s becoming clear that the government’s Making Home Affordable program is failing to yank most struggling homeowners out of foreclosure. Lenders just aren’t modifying loans quickly enough — or on a permanent basis.
As of the end of November, more than 728,000 modifications were under way nationwide, but almost all were still in the trial period, according to the U.S. Treasury Department. Only 31,382 mortgages — about 4% — had their payments permanently reduced. Some analysts are now predicting we could see as many as four million foreclosures in 2010.
This is dreadful news for millions of families and the communities where they live. There is no question: Foreclosures hurt people, property values, cities, and the broader economic recovery. But for a handful of buyers who are willing to jump in, they also represent an opportunity to buy property they might not have otherwise been able to afford.
This year, I have unlocked the padlocked front doors to dozens, probably hundreds of foreclosed homes. There are boarded-up bungalows and chilly two-flats where the utilities were shut off months ago. Condo buildings whose developer went belly up before selling all the units. Single-family homes with children’s wallpaper still decorating the bedrooms. Half-renovated houses missing stoves and refrigerators and electrical outlets, where some investor started a rehab and then ran out of money. Deserted and now owned by a bank, some of these homes have also been damaged by water or mold.
Most of my buyers wind up passing on these homes. The price may be low, but they often require a lot of work. You need to be handy, or have money saved, or be willing to apply for an FHA 203K loan to rehab the place. But the opportunities are certainly there, and more are coming.
More than 9% of Chicago-area mortgages were 90 days or more delinquent in October, compared with 5% a year ago, according to First American CoreLogic. As mentioned in my previous posts, the foreclosure rate in Illinois doubled in the past year, and more than 8,500 homeowners received default notices last month.
If you are interested in purchasing a foreclosure, please give me a call. I can help you find a property that suits your needs, and I will refer you to capable lenders who can get the deal closed with a minimum of fuss. And if you act soon, you may qualify for a $6,500 or 8,000 home buyer tax credit.
Illinois, however, remains one of the hardest-hit states nationwide. It landed at Number 7 on the list of states with the most foreclosure filings last month, according to Realty Trac’s Foreclosure Market Report. There were 16,422 homes in foreclosure statewide.
While this destructive trend seems to be improving, if you look at the entire year rather than just a month-to-month snapshot, you can see the magnitude of our state’s tidal wave of foreclosures. Foreclosure filings have more than doubled since November 2008 in Illinois.
- A sad tale: This home at 5027 W Argyle in Jefferson Park, now owned by a bank, slid slowly into foreclosure over the course of two years. Once listed for sale at $479,000 in February 2007, it is now $299,000.
Sigh. That’s how I felt this morning when I saw the latest foreclosure numbers for Illinois, which were considerably worse than those of most other states.
Foreclosure filings jumped 30.3% in Illinois in the third quarter, compared with that period a year ago, according to RealtyTrac Inc. That gives us the 10th-highest foreclosure rate nationally, with one out of every 136 properties slapped with a filing. Experts point to rising umemployment as the main reason homeowners are defaulting on their mortgages.
On the ground in Chicago, I’m seeing more foreclosures creeping into stable, middle-class neighborhoods like Irving Park, Portage Park and Jefferson Park. Many of them follow a predictable ride downhill, as their owners first attempt to sell them for what they owe on the mortgage, and then franctically try to sell them for less (a short sale.) But short sales require lender approval, which often does not come.
And so several months later, I’ll see the same property pop back up on the MLS. Except now it’s owned by the bank.
The Obama administration said last week that it had helped 500,000 homeowners avoid such a fate with its mortgage relief program. But new defaults are on the rise. This was the seventh month in a row where foreclosures were filed on more than 300,000 properties.
If mortgage relief efforts don’t kick in for millions of homeowners soon, we’re likely to see a fresh wave of foreclosures next year.
- Sizzle is back in the South Loop
- How to Buy a Chicago Foreclosure (as Supply Steadily Shrinks)
- Home prices jump 15% in 2014, but cold weather chills sales
- Lincoln Square on a Tear as Average House Price Tops $600,000
- More choices ahead for Chicago buyers as rally cools