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2/19/2008 10:00:00 PM
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Richard DotyBrookfield to be featured in national cable TV show
Brookfield will get some national TV exposure later this year, when HGTV broadcasts an episode of "House Hunters" that was filmed entirely in the village.
Some filming has already taken place, said Richard Doty, a Brookfield resident and real estate broker associate at Saffron Realty in Chicago.
According to Doty, who moved to Brookfield from Chicago six years ago, the connection with HGTV was something of a coincidence.
"It was a friend of a friend thing," said Doty, who spent a lot of time working in California for a previous employer. "Someone at [the show's production company] was looking for a Realtor, my name came up and the producer got in touch with me."
At the time, Doty had a young couple looking to buy a home in Chicago and the network gave the green light to go ahead with the shoot. At the last minute, however, the couple bailed.
But Doty also had a Chicago couple looking to make a move to the suburbs, specifically to his hometown of Brookfield. HGTV agreed to the change of plans and began working on the episode.
"House Hunters" typically features a couple looking to move to a specific area. With a budget in mind and a Realtor in tow, the couple is shown three homes to choose from and picks one at the end of the show.
Doty said he wasn't allowed to discuss the homes or any details about the couple, citing a confidentiality agreement with HGTV. The filming won't wrap until later this spring, Doty said, with the show airing likely sometime this summer.
-Bob Uphues
Thursday, March 27, 2008
Tuesday, March 18, 2008
Options for serious buyers in a scary housing market.
I know it is incredibly confusing to wade through the information about the housing market. If you listen to the media, everything is gloom and doom. This has caused near panic among buyers and sellers alike across the United States. The market has been crippled by fear!
Wake up America and don't be afraid! Yes there is plenty to be concerned about but, the bottom line is that we all need a place to live. At the end of the day we all need a place to go home, seek solace and shelter, house our families, and live out our lives. There is no shame in hedging one's bets in the rental market right now; none at all. If, for whatever reason, you can't afford to buy, are credit restricted due to the new credit rules, or are simply concerned about buying a home that might not be worth what you paid for it in 6 months, your fears are legitimate.
On the other hand, if you aren't prevented from buying by credit; if you need to make a move, and if you are currently weighing the pros and cons of purchasing; I would urge you to read on.
1) Foreclosures: This is not as bad, (or as good for consumers), as it may sound. Foreclosures are up everywhere across the nation but, for the most part, have higher concentrations in some areas versus others. The factors are purely economic. The foreclosures in today’s market are mostly coming from situations where the buyer of the home bit off more than they could chew, (whether they overestimated their income, misunderstood an adjustable rate mortgage, or fell into the “sub prime” category). Many misrepresented or miscalculated their ability to pay a mortgage and were given the mortgage by the bank with little to no money down and little more than a handshake representation of their income. Not smart. When people hear about foreclosures, they often think that means they can get a “deal” on the home. Even in this market that isn’t necessarily the case. The banks will take losses, most definitely. They will also write off those losses and will, over time, weather the storm. Whether they market the home with an agent or through an auction, those commissions must also be factored in. In many cases, homes have lost value, (which is why the individuals who were foreclosed on walked away), which is where the “bargain” can come into play, but the banks aren’t going to give these homes away. Particularly if you are at an auction, there is generally a reserve price or, the minimum acceptable price that the bank will accept for the home. Auctions can have some hidden expenses for the buyers including the auction house’s fees which are, in many cases, passed along to the buyers directly at a cost of 7-10% or more of the final auction price. Say for example you are bidding on a home that was valued at the peak of the market at $1,000,000. Now it has been foreclosed upon and in an effort to recoup their expenses the bank has factored in a 25% loss on their side making the reserve price of the home $750,000 at auction. Now even if you are the only one to bid the reserve price, (you could very well be looking at higher competing bids), you then make this purchase and then have to pay 10% for the auction fee or an additional $75,000 making the total purchase $825k. This is still a relative bargain but, in most cases, these homes are being sold “as is, where is” and whatever needs to be fixed or updated will also become the buyer’s responsibility. This is where a perceived bargain might start to, in reality, be whittled down to very little. In a foreclosure or auction situation, as a buyer, you are looking to achieve an equity position. That is the goal. So back to the $1,000,000 house; if the entire neighborhood of million dollar homes is suddenly worth 10-20% less because of price corrections in the market, you can see how the price you pay for something at auction may not put you in the position you were hoping for at the end of the day.
Foreclosures are certainly a problem in the current market, but remember, people who are facing foreclosure have many options at their disposal to stave off or delay the process. For one thing, people have up to 6 months to recover, (ie pay their back mortgages), after receiving the bank’s notice of intent to foreclose. This gives many people a window to save money or restructure themselves. Banks are also offering loan modifications to help cash strapped home owners prevent foreclosure. For the bank, the foreclosure process is long and expensive. The foreclosure courts are backed up which can also provide the person in default some breathing room simply because the court cannot keep up. In the current market, it can take the bank, in some extreme cases, a year or more to fully foreclose and even if a person is at the absolute end of their rope, they can always file for bankruptcy which can further delay the foreclosure process.
The bottom line with foreclosures: they are not all they’re cracked up to be and, in many ways, the banks are at the disadvantage. With little to, sometimes, negative equity in the homes being foreclosed upon, the deals rarely live up to investor’s expectations.
2) The Short Sale: This is a good situation to look for if you are in the market for a home at this time. A short sale is, essentially, what a bank and a current homeowner agree to accept for a home, (provided both parties agree), in an attempt to jointly liquidate a property and mitigate losses both to the seller and to the bank. In many of these cases, the homeowner is behind on their payments, is willing to sell and vacate the property, and is in a negative equity situation, (where they basically owe more than the current value of the home). In this situation, the bank independently assesses the current value of the home versus what is owed, and then reviews all offers that may result from the homeowner’s efforts to sell the home. The downside is that the bank can take several weeks, (sometimes a month or more), to reach a decision or make a counter offer. This is partially because these departments are currently overwhelmed. So while a potential buyer needs to be patient, the possibility of getting a good deal is definitely there. The bank understands that they will be selling the property at a loss but taking a certain percentage loss up front helps them avoid the expense and time involved with formal foreclosure proceedings. This method is generally favored by the bank as a way to further mitigate losses.
I’ll give you an example: Say there is an urban condo that, with parking, sold just a few short years ago for 455k. Now, given the current market conditions, the unit with the parking is worth 415k at the top end. The loss to the current owner is 40k in value. Now let’s say that the owner made this purchase with a 100% loan product. The owner has negative equity or negative amortization in the property and is now having trouble paying the mortgage on a home that is suddenly worth 40k less than they originally paid for it. This is a troubling situation for the bank and the owner. When the owner considers selling they feel like they can’t because their place is now worth so much less. This is when a smart owner who is in trouble contacts their lender directly and speaks to someone in loss mitigation. Every loan service company or lender has a loss mitigation department that is there, specifically, to handle issues with struggling homeowners. When someone from the department and the homeowner discuss their options, the idea of a short sale often comes up. In this scenario, the bank considers any offers on the property. The seller can generally employ any real estate agent they choose at customary fees, and the bank then, in considering the offer, considers all of the expenses and losses and then, if the offer is acceptable forgives the seller the shortage.
For example, in the case above: Let’s say that an offer of 400k comes in. The bank has an estimated value of 415k, down from 455k the home was purchased for. Now the bank must decide if, in order to facilitate the sale of the home, they are willing to accept 400k, the loss of 55k plus any brokerage fees and fees associated with the sale, and essentially forgive the seller those funds to get the deal done. In the current market, this is happening more than you might imagine and it is, very often, a win/win situation.
So what do you do in today’s market? True things look very uncertain, but there are so many opportunities, particularly in the “short sale” market, that a patient buyer who has good qualifying credit and money down, can do pretty well. Every individual needs to consider their own situation carefully before deciding.
Bottom line: The real estate market, long term and as a whole, has a track record as a place to build wealth.
Fair warning: If you aren’t ready to look at any real estate purchase you make in this market as a long term, “buy and hold” investment, then it may make sense for you to continue renting. On the other hand, if you are looking at a purchase in this market as a long term investment, (at least 5+ years), then this market may have a lot to offer you right now. With the Fed lowering rates to near historic lows, and pumping much needed cash into credit strained markets, if you qualify for a loan at today’s restrictions, the deals are yours to be had. As a qualified buyer, right now, you have an incredible amount of negotiating power.
The optimal position is that of someone with good credit and assets, and no contingencies such as a current home to sell. If you are a buyer in this category, you wield an incredible amount of power in this market.
What if you have a home to sell?
Well, I’ll start by saying that “move up” opportunities are better than ever. The sticky wicket is selling that house you already have.
Stay tuned. I’ll be covering that very topic in an upcoming post.
No one can predict the future, but fear is not the answer!
Remember:
Amateurs built the Ark
The Titanic was built by “professionals”
Wake up America and don't be afraid! Yes there is plenty to be concerned about but, the bottom line is that we all need a place to live. At the end of the day we all need a place to go home, seek solace and shelter, house our families, and live out our lives. There is no shame in hedging one's bets in the rental market right now; none at all. If, for whatever reason, you can't afford to buy, are credit restricted due to the new credit rules, or are simply concerned about buying a home that might not be worth what you paid for it in 6 months, your fears are legitimate.
On the other hand, if you aren't prevented from buying by credit; if you need to make a move, and if you are currently weighing the pros and cons of purchasing; I would urge you to read on.
1) Foreclosures: This is not as bad, (or as good for consumers), as it may sound. Foreclosures are up everywhere across the nation but, for the most part, have higher concentrations in some areas versus others. The factors are purely economic. The foreclosures in today’s market are mostly coming from situations where the buyer of the home bit off more than they could chew, (whether they overestimated their income, misunderstood an adjustable rate mortgage, or fell into the “sub prime” category). Many misrepresented or miscalculated their ability to pay a mortgage and were given the mortgage by the bank with little to no money down and little more than a handshake representation of their income. Not smart. When people hear about foreclosures, they often think that means they can get a “deal” on the home. Even in this market that isn’t necessarily the case. The banks will take losses, most definitely. They will also write off those losses and will, over time, weather the storm. Whether they market the home with an agent or through an auction, those commissions must also be factored in. In many cases, homes have lost value, (which is why the individuals who were foreclosed on walked away), which is where the “bargain” can come into play, but the banks aren’t going to give these homes away. Particularly if you are at an auction, there is generally a reserve price or, the minimum acceptable price that the bank will accept for the home. Auctions can have some hidden expenses for the buyers including the auction house’s fees which are, in many cases, passed along to the buyers directly at a cost of 7-10% or more of the final auction price. Say for example you are bidding on a home that was valued at the peak of the market at $1,000,000. Now it has been foreclosed upon and in an effort to recoup their expenses the bank has factored in a 25% loss on their side making the reserve price of the home $750,000 at auction. Now even if you are the only one to bid the reserve price, (you could very well be looking at higher competing bids), you then make this purchase and then have to pay 10% for the auction fee or an additional $75,000 making the total purchase $825k. This is still a relative bargain but, in most cases, these homes are being sold “as is, where is” and whatever needs to be fixed or updated will also become the buyer’s responsibility. This is where a perceived bargain might start to, in reality, be whittled down to very little. In a foreclosure or auction situation, as a buyer, you are looking to achieve an equity position. That is the goal. So back to the $1,000,000 house; if the entire neighborhood of million dollar homes is suddenly worth 10-20% less because of price corrections in the market, you can see how the price you pay for something at auction may not put you in the position you were hoping for at the end of the day.
Foreclosures are certainly a problem in the current market, but remember, people who are facing foreclosure have many options at their disposal to stave off or delay the process. For one thing, people have up to 6 months to recover, (ie pay their back mortgages), after receiving the bank’s notice of intent to foreclose. This gives many people a window to save money or restructure themselves. Banks are also offering loan modifications to help cash strapped home owners prevent foreclosure. For the bank, the foreclosure process is long and expensive. The foreclosure courts are backed up which can also provide the person in default some breathing room simply because the court cannot keep up. In the current market, it can take the bank, in some extreme cases, a year or more to fully foreclose and even if a person is at the absolute end of their rope, they can always file for bankruptcy which can further delay the foreclosure process.
The bottom line with foreclosures: they are not all they’re cracked up to be and, in many ways, the banks are at the disadvantage. With little to, sometimes, negative equity in the homes being foreclosed upon, the deals rarely live up to investor’s expectations.
2) The Short Sale: This is a good situation to look for if you are in the market for a home at this time. A short sale is, essentially, what a bank and a current homeowner agree to accept for a home, (provided both parties agree), in an attempt to jointly liquidate a property and mitigate losses both to the seller and to the bank. In many of these cases, the homeowner is behind on their payments, is willing to sell and vacate the property, and is in a negative equity situation, (where they basically owe more than the current value of the home). In this situation, the bank independently assesses the current value of the home versus what is owed, and then reviews all offers that may result from the homeowner’s efforts to sell the home. The downside is that the bank can take several weeks, (sometimes a month or more), to reach a decision or make a counter offer. This is partially because these departments are currently overwhelmed. So while a potential buyer needs to be patient, the possibility of getting a good deal is definitely there. The bank understands that they will be selling the property at a loss but taking a certain percentage loss up front helps them avoid the expense and time involved with formal foreclosure proceedings. This method is generally favored by the bank as a way to further mitigate losses.
I’ll give you an example: Say there is an urban condo that, with parking, sold just a few short years ago for 455k. Now, given the current market conditions, the unit with the parking is worth 415k at the top end. The loss to the current owner is 40k in value. Now let’s say that the owner made this purchase with a 100% loan product. The owner has negative equity or negative amortization in the property and is now having trouble paying the mortgage on a home that is suddenly worth 40k less than they originally paid for it. This is a troubling situation for the bank and the owner. When the owner considers selling they feel like they can’t because their place is now worth so much less. This is when a smart owner who is in trouble contacts their lender directly and speaks to someone in loss mitigation. Every loan service company or lender has a loss mitigation department that is there, specifically, to handle issues with struggling homeowners. When someone from the department and the homeowner discuss their options, the idea of a short sale often comes up. In this scenario, the bank considers any offers on the property. The seller can generally employ any real estate agent they choose at customary fees, and the bank then, in considering the offer, considers all of the expenses and losses and then, if the offer is acceptable forgives the seller the shortage.
For example, in the case above: Let’s say that an offer of 400k comes in. The bank has an estimated value of 415k, down from 455k the home was purchased for. Now the bank must decide if, in order to facilitate the sale of the home, they are willing to accept 400k, the loss of 55k plus any brokerage fees and fees associated with the sale, and essentially forgive the seller those funds to get the deal done. In the current market, this is happening more than you might imagine and it is, very often, a win/win situation.
So what do you do in today’s market? True things look very uncertain, but there are so many opportunities, particularly in the “short sale” market, that a patient buyer who has good qualifying credit and money down, can do pretty well. Every individual needs to consider their own situation carefully before deciding.
Bottom line: The real estate market, long term and as a whole, has a track record as a place to build wealth.
Fair warning: If you aren’t ready to look at any real estate purchase you make in this market as a long term, “buy and hold” investment, then it may make sense for you to continue renting. On the other hand, if you are looking at a purchase in this market as a long term investment, (at least 5+ years), then this market may have a lot to offer you right now. With the Fed lowering rates to near historic lows, and pumping much needed cash into credit strained markets, if you qualify for a loan at today’s restrictions, the deals are yours to be had. As a qualified buyer, right now, you have an incredible amount of negotiating power.
The optimal position is that of someone with good credit and assets, and no contingencies such as a current home to sell. If you are a buyer in this category, you wield an incredible amount of power in this market.
What if you have a home to sell?
Well, I’ll start by saying that “move up” opportunities are better than ever. The sticky wicket is selling that house you already have.
Stay tuned. I’ll be covering that very topic in an upcoming post.
No one can predict the future, but fear is not the answer!
Remember:
Amateurs built the Ark
The Titanic was built by “professionals”
Tuesday, January 29, 2008
Is this really the time to buy?
So many people have been asking me this question lately: Is this REALLY the time to buy real estate?
The answer is, overwhelmingly, YES! At least that's the case in the Chicago area, but I believe there hasn't been a universally better time to buy in a very long time.
There area a number of reasons for this and I think they can be broken down to a variety of key components:
1) Interest rates: Let's face it kids, you can't argue with the fact that the cost of borrowing money continues to get lower. For those of you who are planning on hanging tough in your current home, then this is the time to refinance into a fixed loan program and get out of any ARM or Option ARM product you might have. These recent rate cuts by the Federal Reserve are a gimme to you ARM holders out there so do yourselves a favor and refinance. For buyers there is a double decker goodness in the rate cuts because it dovetails directly into...
2) Moderating and receding home prices: OK so the rates are about what they were when they were at their best, BUT, the houses are actually going DOWN in value. This is a rare situation historically and the combination of low race and moderating home values is about the best opportunity many of you have had, particularly among first time buyers. Even if it takes another full year or more for us to pull out of the housing slump, buying now is not going to hurt you. As the market recovers, the FED is likely to raise rates and while prices slide up and rates slide up the opportunity to really get in low is not going to be there the way it is right now.
3) There are a lot of homes on the market for a variety of reasons: It isn't JUST because of foreclosures and bad mortgages that there are a lot of homes to choose from out there. It is, after all, the Spring market and that said, people are had planned to sell or move anyway are going to be putting their homes up for sale. It's part of a normal market environment. BECAUSE of the foreclosed properties, they may be forced to accept a lower price on their home. In this environment, no matter what your price point, you can afford to be picky and look for the home that has the MOST of what you are looking for. That's an added bonus to this current market.
4) The law of incremental percentage savings: What? What is he talking about? I'm glad you asked! I know there are many of you out there who are concerned about selling your homes and the fact that you might have to take a loss, but you recognize that you can now afford to move up to that larger home. We call people like yourselves, "move ups." As a move up, you are facing having to take a lower price for your current home but take heart, that's where the law of incremental percentage savings applies, (and yes, I made up this law). Here's an example of how it works:
Let's say your current home is 250k
Now let's say the home you want to upgrade to is 500k
In the previous "hot market" you would have been able to get your asking price, but so would the other party in the home you wanted to buy.
NOW, let's say both sides are going to have to back off their prices by 10%.
This means that your 250k home will now sell for 225k.
This ALSO means your "move up" home priced at 500k can now be purchased for 450k!
So although your "loss" on your home is 25k, your net gain on the purchase of your move up home is 25k even after your loss. This is the law of incremental percentage savings! The basic concept is the higher the price of the home, the higher incremental loss even if the relative percentage is the same!!!!!
Smart money has already figured this out and based on information I have from a variety of real estate attorneys, there are a large number of contracts on higher priced homes, or move ups, that also happen to have home sale contingencies, (meaning the people who are looking to do the move up often can only do so if they sell their current home).
You know what that means? First time buyers get your butts out there and start buying. The next 6 months will be full of opportunities to get homes cheaper than you've been able to for several years, at interest rates that are some of the most favorable in history.
5) Stock market investment: Again, you're probably saying, "what is he talking about?" but it isn't as crazy as it sounds. Here's why: I have a number of friends in the industry who, now that the banks and REITs, (real estate investment trusts), have taken a beating in the stock market, have been quietly buying stock in banks and REITs. Why? Their answers have been simple bits of genius. They have said that because of public perception and all of the negative media attention, these stocks have lost significant amounts of value but the value lost has been beyond realistic proportions. Sure there have been losses in banking and real estate, but my experts do not feel the actual losses justify the devaluation of these stocks.
Translation: There's still gas in the real estate tank and the current slump cannot and will not last forever. In fact, the statistics are firmly stacked against it.
My best advice:
If you have been thinking of buying, do it and do it now. Now is when there are more options, you can be choosy and hold out for a property that has as much of what you want and need in a home for your budget and when you find a place that matches your criteria, don't hesitate; go for it!
If you have been thinking of upgrading but have been concerned about the loss on your current home: Consider the law of incremental percentage savings and take the plunge.
If you are struggling: try to stay calm and stick it out. The market will improve and even if it doesn't improve quickly enough to keep you in your home, don't panic. Stay in contact with your bank, they may be able to help you before the federal government steps in, (which there is no guarantee of).
The market is certainly bumpy, but it isn't as scary as you think.
Rick
The answer is, overwhelmingly, YES! At least that's the case in the Chicago area, but I believe there hasn't been a universally better time to buy in a very long time.
There area a number of reasons for this and I think they can be broken down to a variety of key components:
1) Interest rates: Let's face it kids, you can't argue with the fact that the cost of borrowing money continues to get lower. For those of you who are planning on hanging tough in your current home, then this is the time to refinance into a fixed loan program and get out of any ARM or Option ARM product you might have. These recent rate cuts by the Federal Reserve are a gimme to you ARM holders out there so do yourselves a favor and refinance. For buyers there is a double decker goodness in the rate cuts because it dovetails directly into...
2) Moderating and receding home prices: OK so the rates are about what they were when they were at their best, BUT, the houses are actually going DOWN in value. This is a rare situation historically and the combination of low race and moderating home values is about the best opportunity many of you have had, particularly among first time buyers. Even if it takes another full year or more for us to pull out of the housing slump, buying now is not going to hurt you. As the market recovers, the FED is likely to raise rates and while prices slide up and rates slide up the opportunity to really get in low is not going to be there the way it is right now.
3) There are a lot of homes on the market for a variety of reasons: It isn't JUST because of foreclosures and bad mortgages that there are a lot of homes to choose from out there. It is, after all, the Spring market and that said, people are had planned to sell or move anyway are going to be putting their homes up for sale. It's part of a normal market environment. BECAUSE of the foreclosed properties, they may be forced to accept a lower price on their home. In this environment, no matter what your price point, you can afford to be picky and look for the home that has the MOST of what you are looking for. That's an added bonus to this current market.
4) The law of incremental percentage savings: What? What is he talking about? I'm glad you asked! I know there are many of you out there who are concerned about selling your homes and the fact that you might have to take a loss, but you recognize that you can now afford to move up to that larger home. We call people like yourselves, "move ups." As a move up, you are facing having to take a lower price for your current home but take heart, that's where the law of incremental percentage savings applies, (and yes, I made up this law). Here's an example of how it works:
Let's say your current home is 250k
Now let's say the home you want to upgrade to is 500k
In the previous "hot market" you would have been able to get your asking price, but so would the other party in the home you wanted to buy.
NOW, let's say both sides are going to have to back off their prices by 10%.
This means that your 250k home will now sell for 225k.
This ALSO means your "move up" home priced at 500k can now be purchased for 450k!
So although your "loss" on your home is 25k, your net gain on the purchase of your move up home is 25k even after your loss. This is the law of incremental percentage savings! The basic concept is the higher the price of the home, the higher incremental loss even if the relative percentage is the same!!!!!
Smart money has already figured this out and based on information I have from a variety of real estate attorneys, there are a large number of contracts on higher priced homes, or move ups, that also happen to have home sale contingencies, (meaning the people who are looking to do the move up often can only do so if they sell their current home).
You know what that means? First time buyers get your butts out there and start buying. The next 6 months will be full of opportunities to get homes cheaper than you've been able to for several years, at interest rates that are some of the most favorable in history.
5) Stock market investment: Again, you're probably saying, "what is he talking about?" but it isn't as crazy as it sounds. Here's why: I have a number of friends in the industry who, now that the banks and REITs, (real estate investment trusts), have taken a beating in the stock market, have been quietly buying stock in banks and REITs. Why? Their answers have been simple bits of genius. They have said that because of public perception and all of the negative media attention, these stocks have lost significant amounts of value but the value lost has been beyond realistic proportions. Sure there have been losses in banking and real estate, but my experts do not feel the actual losses justify the devaluation of these stocks.
Translation: There's still gas in the real estate tank and the current slump cannot and will not last forever. In fact, the statistics are firmly stacked against it.
My best advice:
If you have been thinking of buying, do it and do it now. Now is when there are more options, you can be choosy and hold out for a property that has as much of what you want and need in a home for your budget and when you find a place that matches your criteria, don't hesitate; go for it!
If you have been thinking of upgrading but have been concerned about the loss on your current home: Consider the law of incremental percentage savings and take the plunge.
If you are struggling: try to stay calm and stick it out. The market will improve and even if it doesn't improve quickly enough to keep you in your home, don't panic. Stay in contact with your bank, they may be able to help you before the federal government steps in, (which there is no guarantee of).
The market is certainly bumpy, but it isn't as scary as you think.
Rick
Thursday, January 17, 2008
House Hunters. . .it's a wrap!
Hello from Hollywood...I mean Chicagoland!
So you may recall a couple months back I was talking about the relation I developed with the good people at HGTV's House Hunters. Well I want everyone to know that they haven't let me down. Although we ran into some slight scheduling issues with my clients who had previously agreed to do the show, we were fortunate that the network equally adored another couple from the area and, in fact, we wrapped the shoot just a day or so ago.
How exciting!
For those of you who don't know, House Hunters airs regularly on HGTV. The show chronicles a buyer and their real estate agent through the buying process once the buyer has narrowed down their selection to 3 choices. The fun part of the show is that no one knows which home the buyers actually chose until the end of the show and then, they follow up a month to several months later so they can see how the buyer is settling in and enjoying their new home.
My clients for this show were absolutely fantastic. They did a great job both on and off camera and were so cooperative and wonderful to work with I can say enough good stuff about them. And the crew sent here by Pietown Productions was totally amazing. They were beyond professional. The crew was efficient, courteous and hard working and I'm convinced we're going ot have an amazing episode once it airs.
This episode is going to be great for a couple of reasons. One because it takes place right here in Chicago area, two because that area specifically is right in Brookfield Illinois where I live and raise my family.
Stay tuned and I'll keep you posted as to when the show will air.
Cheers!
Rick
So you may recall a couple months back I was talking about the relation I developed with the good people at HGTV's House Hunters. Well I want everyone to know that they haven't let me down. Although we ran into some slight scheduling issues with my clients who had previously agreed to do the show, we were fortunate that the network equally adored another couple from the area and, in fact, we wrapped the shoot just a day or so ago.
How exciting!
For those of you who don't know, House Hunters airs regularly on HGTV. The show chronicles a buyer and their real estate agent through the buying process once the buyer has narrowed down their selection to 3 choices. The fun part of the show is that no one knows which home the buyers actually chose until the end of the show and then, they follow up a month to several months later so they can see how the buyer is settling in and enjoying their new home.
My clients for this show were absolutely fantastic. They did a great job both on and off camera and were so cooperative and wonderful to work with I can say enough good stuff about them. And the crew sent here by Pietown Productions was totally amazing. They were beyond professional. The crew was efficient, courteous and hard working and I'm convinced we're going ot have an amazing episode once it airs.
This episode is going to be great for a couple of reasons. One because it takes place right here in Chicago area, two because that area specifically is right in Brookfield Illinois where I live and raise my family.
Stay tuned and I'll keep you posted as to when the show will air.
Cheers!
Rick
Wednesday, January 09, 2008
Real Estate Opportunities in 2008
2008 is here!
But so many of the issues from 2007 are still haunting us.
In Q1 of 2008 I'm certain we'll start to see the greater picture of how the massive write downs from 2007 will effect the greater market as a whole. Then again, there are people that I know within the banking and finance industries who believe that, perhaps, these write downs may have been calculated overestimations on the part of the banking industry; an attempt to write off bad debt and bad loans without cutting into bank profits which, in many cases, are still at a pretty robust 6-8 percent. I know several people who are buying up bank stocks because they strongly feel that the beatings the market gave the banks last year have actually left the bank stocks significantly undervalued. Let's see if that play is right.
But what about real estate? What about the golden child of years past that has suddenly become the diseased bastard child?
Well, it seems that there is a lot of interest and opportunity within the real estate market, it just depends on where, what, and how you look at it. My friends who are in land acquisition and development have whispered that they are scaling back their actual development plans. That conversions of condos or the building of new residential units, has been intentionally scaled back to allow for absorption by the market. Let's face it, these guys didn't become rich by being stupid! On the other hand, they have no intention of slowing their purchase of land for future development. In fact, a friend of mine at a largely diversified development firm who does residential and commercial development has also confided that he has been diversifying the company's assets further by purchasing interest in REITs (Real Estate Investment Trusts), which have been pummelled in the market for the last year or more. In his opinion, this is the land of opportunity because these large real estate holding companies have been bludgeoned more by a perceived loss of value rather than any losses to hard assets, (meaning to the real estate itself).
But what about losses to and of "hard assets" like real estate? As much as real estate may have over inflated over the last several years, the recession of these prices in all but a few extreme cases seems to be fairly moderate or is moderating. Many of us have acted like unruly children and the banks were more than happy to help us out, by allowing us to use our homes as ATMs so that we could live the lives we thought we needed to.
Life now, must return to more conservative and realistic choices. We have been living above our means for too long and there is going to be a consumer backlash. Over consumption will, in the coming years, give weigh to moderation and conscious consumerism. We will work on controlling our impulses. We will emulate those who are truly wealthy. I'm not talking about the neaveau riche who opitimize the overconsumption and gluttony of the last several years; I'm talking about "old money." Old money prefers quality over quantity, substance that still exudes style, and old money makes a conscious effort to live comfortably within their means. The goal of "old money" is to avoid waste so that wealth is perpetuated. After all, it is easy to make money but it isn't so easy to keep it.
So what are smart people doing with their real estate dollars these days? Why moving UP of course!
As I've watched the housing market bounce around like a rowboat in a hurricane, I've noticed a trend: a "stealth recovery," of sorts. One aspect is the people who were reluctant to purchase before. The first time buyers who, having good credit histories and a bit of saved money, were reluctant to jump into the frenzied highs of the markets last few years. They quietly, (and it would appear very shrewdly), recognized that the market was too rich for their blood. Now, with receding prices and desperate sellers, these buyers are making the most of this market which is loaded with opportunity.
The second group, ironically, has been the "move up" crowd. Whatever their financial situation, one of the strongest group of buyers at this very moment seems to be the group that is looking to upgrade from their current home. In general, this group has, for some time, been looking to make that move to a larger or more posh home, but often found the price too steep for the upgrade in the hot market of the past. For example: if the client has a $500k home and is looking to upgrade to that $1mil home in a nicer area, even though they could sell their home for top dollar in the hot market, they would pay top dollar for the upgrade.
Now look where we are:
Say we take the same client with the same home valued at $500k. Now let's say because of price recession the home now could only command $450k or 10% less than at the top of the hot market. Most of us would say OUCH! That's a $50k loss that really hurts. But the smart money sees it as an opportunity.
Here's why:
Let's now take the upgrade house that was valued at $1mil. Now let's apply the same percentage of price recession to this home and now, in the cooler market, the home has a top value of $900k. The value and potential for gain lies within the incrimental loss to this property.
Where at the top of the market the swap of the $500k home would cost the buyer an additional $500k, the swap NOW only costs them $450k or a savings of $50k over an upgrade in the hotter market. And that is despite the loss on their current home.
It seems that folks are really starting to wake up to this and, in fact, a lot of the people who I'm dealing with right now are in that 700k plus price range. They are taking their time and being very particular because of the amount of homes out there, but they recognize the opportunity and are ready to take it.
I predict we see a surprising spike in the Spring market, particularly in the Chicagoland area, in the sale of homes priced 500k and above.
The by product of this is that there will be a solid number of homes for new buyers that will be relative bargains. Once the "move up" crowd spots an opportunity, look for them to make more aggressive deals on the homes they are leaving.
2008 will be full of opportunites in Real Estate and this is the tip of the iceberg.
Rick
But so many of the issues from 2007 are still haunting us.
In Q1 of 2008 I'm certain we'll start to see the greater picture of how the massive write downs from 2007 will effect the greater market as a whole. Then again, there are people that I know within the banking and finance industries who believe that, perhaps, these write downs may have been calculated overestimations on the part of the banking industry; an attempt to write off bad debt and bad loans without cutting into bank profits which, in many cases, are still at a pretty robust 6-8 percent. I know several people who are buying up bank stocks because they strongly feel that the beatings the market gave the banks last year have actually left the bank stocks significantly undervalued. Let's see if that play is right.
But what about real estate? What about the golden child of years past that has suddenly become the diseased bastard child?
Well, it seems that there is a lot of interest and opportunity within the real estate market, it just depends on where, what, and how you look at it. My friends who are in land acquisition and development have whispered that they are scaling back their actual development plans. That conversions of condos or the building of new residential units, has been intentionally scaled back to allow for absorption by the market. Let's face it, these guys didn't become rich by being stupid! On the other hand, they have no intention of slowing their purchase of land for future development. In fact, a friend of mine at a largely diversified development firm who does residential and commercial development has also confided that he has been diversifying the company's assets further by purchasing interest in REITs (Real Estate Investment Trusts), which have been pummelled in the market for the last year or more. In his opinion, this is the land of opportunity because these large real estate holding companies have been bludgeoned more by a perceived loss of value rather than any losses to hard assets, (meaning to the real estate itself).
But what about losses to and of "hard assets" like real estate? As much as real estate may have over inflated over the last several years, the recession of these prices in all but a few extreme cases seems to be fairly moderate or is moderating. Many of us have acted like unruly children and the banks were more than happy to help us out, by allowing us to use our homes as ATMs so that we could live the lives we thought we needed to.
Life now, must return to more conservative and realistic choices. We have been living above our means for too long and there is going to be a consumer backlash. Over consumption will, in the coming years, give weigh to moderation and conscious consumerism. We will work on controlling our impulses. We will emulate those who are truly wealthy. I'm not talking about the neaveau riche who opitimize the overconsumption and gluttony of the last several years; I'm talking about "old money." Old money prefers quality over quantity, substance that still exudes style, and old money makes a conscious effort to live comfortably within their means. The goal of "old money" is to avoid waste so that wealth is perpetuated. After all, it is easy to make money but it isn't so easy to keep it.
So what are smart people doing with their real estate dollars these days? Why moving UP of course!
As I've watched the housing market bounce around like a rowboat in a hurricane, I've noticed a trend: a "stealth recovery," of sorts. One aspect is the people who were reluctant to purchase before. The first time buyers who, having good credit histories and a bit of saved money, were reluctant to jump into the frenzied highs of the markets last few years. They quietly, (and it would appear very shrewdly), recognized that the market was too rich for their blood. Now, with receding prices and desperate sellers, these buyers are making the most of this market which is loaded with opportunity.
The second group, ironically, has been the "move up" crowd. Whatever their financial situation, one of the strongest group of buyers at this very moment seems to be the group that is looking to upgrade from their current home. In general, this group has, for some time, been looking to make that move to a larger or more posh home, but often found the price too steep for the upgrade in the hot market of the past. For example: if the client has a $500k home and is looking to upgrade to that $1mil home in a nicer area, even though they could sell their home for top dollar in the hot market, they would pay top dollar for the upgrade.
Now look where we are:
Say we take the same client with the same home valued at $500k. Now let's say because of price recession the home now could only command $450k or 10% less than at the top of the hot market. Most of us would say OUCH! That's a $50k loss that really hurts. But the smart money sees it as an opportunity.
Here's why:
Let's now take the upgrade house that was valued at $1mil. Now let's apply the same percentage of price recession to this home and now, in the cooler market, the home has a top value of $900k. The value and potential for gain lies within the incrimental loss to this property.
Where at the top of the market the swap of the $500k home would cost the buyer an additional $500k, the swap NOW only costs them $450k or a savings of $50k over an upgrade in the hotter market. And that is despite the loss on their current home.
It seems that folks are really starting to wake up to this and, in fact, a lot of the people who I'm dealing with right now are in that 700k plus price range. They are taking their time and being very particular because of the amount of homes out there, but they recognize the opportunity and are ready to take it.
I predict we see a surprising spike in the Spring market, particularly in the Chicagoland area, in the sale of homes priced 500k and above.
The by product of this is that there will be a solid number of homes for new buyers that will be relative bargains. Once the "move up" crowd spots an opportunity, look for them to make more aggressive deals on the homes they are leaving.
2008 will be full of opportunites in Real Estate and this is the tip of the iceberg.
Rick
A New Year's Resolution
I've come to the conclusion that I am a bad blogger.
It really isn't an intentional thing mind you, it has been more of an oversight on my part. Sure things get away from us during the holiday season. No matter what your particular creed or what you celebrate, the last couple of weeks of any given year, not to mention the weeks leading up to them, tend to be surrounded by chaos and tension. That goes for most of us, whatever our profession. And heaven forbid you have a blog or something you might need to update on a regular basis! Things like this can easily fall by the wayside.
It is easy to consider that people aren't reading your posts but, any of us who look at the stats know better: we know that somewhere out there, SOMEONE is reading. Someone cares enough to take time out of their day to look at your words and your opinions.
So let this serve as an open apology for all of those who care: I'm sorry if I've left anyone hanging and I'm sorry for any disrespect.
Aside from the standard resolutions that we all make, (eat healthier, get fit, get a handle on our finances, etc), I have decided that one of my resolutions for 2008 is to be a better and more consistent blogger.
And why not? 2008 is already shaping up to be a very interesting year indeed. We're about to see what any remaining fallout from sub-prime might have in store for us. We're about to choose candidates and, ultimately a new president to help guide our country through these perilous times. We're going to see so many changes and opportunities, particularly within the real estate markets, that you guys are going to need people like me for insight and as a guide through these murky waters.
Our lives are changing. Our country is changing. This blog is changing!
May it all be for the better.
Happy 2008!
Rick
It really isn't an intentional thing mind you, it has been more of an oversight on my part. Sure things get away from us during the holiday season. No matter what your particular creed or what you celebrate, the last couple of weeks of any given year, not to mention the weeks leading up to them, tend to be surrounded by chaos and tension. That goes for most of us, whatever our profession. And heaven forbid you have a blog or something you might need to update on a regular basis! Things like this can easily fall by the wayside.
It is easy to consider that people aren't reading your posts but, any of us who look at the stats know better: we know that somewhere out there, SOMEONE is reading. Someone cares enough to take time out of their day to look at your words and your opinions.
So let this serve as an open apology for all of those who care: I'm sorry if I've left anyone hanging and I'm sorry for any disrespect.
Aside from the standard resolutions that we all make, (eat healthier, get fit, get a handle on our finances, etc), I have decided that one of my resolutions for 2008 is to be a better and more consistent blogger.
And why not? 2008 is already shaping up to be a very interesting year indeed. We're about to see what any remaining fallout from sub-prime might have in store for us. We're about to choose candidates and, ultimately a new president to help guide our country through these perilous times. We're going to see so many changes and opportunities, particularly within the real estate markets, that you guys are going to need people like me for insight and as a guide through these murky waters.
Our lives are changing. Our country is changing. This blog is changing!
May it all be for the better.
Happy 2008!
Rick
Friday, November 23, 2007
Happy Thanksgiving!
Hello all!
First off I wanted to take a moment to wish you all a very happy and healthy Thanksgiving holiday. I hope all of you and your families were able to share the joy and meaning of this truly great American Holiday together.
Secondly, I'd like to proudly announce that me and a nice young couple who I've been working with have been approved by HGTV and Pie Town Productions for our very own episode of House Hunters. We're very excited to have House Hunters coming out to film our search, next weekend actually, as we look for the perfect home in the Chicago area for this wonderful young couple. If all goes to plan, the show will be edited and schedule for air on HGTV later in the Spring or in the early Summer months. I want to, from the bottom of my heart, thank my clients and the producers at HGTV for being so helpful and supportive. I'd also like to thank my colleagues and friends at Saffron Realty Group for all of their help and support.
I'm not going to give anything away here, (it's all going to be a big surprise for all of us actually, including myself and my clients), but I will say that these folks are perfect buyers for an urban suburbanite Realtor like myself. They're new in town, work in the suburbs, but have been living in and really enjoying the city. So their dilemma has been, do they stay in the city and take advantage of all that life can offer a young couple there? Or do they position themselves closer to work and live in the suburbs where their money might go a little further and their respective commutes would be far less? Great questions and a great scenario! I don't even know what they will ultimately choose.
It's one of the truly fun things about being the urban/suburban Realtor. The fact that I know the suburbs and the city, in most cases, equally well, I've really been able to help them hone in on the areas of the city, as well as the areas of the suburbs, that could be good choices for them no matter which way their decision goes.
It's all very exciting!
I also wanted to point out that, at least in some areas I've seen recently, it appears that my hunch about people being out there and buying in these last months of 2007 is proving to be true. I'm actually seeing places that I've been showing reluctant buyers, going under contract and closing quickly. Here in the town where I live, Brookfield Illinois, things are showing signs of a stealth-like recovery. This community has a lot to offer though. Brookfield has culture and science, with one of the largest private zoological parks in the country right here. We also have excellent schools, (in fact Riverside Brookfield High School was recognized in Newsweek magazine two years in a row for academic acheimvent and excellence), reasonable taxes and affordable housing. All of this within 13 miles of Chicago and right on a light rail, (Metra), stop. We actually have 2 stops: One that services the area directly around the zoo, (and allows people from all over to visit the park without driving there), and one right in the downtown area. Brookfield Illinois is really becoming an area to watch. It's truly an urban/suburban community:Big city feel, close to Chicago, but still in the more placid suburban surroundings.
There are a lot of communites, concentrically around the edges of the city of Chicago. If you ever have any questions let me know!
And keep your eyes peeled for our House Hunters episode airing in the Spring or Summer of 2008.
I'll keep you posted on how things go with the show and all other developments in the market here at www.urbansuburbanite.com .
Cheers!
Rick Doty
First off I wanted to take a moment to wish you all a very happy and healthy Thanksgiving holiday. I hope all of you and your families were able to share the joy and meaning of this truly great American Holiday together.
Secondly, I'd like to proudly announce that me and a nice young couple who I've been working with have been approved by HGTV and Pie Town Productions for our very own episode of House Hunters. We're very excited to have House Hunters coming out to film our search, next weekend actually, as we look for the perfect home in the Chicago area for this wonderful young couple. If all goes to plan, the show will be edited and schedule for air on HGTV later in the Spring or in the early Summer months. I want to, from the bottom of my heart, thank my clients and the producers at HGTV for being so helpful and supportive. I'd also like to thank my colleagues and friends at Saffron Realty Group for all of their help and support.
I'm not going to give anything away here, (it's all going to be a big surprise for all of us actually, including myself and my clients), but I will say that these folks are perfect buyers for an urban suburbanite Realtor like myself. They're new in town, work in the suburbs, but have been living in and really enjoying the city. So their dilemma has been, do they stay in the city and take advantage of all that life can offer a young couple there? Or do they position themselves closer to work and live in the suburbs where their money might go a little further and their respective commutes would be far less? Great questions and a great scenario! I don't even know what they will ultimately choose.
It's one of the truly fun things about being the urban/suburban Realtor. The fact that I know the suburbs and the city, in most cases, equally well, I've really been able to help them hone in on the areas of the city, as well as the areas of the suburbs, that could be good choices for them no matter which way their decision goes.
It's all very exciting!
I also wanted to point out that, at least in some areas I've seen recently, it appears that my hunch about people being out there and buying in these last months of 2007 is proving to be true. I'm actually seeing places that I've been showing reluctant buyers, going under contract and closing quickly. Here in the town where I live, Brookfield Illinois, things are showing signs of a stealth-like recovery. This community has a lot to offer though. Brookfield has culture and science, with one of the largest private zoological parks in the country right here. We also have excellent schools, (in fact Riverside Brookfield High School was recognized in Newsweek magazine two years in a row for academic acheimvent and excellence), reasonable taxes and affordable housing. All of this within 13 miles of Chicago and right on a light rail, (Metra), stop. We actually have 2 stops: One that services the area directly around the zoo, (and allows people from all over to visit the park without driving there), and one right in the downtown area. Brookfield Illinois is really becoming an area to watch. It's truly an urban/suburban community:Big city feel, close to Chicago, but still in the more placid suburban surroundings.
There are a lot of communites, concentrically around the edges of the city of Chicago. If you ever have any questions let me know!
And keep your eyes peeled for our House Hunters episode airing in the Spring or Summer of 2008.
I'll keep you posted on how things go with the show and all other developments in the market here at www.urbansuburbanite.com .
Cheers!
Rick Doty
Monday, November 05, 2007
I hate to say I told you so BUT. . .
No to toot my own horn here, but I think we're starting to see the emergence of an untapped or under utlized, (and oft misunderstood), segment of the real estate market. That segment is the multi-unit investment market.
For several years I've been telling my buyers, particularly those who were considering investing, to look into small multi-unit buildings. There were definitely concerns over these last few years; the biggest one was cash flow. A good number of people were put off by multi-units because they required larger downpayments and, despite these down payments, would barely break even on a yearly basis when all was said and done. I stressed to these buyers that a multi-unit investment property can really boost their portfolio long term and even if they broke even or sustained losses for a period of time, the curve would catch up with them and they profitability would eventually be there. Particularly if we're talking about owner occupied multi-unit residential buildings. It simply translated to having an apartment you live in while renting out the others. Ostensibly, this would be to offset your mortgage costs and any losses or improvements to the the rental units could be written off directly providing the owner with some distinct tax advantages.
And what came of my urgings?
Some people saw the logic and purchased properties, even if they were losing a bit of money in the short term. This is going to end up being a favorable mark in their corner at this point, no doubt, as we are seeing more and more fallout from the subprime mortgage crisis.
Currently in the real estate market, across the board, we are facing several negative factors. We are seeing home prices receeding on the heels of increased supply. That's basic supply and demand: supply goes up, prices go down until demand re-engages or meets up, (or hopefully exceeds), supply. The reason the supply of unsold properties is going up has a lot to do with subprime mortgages. These mortgages weren't just to people who had marginal credit; mortgages were, literally, being written without income verification. This basically meant that if you could prove a certain amount of money moved through your account, you could get a loan for "x" based on the amount of cash going through your account. The logic behind this, (I'm guessing), is that the lender could see cashflow that may or may not, (more than likely would not), show up on more conventional benchmarks such as the review of a buyer's income tax returns. What this did is it flooded the market with people who essentially, by their assertion, claimed to be able to afford homes they clearly could not.
The banks became greedy because these subprime loans were frequently at higher rates of interest because of the "risk." The lenders failed to recognize just how much risk there was.
The second segment of the mortgage market that has caused this monsoon of foreclosures are the ARMs or Option ARMs. These were loans that were hard for most consumers to understand. The assumption on the lender's part was that the actual realities of these loans were properly explained to the buyers and that the buyers understood the additional risk if they did not refinance their loans prior to the rate adjustment that was built into the ARM. An ARM or, Adjustable Rate Mortgage is a mortgage that has an intial fixed rate, (sometimes called a "teaser" rate), that is artificially low for a period of time. After that period of time, the rate adjusts exponentially leaving the owner with payments significantly higher than they had been paying. An Option ARM threw in the "convenience" of allowing a buyer to choose their monthly payment during the fixed period. This, allegedly, allowed the buyer to compensate for cash crunches in some months and play catch up in others. All the while, there were different fees or resettings/re-amortizations of these loans as people paid at different rates from month to month. At the end of it all loomed the big rate adjustment that would blindside the owner and put their monthly payments beyond their monthly means.
The third segment of the mortgage market that contributed to this meltdown are HELOCs or Home Equity Lines of Credit where homeowners were, basically, allowed to use whatever equity they had in their homes as an ATM or, even worse, a revolving line of credit that was designed to be next to impossible to pay down.
The result was debt, upon debt, upon debt!
All of which has lead up to people not being able to afford the homes they worked so hard to purchase. The options are foreclosure in which the bank forcibly takes the home from the former owner in a legal proceeding. The former owner is then responsible for those legal fees and, often, any difference between the price the home sells for and what is owed on the loan.
Smart homeowners who are in trouble are working with their lenders to either keep their homes or to mitigate losses on both sides. If an owner is clearly unable to financially support the home, the bank may negotiate a short sale wherein they agree to allow the home to be purchased for less than is owed on the mortgage.
The bottom line with all of this is that these mortgage issues are far from over and with another wave of mortgages due to adjust in the next 12-18months, there could be more ripples, (or tidal waves), throughout the market. Perhaps the worst part about it is that people who fall into default will cause harm to their credit which will, in turn, hurt their chances of getting another mortgage. And with the banks tightening lending restrictions we could soon see an even bigger glut of unsold homes because the pool of qualified buyers is significantly smaller.
Certainly there will come an answer or help, be it from the banks directly or in the form of governmental assistance. Regardless, the prevailing fear and the tightening of credit standards has created a whole new pool of people. . .renters.
Sam Zell announced a few years ago that he would be building the largest residential rental development in Chicago in many, many years. People thought he was nuts but if we've learned anything about Mr. Zell, he's crazy like a fox. He must have anticipated that there was going to be significant rental demand to take a gamble on investing in high end rentals. And he was right!
So if any of you out there have thought about real estate as an investment, now is the time to strike. With prices sliding back, there should be an excellent opportunity to acquire multi-unit properties that can be easily upgraded and, given the stronger pool of renters, could also provide some cash flow. Even smaller single family homes in good school districts would be ideal investment properties.
And for those of you considering purchasing, particularly if you are looking in the city; now may be the time to look at 2-4 flat multi-unit buildings. If you qualify and have available cash for a down payment, you could command significantly higher rents than in years past.
There are some great investment opportunities in the multi-unit residential market. Please contact me for details or if you have any questions.
Your urban/suburban Realtor.
Rick Doty
For several years I've been telling my buyers, particularly those who were considering investing, to look into small multi-unit buildings. There were definitely concerns over these last few years; the biggest one was cash flow. A good number of people were put off by multi-units because they required larger downpayments and, despite these down payments, would barely break even on a yearly basis when all was said and done. I stressed to these buyers that a multi-unit investment property can really boost their portfolio long term and even if they broke even or sustained losses for a period of time, the curve would catch up with them and they profitability would eventually be there. Particularly if we're talking about owner occupied multi-unit residential buildings. It simply translated to having an apartment you live in while renting out the others. Ostensibly, this would be to offset your mortgage costs and any losses or improvements to the the rental units could be written off directly providing the owner with some distinct tax advantages.
And what came of my urgings?
Some people saw the logic and purchased properties, even if they were losing a bit of money in the short term. This is going to end up being a favorable mark in their corner at this point, no doubt, as we are seeing more and more fallout from the subprime mortgage crisis.
Currently in the real estate market, across the board, we are facing several negative factors. We are seeing home prices receeding on the heels of increased supply. That's basic supply and demand: supply goes up, prices go down until demand re-engages or meets up, (or hopefully exceeds), supply. The reason the supply of unsold properties is going up has a lot to do with subprime mortgages. These mortgages weren't just to people who had marginal credit; mortgages were, literally, being written without income verification. This basically meant that if you could prove a certain amount of money moved through your account, you could get a loan for "x" based on the amount of cash going through your account. The logic behind this, (I'm guessing), is that the lender could see cashflow that may or may not, (more than likely would not), show up on more conventional benchmarks such as the review of a buyer's income tax returns. What this did is it flooded the market with people who essentially, by their assertion, claimed to be able to afford homes they clearly could not.
The banks became greedy because these subprime loans were frequently at higher rates of interest because of the "risk." The lenders failed to recognize just how much risk there was.
The second segment of the mortgage market that has caused this monsoon of foreclosures are the ARMs or Option ARMs. These were loans that were hard for most consumers to understand. The assumption on the lender's part was that the actual realities of these loans were properly explained to the buyers and that the buyers understood the additional risk if they did not refinance their loans prior to the rate adjustment that was built into the ARM. An ARM or, Adjustable Rate Mortgage is a mortgage that has an intial fixed rate, (sometimes called a "teaser" rate), that is artificially low for a period of time. After that period of time, the rate adjusts exponentially leaving the owner with payments significantly higher than they had been paying. An Option ARM threw in the "convenience" of allowing a buyer to choose their monthly payment during the fixed period. This, allegedly, allowed the buyer to compensate for cash crunches in some months and play catch up in others. All the while, there were different fees or resettings/re-amortizations of these loans as people paid at different rates from month to month. At the end of it all loomed the big rate adjustment that would blindside the owner and put their monthly payments beyond their monthly means.
The third segment of the mortgage market that contributed to this meltdown are HELOCs or Home Equity Lines of Credit where homeowners were, basically, allowed to use whatever equity they had in their homes as an ATM or, even worse, a revolving line of credit that was designed to be next to impossible to pay down.
The result was debt, upon debt, upon debt!
All of which has lead up to people not being able to afford the homes they worked so hard to purchase. The options are foreclosure in which the bank forcibly takes the home from the former owner in a legal proceeding. The former owner is then responsible for those legal fees and, often, any difference between the price the home sells for and what is owed on the loan.
Smart homeowners who are in trouble are working with their lenders to either keep their homes or to mitigate losses on both sides. If an owner is clearly unable to financially support the home, the bank may negotiate a short sale wherein they agree to allow the home to be purchased for less than is owed on the mortgage.
The bottom line with all of this is that these mortgage issues are far from over and with another wave of mortgages due to adjust in the next 12-18months, there could be more ripples, (or tidal waves), throughout the market. Perhaps the worst part about it is that people who fall into default will cause harm to their credit which will, in turn, hurt their chances of getting another mortgage. And with the banks tightening lending restrictions we could soon see an even bigger glut of unsold homes because the pool of qualified buyers is significantly smaller.
Certainly there will come an answer or help, be it from the banks directly or in the form of governmental assistance. Regardless, the prevailing fear and the tightening of credit standards has created a whole new pool of people. . .renters.
Sam Zell announced a few years ago that he would be building the largest residential rental development in Chicago in many, many years. People thought he was nuts but if we've learned anything about Mr. Zell, he's crazy like a fox. He must have anticipated that there was going to be significant rental demand to take a gamble on investing in high end rentals. And he was right!
So if any of you out there have thought about real estate as an investment, now is the time to strike. With prices sliding back, there should be an excellent opportunity to acquire multi-unit properties that can be easily upgraded and, given the stronger pool of renters, could also provide some cash flow. Even smaller single family homes in good school districts would be ideal investment properties.
And for those of you considering purchasing, particularly if you are looking in the city; now may be the time to look at 2-4 flat multi-unit buildings. If you qualify and have available cash for a down payment, you could command significantly higher rents than in years past.
There are some great investment opportunities in the multi-unit residential market. Please contact me for details or if you have any questions.
Your urban/suburban Realtor.
Rick Doty
Friday, October 26, 2007
Are you ready to share your homebuying experience with the world?
Hello to all of you.
I know that some of you may be regular readers or people who just pop in. Others, may be just poking through the internet and stumbling across me and my business. You may be a friend or a client, both, or perhaps you want to be a client, (or a friend).
Regardless, I've just been given the potential, (that's potential not promise), of an extraordinary opportunity from my friends over at Pie Town Productions. They contacted me, just like many clients would, because they found me on the internet. Interestingly enough, they liked me enough to propose that I might have some interest in participating in a little show called House Hunters on HGTV.
If you've never seen the show the premise is pretty simple: The buyer and their Realtor, (in this case ME), identify their top 3 picks of homes they are seriously considering. They weigh the pros and cons of each home and, the buyer makes a final decsion. The whole time they are covering the process and the end result is you the buyer, going from your old place to your wonderful new place.
Of course, not everyone is ready to get in front of the camera. So if any of you are seriously looking for a home in the Chicago area, city or suburbs, and feel you'll be making this purchase within the next 6 months, (the sooner the better for TV consideration), then by all means drop me a line and I'll give you the details on how it all works.
If you want to see the fun, check out House Hunters at http://www.hgtv.com/hgtv/shows_hnt
Lots of fun for everyone!!
Happy house hunting.
I know that some of you may be regular readers or people who just pop in. Others, may be just poking through the internet and stumbling across me and my business. You may be a friend or a client, both, or perhaps you want to be a client, (or a friend).
Regardless, I've just been given the potential, (that's potential not promise), of an extraordinary opportunity from my friends over at Pie Town Productions. They contacted me, just like many clients would, because they found me on the internet. Interestingly enough, they liked me enough to propose that I might have some interest in participating in a little show called House Hunters on HGTV.
If you've never seen the show the premise is pretty simple: The buyer and their Realtor, (in this case ME), identify their top 3 picks of homes they are seriously considering. They weigh the pros and cons of each home and, the buyer makes a final decsion. The whole time they are covering the process and the end result is you the buyer, going from your old place to your wonderful new place.
Of course, not everyone is ready to get in front of the camera. So if any of you are seriously looking for a home in the Chicago area, city or suburbs, and feel you'll be making this purchase within the next 6 months, (the sooner the better for TV consideration), then by all means drop me a line and I'll give you the details on how it all works.
If you want to see the fun, check out House Hunters at http://www.hgtv.com/hgtv/shows_hnt
Lots of fun for everyone!!
Happy house hunting.
Wednesday, October 24, 2007
Could we be looking at an urban exodus in Chicago?
It seems like the writing is on the wall when it comes to real estate in Chicago, I wonder if urban dwellers actually see it.
In Cook County and Chicago we are facing some serious issues with county and city government. With two large political machines in charge, Todd Stroger in county government who managed to ride on his daddy's coat tails to a victory. Todd Stroger, who has consistently upheld the wasteful patronage that his father instituted over decades of waste and corruption. And the Daley machine in the city of Chicago: both Daley and Stroger seem poised to impose some of the most brutal tax hikes in Cook County or Chicago history.
There's speculation on many levels as to why this is. Many within Cook County believe that Mr. Stroger is making room for more patronage programs hiring friends and family members into do nothing jobs at high salaries; all on the backs of the taxpayers. As for Mayor Daley, who has been untouchable as far as scandal is concerned, I think the prevailing opinion of his motives are pretty transparent. Mr. Daley really wants Chicago to host the summer Olympic games. He's spent tons of time and taxpayer money, (on top of private money), to woo the Olympic committee in an attempt to get Chicago anointed. But he has a way to go and he's starting to look toward the taxpayers for help.
There is no doubt that Daley has done a lot of good. Unlike his county counterpart who has accomplished nothing more than being the heir apparent to wasteful patronage, the mayor has done a lot to beautify, improve and strengthen the city of Chicago. At least, on the surface, the improvements are apparent.
But if you peel back the layers of the onion, many people, particularly property owners within the city of Chicago, are becomming increasingly disenchanted. One of the most problematic issues pertains to Chicago public schools. Many people who live in the city, and this is by their own testimony, have related to me that despite the cost of their property, (in many cases, I'm talking about people who have paid 600k up to well over 1million for a home), the city has been unable to produce a satisfactory public school in their area; despite their enormous tax bills.
For many of these people, they have opted for pricey private schools. I even spoke to one gentleman recently who has 2 children, both of whom go to the British School in Chicago, and for whom he pays approximately $20k per year each for tuition. His personal property tax bill is already in the high teen yet, for that money, he doesn't feel confident in the public services this money is supposed to provide so, as a result, he pays over $40 thousand dollars per year for his young children to attend school. All, ostensibly, for the "privilege" of residing in the city of Chicago. So when people like this see that the county wants more money; that the city wants more money; they begin to wonder if it is really worth it to continue to reside in either.
The city of Chicago and Cook county are on a very precarious, very slippery slope in regard to their opressive taxation. For years, there has been a "natural" cycle of people flowing into the city and then, conversely, flowing out of the city. I believe these cycles are generally every 5-15 years. This was a phenomenon that was, at one time, referred to as "white flight" where, theorhetically, "white" people left a city because of encroachment of too much integration in their areas. In this case, I can see the flight on the horizon but it has absolutely nothing to do with color. If Mr. Stroger and Mr. Daley continue to levy increasingly oppressive taxes, this flight will be strictly economic. It will, without a doubt, either lead to a massive, Boston Tea Party like revolt, or will inspire a quiet revolution. A revolution that will slowly drain Chicago and its Mother county of taxpayers and will leave a legacy for years to come.
People feel helpless. People don't feel their interests are being fully represented. People are sick of being robbed of their hard earned money.
And people are finding that there is little that the city offers that they can't find in many suburban areas. People are discovering they can find reasonable homes with good schools that are supported by fair local taxes in counties beyond Cook county. People are discovering that, no matter what color they may be, or what their personal circumstances are, a better quality of life often lies within 20 or 25 miles of the city, out of the reach of greedy king Richard and prince Todd.
If this trend continues, the people will leave the city. The jobs will relocate to the suburbs as well because they'll also have more incentive to do so and, if I'm right, Mr. Daley will be sitting by himself with his Olympic torch and Mr. Stroger won't have the money to hire any more of his friends and relatives. The people, and the money, will be gone.
The leaders in both city and county government need to take heed. For if they continue on this paty, we could be looking at a massive urban exodus.
There has to be a better way if Chicago and Cook county are going to survive.
Increasing taxes is not the answer.
In Cook County and Chicago we are facing some serious issues with county and city government. With two large political machines in charge, Todd Stroger in county government who managed to ride on his daddy's coat tails to a victory. Todd Stroger, who has consistently upheld the wasteful patronage that his father instituted over decades of waste and corruption. And the Daley machine in the city of Chicago: both Daley and Stroger seem poised to impose some of the most brutal tax hikes in Cook County or Chicago history.
There's speculation on many levels as to why this is. Many within Cook County believe that Mr. Stroger is making room for more patronage programs hiring friends and family members into do nothing jobs at high salaries; all on the backs of the taxpayers. As for Mayor Daley, who has been untouchable as far as scandal is concerned, I think the prevailing opinion of his motives are pretty transparent. Mr. Daley really wants Chicago to host the summer Olympic games. He's spent tons of time and taxpayer money, (on top of private money), to woo the Olympic committee in an attempt to get Chicago anointed. But he has a way to go and he's starting to look toward the taxpayers for help.
There is no doubt that Daley has done a lot of good. Unlike his county counterpart who has accomplished nothing more than being the heir apparent to wasteful patronage, the mayor has done a lot to beautify, improve and strengthen the city of Chicago. At least, on the surface, the improvements are apparent.
But if you peel back the layers of the onion, many people, particularly property owners within the city of Chicago, are becomming increasingly disenchanted. One of the most problematic issues pertains to Chicago public schools. Many people who live in the city, and this is by their own testimony, have related to me that despite the cost of their property, (in many cases, I'm talking about people who have paid 600k up to well over 1million for a home), the city has been unable to produce a satisfactory public school in their area; despite their enormous tax bills.
For many of these people, they have opted for pricey private schools. I even spoke to one gentleman recently who has 2 children, both of whom go to the British School in Chicago, and for whom he pays approximately $20k per year each for tuition. His personal property tax bill is already in the high teen yet, for that money, he doesn't feel confident in the public services this money is supposed to provide so, as a result, he pays over $40 thousand dollars per year for his young children to attend school. All, ostensibly, for the "privilege" of residing in the city of Chicago. So when people like this see that the county wants more money; that the city wants more money; they begin to wonder if it is really worth it to continue to reside in either.
The city of Chicago and Cook county are on a very precarious, very slippery slope in regard to their opressive taxation. For years, there has been a "natural" cycle of people flowing into the city and then, conversely, flowing out of the city. I believe these cycles are generally every 5-15 years. This was a phenomenon that was, at one time, referred to as "white flight" where, theorhetically, "white" people left a city because of encroachment of too much integration in their areas. In this case, I can see the flight on the horizon but it has absolutely nothing to do with color. If Mr. Stroger and Mr. Daley continue to levy increasingly oppressive taxes, this flight will be strictly economic. It will, without a doubt, either lead to a massive, Boston Tea Party like revolt, or will inspire a quiet revolution. A revolution that will slowly drain Chicago and its Mother county of taxpayers and will leave a legacy for years to come.
People feel helpless. People don't feel their interests are being fully represented. People are sick of being robbed of their hard earned money.
And people are finding that there is little that the city offers that they can't find in many suburban areas. People are discovering they can find reasonable homes with good schools that are supported by fair local taxes in counties beyond Cook county. People are discovering that, no matter what color they may be, or what their personal circumstances are, a better quality of life often lies within 20 or 25 miles of the city, out of the reach of greedy king Richard and prince Todd.
If this trend continues, the people will leave the city. The jobs will relocate to the suburbs as well because they'll also have more incentive to do so and, if I'm right, Mr. Daley will be sitting by himself with his Olympic torch and Mr. Stroger won't have the money to hire any more of his friends and relatives. The people, and the money, will be gone.
The leaders in both city and county government need to take heed. For if they continue on this paty, we could be looking at a massive urban exodus.
There has to be a better way if Chicago and Cook county are going to survive.
Increasing taxes is not the answer.
Banks tightening restrictions on lending
The real estate business everywhere in the United States has become a tragic mess. Mortgage lenders are filing for bankruptcy or begging for the federal government to bail them out. News of record breaking foreclosure rates are permeating the media. Just yesterday, I even heard that a builder, Neumann Homes is filing for bankruptcy. Is there any wonder why the real estate buyers seem to be heading for the hills or searching for cover?
Fear of real estate has taken us over, but there seems to be no real explanation. Yes, foreclosures are up; yes lenders are tightening their restrictions on credit and looking for larger down payments; yes there is a lot of negative stuff out there. I believe the media has overblown things and, as far as real estate goes, is actually causing an unnatural knee jerk reaction in the public.
Let's look at things from less of a fear mongering point of view and more of an opportunistic point of view. The interest rates are still at near historic lows. It appears that the federal reserve will be lowering rates again in an answer to the current "crisis" in the housing market. Housing prices have moderated and short sales and pre-foreclosures are presenting even greater opportunities for buyers. The job market is still very robust. As a reaction to people fleeing toward rentals, landlords are now commanding some of the highest rents in history, making it more sensible to buy than ever. So what is stopping people from buying?
Fear.
Don't be afraid of real estate people! This has happened before and will, in all likelihood happen again in the future but if you aren't a flipper, or someone who only has the very short term picture in mind, then you should seriously re-evaluate your position on making a purchase.
The banks are even getting wise and starting to help out. Take for example my friends at e-loan. I trust very few lenders these days. Ask me personally and I'll only give you a handful of reccomendations, (because I want my deals to close and if you are a buyer so do you). But e-loan has come up with a program for people on the bubble; people who want to buy but whose credit is just short of what they need to commence a transaction.
So what is e-loan doing differently? They are offerring in house credit counselling that will help you improve your credit scorese and get you the loan and the home that you want. It's a bit of a pilot program and I'm one of the few Realtors or real estate agents out there who has been made aware of it but I want to shout it from the rooftops.
If your credit scores are just short of the mark, at least there's a bank out there that will help get you to where you need to be. No costs or gimmicks, just some guidance and help to get you to your real estate goals.
I'm hoping other lenders will follow suit.
The smart people will see this as an opportunity. This market is currently full of opportunities but, as with any opportunity, the window is likely small.
I'm reccommending to anyone who is interested in real estate either as an investment, as their first entry into the market, or as an improvement to their current situation: this is a buying opportunity.
If you have any more questions, please ask me, e-mail me, or click on one of the links on my sidebar.
I'm happy to help you and will be happy to answer any of your real estate questions.
You're trusted Realtor in the Chicago area.
Rick
Fear of real estate has taken us over, but there seems to be no real explanation. Yes, foreclosures are up; yes lenders are tightening their restrictions on credit and looking for larger down payments; yes there is a lot of negative stuff out there. I believe the media has overblown things and, as far as real estate goes, is actually causing an unnatural knee jerk reaction in the public.
Let's look at things from less of a fear mongering point of view and more of an opportunistic point of view. The interest rates are still at near historic lows. It appears that the federal reserve will be lowering rates again in an answer to the current "crisis" in the housing market. Housing prices have moderated and short sales and pre-foreclosures are presenting even greater opportunities for buyers. The job market is still very robust. As a reaction to people fleeing toward rentals, landlords are now commanding some of the highest rents in history, making it more sensible to buy than ever. So what is stopping people from buying?
Fear.
Don't be afraid of real estate people! This has happened before and will, in all likelihood happen again in the future but if you aren't a flipper, or someone who only has the very short term picture in mind, then you should seriously re-evaluate your position on making a purchase.
The banks are even getting wise and starting to help out. Take for example my friends at e-loan. I trust very few lenders these days. Ask me personally and I'll only give you a handful of reccomendations, (because I want my deals to close and if you are a buyer so do you). But e-loan has come up with a program for people on the bubble; people who want to buy but whose credit is just short of what they need to commence a transaction.
So what is e-loan doing differently? They are offerring in house credit counselling that will help you improve your credit scorese and get you the loan and the home that you want. It's a bit of a pilot program and I'm one of the few Realtors or real estate agents out there who has been made aware of it but I want to shout it from the rooftops.
If your credit scores are just short of the mark, at least there's a bank out there that will help get you to where you need to be. No costs or gimmicks, just some guidance and help to get you to your real estate goals.
I'm hoping other lenders will follow suit.
The smart people will see this as an opportunity. This market is currently full of opportunities but, as with any opportunity, the window is likely small.
I'm reccommending to anyone who is interested in real estate either as an investment, as their first entry into the market, or as an improvement to their current situation: this is a buying opportunity.
If you have any more questions, please ask me, e-mail me, or click on one of the links on my sidebar.
I'm happy to help you and will be happy to answer any of your real estate questions.
You're trusted Realtor in the Chicago area.
Rick
Sunday, October 07, 2007
My Fall/Winter 2007 Market Predictions
So depending on who you listen to, and there are many opinions out there; predictions for real estate for the remainder of the year are a mixed bag at best.
You have some people predicting further gloom and doom. The spectre of increasing foreclosures and further fallout from the sub prime mortgage market has buyers wary. Certainly concerns over the falling value of the American dollar as well as concerns about inflation and growing concerns about more escalation in the Middle East spurs even more concerns about what is going to happen.
But let's face reality people. If the housing market doesn't pick back up, we could very well see ourselves on the way to an economic nightmare.
Of course, landlords are happy. Based on some current statistics, occupancy rates are in the mid to high 90 percentile in rental properties, (and for any of you who didn't believe me when I told you to buy multi-unit flats over the last several years then, there you go!); landlords, as a result, have been able to hike rents to their highest levels in years. So even though the rental prices are increasing at a pace where, once again, it makes more sense to buy, and even though rates are still low and over inflated real estate prices are receding; people still aren't buying houses.
WHY?
Where are all the buyers?
I believe they are out there and I believe they are all waiting for something, some big sign that it is OK to come out. Just like in the Wizard of Oz when the Munchkins realize the witch is dead, the fearful little people are hiding out looking for their Dorothy.
Or, perhaps home buyers are more savvy than anyone thinks. For what it's worth, here are my predictions:
I believe that the demand has not shriveled up and blown away. On the contrary, I believe there is a lot of pent up demand out there and plenty of people who qualify for loans despite the tightening of lending restrictions. Additionally, I think these people will benefit from the government coming in and expanding FHA backed loans and this will go a long way to stabilize the market long term.
The fact is that there is enough inventory out there that these buyers are waiting. They are patient. They do their research. And the smartest ones are waiting for the Winter to make their move. Particularly in states like Illinois where there can be harsh weather conditions that keep buyers away; the smart buyers are looking to find the wounded and limping sellers in the toughest season and it will be, at that point, the deals will start to happen. Sellers will make concessions they would never have dreamed of a year or two ago and the buyers will benefit from all of the market instabilities. I believe there will be a short run up in the Winter market that will lead to a roaring comeback in the Spring. That's when the carpet baggers, or the fearful Munchkins if you will, recognize that there has been a divine sign from the risk takers and will take that as their cue to strike.
If they lower rates further at the next Fed meeting, then I'm confident we can expect a scenario like this.
The bottom line: If you are looking to buy a piece of property, this might be the time. Particularly if you are looking at this as more of a long term investment which is what really makes real estate a winner. The days of short term gains may be long gone but if you are looking for a home or an investment that you will be holding as part of a portfolio; I sincerely think that this is going to be one of the best opportunities we've seen in years and, quite possibly, for years to come.
Time will tell.
You have some people predicting further gloom and doom. The spectre of increasing foreclosures and further fallout from the sub prime mortgage market has buyers wary. Certainly concerns over the falling value of the American dollar as well as concerns about inflation and growing concerns about more escalation in the Middle East spurs even more concerns about what is going to happen.
But let's face reality people. If the housing market doesn't pick back up, we could very well see ourselves on the way to an economic nightmare.
Of course, landlords are happy. Based on some current statistics, occupancy rates are in the mid to high 90 percentile in rental properties, (and for any of you who didn't believe me when I told you to buy multi-unit flats over the last several years then, there you go!); landlords, as a result, have been able to hike rents to their highest levels in years. So even though the rental prices are increasing at a pace where, once again, it makes more sense to buy, and even though rates are still low and over inflated real estate prices are receding; people still aren't buying houses.
WHY?
Where are all the buyers?
I believe they are out there and I believe they are all waiting for something, some big sign that it is OK to come out. Just like in the Wizard of Oz when the Munchkins realize the witch is dead, the fearful little people are hiding out looking for their Dorothy.
Or, perhaps home buyers are more savvy than anyone thinks. For what it's worth, here are my predictions:
I believe that the demand has not shriveled up and blown away. On the contrary, I believe there is a lot of pent up demand out there and plenty of people who qualify for loans despite the tightening of lending restrictions. Additionally, I think these people will benefit from the government coming in and expanding FHA backed loans and this will go a long way to stabilize the market long term.
The fact is that there is enough inventory out there that these buyers are waiting. They are patient. They do their research. And the smartest ones are waiting for the Winter to make their move. Particularly in states like Illinois where there can be harsh weather conditions that keep buyers away; the smart buyers are looking to find the wounded and limping sellers in the toughest season and it will be, at that point, the deals will start to happen. Sellers will make concessions they would never have dreamed of a year or two ago and the buyers will benefit from all of the market instabilities. I believe there will be a short run up in the Winter market that will lead to a roaring comeback in the Spring. That's when the carpet baggers, or the fearful Munchkins if you will, recognize that there has been a divine sign from the risk takers and will take that as their cue to strike.
If they lower rates further at the next Fed meeting, then I'm confident we can expect a scenario like this.
The bottom line: If you are looking to buy a piece of property, this might be the time. Particularly if you are looking at this as more of a long term investment which is what really makes real estate a winner. The days of short term gains may be long gone but if you are looking for a home or an investment that you will be holding as part of a portfolio; I sincerely think that this is going to be one of the best opportunities we've seen in years and, quite possibly, for years to come.
Time will tell.
Thursday, September 06, 2007
Anatomy of a foreclosure
Hello again!
A lot of people have been asking me questions about foreclosures lately. I think there area a lot of misconceptions out there so I thought I'd post something I've been sending out to all of my clients and prospective clients.
Real estate is something that interests everyone. When the market is down, it seems that there are even more opportunities for buyers. While this is true, I understand there is still a lot of trepidation. Even more so, I understand there are a lot of misconceptions.
Today, I want to address the idea of foreclosures.
It seems that, every time we turn on the news or listen to the radio, there is a gloomy report on the housing market. The concept of “sub-prime,” “ARM’s” and “foreclosures,” are big news all around. I think that has been giving a lot of prospective buyers a sense that, if they just wait it out, there are going to be loads of properties available for rock bottom, next to nothing prices.
This is a real misconception among many people.
One of the biggest sources are these infomercials that tell people they can make “big money” in foreclosures if they just follow the simple system that costs “x” amount of dollars. If that were the case, don’t you think everyone would be rich on foreclosed properties?
So, just to help you understand, (if you don’t already), a foreclosure is a pretty complicated series of events. It isn’t simply a matter of someone missing a payment or two and then being kicked out of their home. The foreclosure process can take a year or more in some cases and with the foreclosure rate rising, banks are actually starting to help people avoid the foreclosure process in a number of ways.
Generally, by missing one or two payments, the bank or lender sends an “intent to foreclose” letter. This notifies the homeowner that if they do not make the payments the formal foreclosure process will begin. By the 3rd or 4th payment missed, the lender has employed legal assistance in the matter and is filing the proper legal paperwork for foreclosure. At any point, the homeowner can stop the process by making the payments including any late fees and/or legal fees.
The homeowner also has other options. They can retain an attorney or even declare bankruptcy which effectively stops the bank and slows the foreclosure process considerably.
It is at this point that, many banks, are encouraged to work with struggling homeowners in an attempt to help them keep their homes. The lender can elect to restructure the loan, defer payments or set up a payment arrangement.
And remember, at any point during this process, a distressed homeowner can always put the home on the market and sell it!
The bottom line, for those facing foreclosure, there are many options. Couple that with recent programs the government and the Federal Reserve are sponsoring to keep people in their homes and foreclosures may not be all they are cracked up to be.
That doesn’t mean there aren’t opportunities.
The market has corrected in many ways and sellers have definitely become more realistic. Prices have moderated and come down; perhaps not as much in the Chicago area as they have in other markets but they have come down. In my opinion that reflects the overall strength of the Chicago area as far as real estate is concerned.
So the opportunities are there, you, as a buyer, have more negotiating power than you’ve had in at least 5 years. Prices are down to more reasonable levels. Money, while not as easy to borrow as it was, is still readily available at excellent rates to qualified buyers.
And there are also “short sale” opportunities. This is a, relatively, little known way for people facing foreclosure to get out of their loan. If you can find one, this can be a great opportunity for you as a buyer. Basically, a “short sale” is an agreement by where the seller’s bank/lender, review any offers and, if the bank agrees, will actually allow the seller to sell you a home for LESS than they owe on it and will absolve the seller of any deficit on the loan. These situations can be win/win situations for everyone. YOU, as the buyer, are often able to negotiate a great deal while the seller, who is facing foreclosure, is able to get out of their home and loan and their lender is able to cut their losses without having to deal with the expense of legal action.
Expect that, if anything, we’ll see more “short sale” opportunities in the market if it continues to be sluggish. All signs are pointing to a recovery as soon as Spring so it is definitely hard to predict exactly what we can expect
A lot of people have been asking me questions about foreclosures lately. I think there area a lot of misconceptions out there so I thought I'd post something I've been sending out to all of my clients and prospective clients.
Real estate is something that interests everyone. When the market is down, it seems that there are even more opportunities for buyers. While this is true, I understand there is still a lot of trepidation. Even more so, I understand there are a lot of misconceptions.
Today, I want to address the idea of foreclosures.
It seems that, every time we turn on the news or listen to the radio, there is a gloomy report on the housing market. The concept of “sub-prime,” “ARM’s” and “foreclosures,” are big news all around. I think that has been giving a lot of prospective buyers a sense that, if they just wait it out, there are going to be loads of properties available for rock bottom, next to nothing prices.
This is a real misconception among many people.
One of the biggest sources are these infomercials that tell people they can make “big money” in foreclosures if they just follow the simple system that costs “x” amount of dollars. If that were the case, don’t you think everyone would be rich on foreclosed properties?
So, just to help you understand, (if you don’t already), a foreclosure is a pretty complicated series of events. It isn’t simply a matter of someone missing a payment or two and then being kicked out of their home. The foreclosure process can take a year or more in some cases and with the foreclosure rate rising, banks are actually starting to help people avoid the foreclosure process in a number of ways.
Generally, by missing one or two payments, the bank or lender sends an “intent to foreclose” letter. This notifies the homeowner that if they do not make the payments the formal foreclosure process will begin. By the 3rd or 4th payment missed, the lender has employed legal assistance in the matter and is filing the proper legal paperwork for foreclosure. At any point, the homeowner can stop the process by making the payments including any late fees and/or legal fees.
The homeowner also has other options. They can retain an attorney or even declare bankruptcy which effectively stops the bank and slows the foreclosure process considerably.
It is at this point that, many banks, are encouraged to work with struggling homeowners in an attempt to help them keep their homes. The lender can elect to restructure the loan, defer payments or set up a payment arrangement.
And remember, at any point during this process, a distressed homeowner can always put the home on the market and sell it!
The bottom line, for those facing foreclosure, there are many options. Couple that with recent programs the government and the Federal Reserve are sponsoring to keep people in their homes and foreclosures may not be all they are cracked up to be.
That doesn’t mean there aren’t opportunities.
The market has corrected in many ways and sellers have definitely become more realistic. Prices have moderated and come down; perhaps not as much in the Chicago area as they have in other markets but they have come down. In my opinion that reflects the overall strength of the Chicago area as far as real estate is concerned.
So the opportunities are there, you, as a buyer, have more negotiating power than you’ve had in at least 5 years. Prices are down to more reasonable levels. Money, while not as easy to borrow as it was, is still readily available at excellent rates to qualified buyers.
And there are also “short sale” opportunities. This is a, relatively, little known way for people facing foreclosure to get out of their loan. If you can find one, this can be a great opportunity for you as a buyer. Basically, a “short sale” is an agreement by where the seller’s bank/lender, review any offers and, if the bank agrees, will actually allow the seller to sell you a home for LESS than they owe on it and will absolve the seller of any deficit on the loan. These situations can be win/win situations for everyone. YOU, as the buyer, are often able to negotiate a great deal while the seller, who is facing foreclosure, is able to get out of their home and loan and their lender is able to cut their losses without having to deal with the expense of legal action.
Expect that, if anything, we’ll see more “short sale” opportunities in the market if it continues to be sluggish. All signs are pointing to a recovery as soon as Spring so it is definitely hard to predict exactly what we can expect
Monday, June 18, 2007
Real Estate is Sucking in the Spring!
OK everyone!
So I'm going to turn my traditionally optimistic market view to one of looming horror, (at least for myself).
I've got cicadas coating the trees around my home but my buyer traffic has all but dried up. That's definitely making sellers, (mine included), pretty anxious.
What happened? Everything was banging until just before Memorial Day and then. . .dead!
HELLOOOOOOOOO!!!! Where are all the home buyers out there? Don't you know that now is the time people? I have people who bought in the last couple of years that would have killed for the deals you can get now. It hasn't been this affordable in close to 5 years! What is everyone waiting for?
Perhaps everyone is waiting for the Cicadas to go away. If they're anything like some people I know, then my guess is the buyers are entophobes who are unable to deal with the cicada invasion.
Not me! I'll brave anything for my buyers and sellers!
Let's get moving people!!!
So I'm going to turn my traditionally optimistic market view to one of looming horror, (at least for myself).
I've got cicadas coating the trees around my home but my buyer traffic has all but dried up. That's definitely making sellers, (mine included), pretty anxious.
What happened? Everything was banging until just before Memorial Day and then. . .dead!
HELLOOOOOOOOO!!!! Where are all the home buyers out there? Don't you know that now is the time people? I have people who bought in the last couple of years that would have killed for the deals you can get now. It hasn't been this affordable in close to 5 years! What is everyone waiting for?
Perhaps everyone is waiting for the Cicadas to go away. If they're anything like some people I know, then my guess is the buyers are entophobes who are unable to deal with the cicada invasion.
Not me! I'll brave anything for my buyers and sellers!
Let's get moving people!!!
Father's Day 2007
So it was off to the races for the Doty family this Father's Day. In a wonderful surprise I was taken for a fabulous Father's Day brunch in the International Room of Arlington Park Racecourse. There is definitely a reason why the call it the "Sport of Kings"; I certainly felt like a king.
While it was extremely hot this year, we were in air conditioned comfort in the International Room. Having this handy made trips outside more bearable.
I'd definitely reccommend this treat to any family looking for something different to do on Father's Day. For the kids, there were pony rides, a petting zoo, clowns, and face painters. For grown ups there was live entertainment and, of course, the main event: the races!
I'm thinking this might have to be our new Father's Day tradition.
While it was extremely hot this year, we were in air conditioned comfort in the International Room. Having this handy made trips outside more bearable.
I'd definitely reccommend this treat to any family looking for something different to do on Father's Day. For the kids, there were pony rides, a petting zoo, clowns, and face painters. For grown ups there was live entertainment and, of course, the main event: the races!
I'm thinking this might have to be our new Father's Day tradition.
Monday, October 02, 2006
The Fall Real Estate Market
It's the beginning of October and, generally speaking, mid-September marks the fall real estate market here in the Chicago area. Overall, there have been some differences in the market this year from years past. Most notably, there has definitely been a slowdown.
Homes are still selling. Prices are still holding. The sales cycle is simply taking longer than it has in years past.
And we definitely have seen some corrections to pricing.
Thankfully the pricing corrections have been livable at this point. Of course, why wouldn't they be given the extreme, (ok, OUTRAGEOUS), levels of appreciation over the last few years. That was so far from sustainable long term. The gentle landing does seem as if it is occurring and sellers are having to back off their prices and, in some cases, offer incentives.
If that trend continues, it may cause more desperation than anything else. Desperation selling could definitely have a negative impact on the market.
Of course, there is the quantifiable data for our area that was compiled by the Seventh District of the Federal Reserve, (that is our Midwestern area).
Here is a letter from July of 2005 that illustrates some very interesting indicies, graphs and economic ratios regarding housing prices.
http://www.chicagofed.org/publications/fedletter/cfljuly2005_216.pdf#search=
It is a very interesting read.
In my own business, things aren't so bad. My pipeline is good. I have 4 very strong listings and and am building my business pretty consistently.
Let's hope things stay healthy for all of us who sell or own a home.
Homes are still selling. Prices are still holding. The sales cycle is simply taking longer than it has in years past.
And we definitely have seen some corrections to pricing.
Thankfully the pricing corrections have been livable at this point. Of course, why wouldn't they be given the extreme, (ok, OUTRAGEOUS), levels of appreciation over the last few years. That was so far from sustainable long term. The gentle landing does seem as if it is occurring and sellers are having to back off their prices and, in some cases, offer incentives.
If that trend continues, it may cause more desperation than anything else. Desperation selling could definitely have a negative impact on the market.
Of course, there is the quantifiable data for our area that was compiled by the Seventh District of the Federal Reserve, (that is our Midwestern area).
Here is a letter from July of 2005 that illustrates some very interesting indicies, graphs and economic ratios regarding housing prices.
http://www.chicagofed.org/publications/fedletter/cfljuly2005_216.pdf#search=
It is a very interesting read.
In my own business, things aren't so bad. My pipeline is good. I have 4 very strong listings and and am building my business pretty consistently.
Let's hope things stay healthy for all of us who sell or own a home.
Friday, July 14, 2006
Long absence
I have had a bit of an absence since my last entry. Summer is here and lots of stuff is going on.
The market has been a fickle place for everyone I have spoken to. Suddenly, things aren't exactly as they seem or exactly as they were.
For one thing, the economy is changing not for the reasons everyone thinks, or wants to think about.
Everything was popping along fine. We all expected a bit of a hiccup, but no one has expected the uncertainly and military escalation that is happening in the Middle East. It is looking like the beginning of something big. . .REALLY BIG. And REALLY SCARY.
Of course, we all still need a place to live right?
I'm still faithful to the trade.
I just need to get this blog to pop a bit more. It needs more sass!
I'm going to try and get in here more often and keep it up.
Rick
The market has been a fickle place for everyone I have spoken to. Suddenly, things aren't exactly as they seem or exactly as they were.
For one thing, the economy is changing not for the reasons everyone thinks, or wants to think about.
Everything was popping along fine. We all expected a bit of a hiccup, but no one has expected the uncertainly and military escalation that is happening in the Middle East. It is looking like the beginning of something big. . .REALLY BIG. And REALLY SCARY.
Of course, we all still need a place to live right?
I'm still faithful to the trade.
I just need to get this blog to pop a bit more. It needs more sass!
I'm going to try and get in here more often and keep it up.
Rick
Monday, April 03, 2006
Changes to the Market
So Spring has sprung but where is the rush to real estate?
Here in the Chicago area, that's a really good question. The state of affairs is a bit puzzling to everyone out there. It is like everyone is at a standoff when it comes to what to do.
My analysis of things is similar, I'm sure, to a lot of brokers out there in the marketplace.
Interest rates are still on the rise, but interestingly enough, it is the short term rates that seem to be impacted more. I've been told that, the artificially low rates are based on changes within the bond market. One theory, (and a fairly reasonable and reputable one at that), makes the assertion that when the Federal Reserve raises rates, a flood of foreign money, (presumably Chinese held dollars that, because of our trade deficit/surplus, the Chinese are reinvesting in the stable, conservative yield, US bond market), comes in and actually keeps rates the same or can actually push them down. The Fed has raised rates and unprecedented 15 times which has never happened in US history. Economics on a global scale have not worked the way, I'm sure, many people may have imagined. As a result, we are actually making history here. Interest rates in the States are being affected and influenced by foreign markets quickly and directly and in ways no one may have perceived.
This has spelled good news in the US housing market for awhile now but it definitely appears that the boom in home equity lines of credit, (which generally have adjustable rates and can, under the present circumstances, fluctuate wildly), as well as ARM, (adjustable rate mortgages), and Interest Only mortgages, is over. People are moving to more conservative, fixed rate products to maintain some stability during some unpredictable times.
Still, 30 year fixed rate mortgages continue to hover in the mid 6% range which is STILL excellent.
Now let's turn our eye to the housing market.
While I don't see a bubble, I am definitely seeing a slow down. I am attributing this phenomenon to a number of things.
With rising rates, the number of people who can actually afford to purchase is going down.
People are now being more choosy about what they buy. Although everyone realizes that purchasing a home is a big decision to begin with, I think they also realize that if the upward trend in rates continues, it may be awhile before they move up to their next home. I think more people are looking at purchasing long term and staying put a minnimum of 5-10 years.
Also, I am seeing a lot of buyers in the 20 something to early 30 something category and they have different expectations. Many of these buyers are young professionals who do not want to concern themselves with earning any "sweat equity" they spend a lot of time at work and at play and don't want to compromise their lifestyles. Thusly, they expect that any home they purchase, (be it single family, condo, etc), be in tip top shape and updated to reflect the expectations of the millenium home.
Where do I go? This factor is huge for sellers. Many sellers are faced with the dilemma of having a lot of equity in their home, but moving up to that next home, (larger home, better location, etc), can actually cost them way more. Thus, many sellers are concerned about what to do or where they will go after the sale of their homes. Because of this, many sellers are content to hold out for their ideal asking price. There is simply less motivation to sell.
So the market has come to a standoff, as opposed to a standstill.
Buyers are either looking for value and are taking their time to make the perfect choice, or if they are inclined to pay a premium for a home, they expect it to be in tip top, spot on, shape.
Seller's, unless under financial duress or pressed into selling for other circumstances, (ie, divorce, job transfer, etc), are inclined to hunker down for the long haul and wait until they get their asking price.
As a broker, it is sometimes difficult to bring these two factions to a meeting of the minds. They both, essentially, are looking for the same thing, which is value. Unfortunately, they are on polar opposite sides.
Of course, what people see on television doesn't help either. There are a plethora of home shows touting how some new drapes, a coat of paint and a new slipcover on your sofa can bring you thousands, if not tens of thousands of dollars in additional value when you sell your home. This is simply not to case. What people fail to understand is that the majority of these shows eminate from red hot California where it has been a seller's market, to the max, for many years with no sign of slowing. It is one thing to stage your home for a quick sale and, hopefully, acheive as close to one's asking price as possible. It is quite another to expect multiple offers and frenzied buyers who are ga-ga over your new paint job and are willing to pay OVER your asking price.
Of course, as with many things, this is something that almost ONLY happens on TV.
Remember folks, even if it is "reality TV" doesn't mean it is real. After all, once you add "TV" to "reality" you create an oxymoron.
Look for me to talk about investing in upcoming posts.
Cheers!
Rick
Here in the Chicago area, that's a really good question. The state of affairs is a bit puzzling to everyone out there. It is like everyone is at a standoff when it comes to what to do.
My analysis of things is similar, I'm sure, to a lot of brokers out there in the marketplace.
Interest rates are still on the rise, but interestingly enough, it is the short term rates that seem to be impacted more. I've been told that, the artificially low rates are based on changes within the bond market. One theory, (and a fairly reasonable and reputable one at that), makes the assertion that when the Federal Reserve raises rates, a flood of foreign money, (presumably Chinese held dollars that, because of our trade deficit/surplus, the Chinese are reinvesting in the stable, conservative yield, US bond market), comes in and actually keeps rates the same or can actually push them down. The Fed has raised rates and unprecedented 15 times which has never happened in US history. Economics on a global scale have not worked the way, I'm sure, many people may have imagined. As a result, we are actually making history here. Interest rates in the States are being affected and influenced by foreign markets quickly and directly and in ways no one may have perceived.
This has spelled good news in the US housing market for awhile now but it definitely appears that the boom in home equity lines of credit, (which generally have adjustable rates and can, under the present circumstances, fluctuate wildly), as well as ARM, (adjustable rate mortgages), and Interest Only mortgages, is over. People are moving to more conservative, fixed rate products to maintain some stability during some unpredictable times.
Still, 30 year fixed rate mortgages continue to hover in the mid 6% range which is STILL excellent.
Now let's turn our eye to the housing market.
While I don't see a bubble, I am definitely seeing a slow down. I am attributing this phenomenon to a number of things.
With rising rates, the number of people who can actually afford to purchase is going down.
People are now being more choosy about what they buy. Although everyone realizes that purchasing a home is a big decision to begin with, I think they also realize that if the upward trend in rates continues, it may be awhile before they move up to their next home. I think more people are looking at purchasing long term and staying put a minnimum of 5-10 years.
Also, I am seeing a lot of buyers in the 20 something to early 30 something category and they have different expectations. Many of these buyers are young professionals who do not want to concern themselves with earning any "sweat equity" they spend a lot of time at work and at play and don't want to compromise their lifestyles. Thusly, they expect that any home they purchase, (be it single family, condo, etc), be in tip top shape and updated to reflect the expectations of the millenium home.
Where do I go? This factor is huge for sellers. Many sellers are faced with the dilemma of having a lot of equity in their home, but moving up to that next home, (larger home, better location, etc), can actually cost them way more. Thus, many sellers are concerned about what to do or where they will go after the sale of their homes. Because of this, many sellers are content to hold out for their ideal asking price. There is simply less motivation to sell.
So the market has come to a standoff, as opposed to a standstill.
Buyers are either looking for value and are taking their time to make the perfect choice, or if they are inclined to pay a premium for a home, they expect it to be in tip top, spot on, shape.
Seller's, unless under financial duress or pressed into selling for other circumstances, (ie, divorce, job transfer, etc), are inclined to hunker down for the long haul and wait until they get their asking price.
As a broker, it is sometimes difficult to bring these two factions to a meeting of the minds. They both, essentially, are looking for the same thing, which is value. Unfortunately, they are on polar opposite sides.
Of course, what people see on television doesn't help either. There are a plethora of home shows touting how some new drapes, a coat of paint and a new slipcover on your sofa can bring you thousands, if not tens of thousands of dollars in additional value when you sell your home. This is simply not to case. What people fail to understand is that the majority of these shows eminate from red hot California where it has been a seller's market, to the max, for many years with no sign of slowing. It is one thing to stage your home for a quick sale and, hopefully, acheive as close to one's asking price as possible. It is quite another to expect multiple offers and frenzied buyers who are ga-ga over your new paint job and are willing to pay OVER your asking price.
Of course, as with many things, this is something that almost ONLY happens on TV.
Remember folks, even if it is "reality TV" doesn't mean it is real. After all, once you add "TV" to "reality" you create an oxymoron.
Look for me to talk about investing in upcoming posts.
Cheers!
Rick
Friday, February 24, 2006
Pictures
I am posting the photo of my daughter and I that I have been using in all of my marketing pieces. She has been instrumental in helping her "Papa" do some marketing.
In coming posts, I'll be posting some of my listings, virtual tours and other fun items from past and current clients.
Enjoy!
Rick
In coming posts, I'll be posting some of my listings, virtual tours and other fun items from past and current clients.
Enjoy!
Rick
Greetings!
Hello to all of you!
Periodically I like to check in and thank everyone who stops by. Even if you don't post a comment, I hope that you find the information provided here to be helpful and insightful.
If you are in the market for real estate, whether buying, selling or as an investor, I would encourage you to use this blog as a forum for discussion. With over 8 professional years of real estate experience, and as a licensed broker in the state of Illinois, I am knowlegeable and highly qualified to address your real estate needs and concerns.
If you'd like to send me an e-mail, you may do so at rick@saffronrealtygroup.com
If you'd like to search the MLS right now, you can at our website, www.greatchicagorealestate.com or by selecting among the real estate links in the column on this page that says "links".
I'm always happy to help people. I look forward to an opportunity to help you.
Thanks!
Rick
Periodically I like to check in and thank everyone who stops by. Even if you don't post a comment, I hope that you find the information provided here to be helpful and insightful.
If you are in the market for real estate, whether buying, selling or as an investor, I would encourage you to use this blog as a forum for discussion. With over 8 professional years of real estate experience, and as a licensed broker in the state of Illinois, I am knowlegeable and highly qualified to address your real estate needs and concerns.
If you'd like to send me an e-mail, you may do so at rick@saffronrealtygroup.com
If you'd like to search the MLS right now, you can at our website, www.greatchicagorealestate.com or by selecting among the real estate links in the column on this page that says "links".
I'm always happy to help people. I look forward to an opportunity to help you.
Thanks!
Rick
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