It Ain’t All Big Hair and Cadillacs

Times are tough and finances are tight. Trying to fight creative gift ideas that don’t cost alot?

Why not make the holidays all about family? I came across a great social media tool called Geni, www.geni.com.

It allows you to create a family tree, share photos and details about your entire family - from yesterday’s generation(s) to today!

I have six other siblings are we are scattered across the country. The great thing about this for me is the ability to share photos of my kids and details of our day to day activities with my brothers and sisters, my parents, nieces, nephews and cousins.

Give it a try!

Tags: gift ideas, On a lighter note, www.geni.com

Tags: Condos in Chicago, Foreclosures, Real Estate Chicago, Real Estate Market

Tags: Federal Bailout, Lending, Politics

Tags: Chicago Real Estate, Qik.com, Real Estate Marketing, Social Networking, Vlogging

Get your own - Open publication

Tags: Chicago Real Estate, New Construction, The Rotunda

I check in with my mortgage peeps on a regular basis to see how the lending business is doing in light of the current credit crisis.  Consistently, I hear that buyers who qualify for conventional financing, i.e. loan values that are below $417,000, have excellent credit above 720, verifiable income and have at least 20% down, money is still readily available.

That’s the good news.

Now the not so good news.

If you are a buyer looking to purchase a new construction condo, the lending guidelines have changed fairly dramatically.  A well qualified buyer with excellent credit, substantial downpayment (20% or greater) and a mortgage value of $417,000 or less may still not be able to purchase a newly constructed condo.

Here’s the rub,

According to Chase’s newly instituted underwriting standards, developers - in Chicago - who are currently under construction with new projects must:

1.  Have at least 50% of the units under contract

2.  Have completed constuction on ALL units - they can no longer complete and deliver as they go

PRIOR to closing any and all units under contract.  Hence, if you are a buyer, you may qualify for a mortgage for a new construction project but you may not be able to CLOSE unit at least 50% of the units are under contract.

These restrictions are even more stringent in declining markets such as Florida - they require 70% of the units to be under contract prior to closing.

This poses a very serious challenge to any and all developers who are currently in the process of completing or currently under construction with condo projects who have not yet met pre-sale requirements.

For those who’s prices are not within the conforming loan guidelines and do not have sufficient pre-sales or units under contract had best get serious about pricing.

Any developer who is having a challenge selling may be forced into foreclosure.  That doesn’t help buyers.

To potentially make matters worse, newly instituted lending guidelines from ING - one of the largest underwriters of Jumbo mortgages, i.e. mortgage values which exceed $417,000, has instituted a new policy seeking a minimum 45% downpayment requirement for new construction jumbo loans.

Again - while Chicago is still considered fairly stable, it is fair to say that many new construction developers had better see the writing on the wall.  These trends are filtering into the Chicago market - not surprising considering that condos represent 64% of all residential real estate transactions in the city.

If you are seeking new construction condos be sure to check what the current sales are at the project.  If it is less than 50%, you may not be able to close until the developer meets the new lending threshold.

Tags: Buying Real Estate, Chicago Condos, Chicago Real Estate, Lending, New Construction Guidelines, Selling Real Estate

Now don’t get all excited - my title refers to the height of the building - not the quantity of units sold.  I’m just trying to keep it real.

Ok - for some of you, this may very well be old news, but The Spire - slated to be North America’s tallest all residential building just sold the penthouse unit to none other than the creator of Beanie Babies.

Ty Warner purchased the 141st and 142nd floors - over 10,000 squares for $40,000,000 bucks.  While the actual price has not been disclosed, it’s fair to assume it went for close to 20,000,000 “Chillys” - the polar bear at wholesale - again - a whole lot of cold cash.  ha … ha ……   ha

Ahem…

How about the rest of the Chicago market?  Let’s just say it’s a WHOLE lot further down to earth.

Here’s the scoop regarding the condo sale thru June, 2008, compiled by ChicagoCondosOnline.com - a great resourse for condos in Chicago.

Tags: Chicago Condos, Condo Sales Statistics, The Spire

So much news about the financial meltdown - what does it mean?  Personally, I am completely overwhelmed by all the news.  Quite frankly, the more I read - the more questions and concerns I have.

I don’t want to add another commentary on what this all means.  I contribute to a national real estate blog - Bloodhound Blog - I simply refer you to the truly insightful comments and queries posted by my colleagues.

I am trying to keep my mind off of all the bad news.  The more I read about the current state of affairs, the more anxious I become - so my mind wanders …

You know, as man has evolved over the last thousands and thousands of years, we may have lost part of instinctual sense of knowing when and where danger lurks.  Perhaps that’s why man and dog have become familial companions.

I have two dogs - both rescues - both crazy.  Libby - the biggest dog - is a collie, lab, “something with a curly tail” mix.  The other, Cola - is a Beagle, Cattle Dog mix.

In questionable weather, I know when trouble’s brewing when my hounds disappear - one to be found wedged between the toilet and the bathtub in the guest bathroom, the other laying on the floor in the master bath - both in silence.  That is a telltale sign that thunder and lightning are on their way.

Cola is a TV watcher - not a casual, look at the TV when there are animals on commercials kind of TV watcher, but an interactive participant in what happens on TV - news, reality etc.  She barks at Wolf Blitzer on CNN.

So I decided to do a little experiment regarding Cola and TV.  She is much more attune to reacting to impending danger - maybe I should watch her reaction to the news.

Needless to say - she was riveted to the TV.

Cola Watching CNN

After Anderson Cooper’s 360 - Cola’s interest waned - she sat in disgust:

Cola in Disgust

She didn’t bolt into the bathroom - she simply sat - passively - no longer able to listen with interest.

Now - if I were to rely on her instincts regarding how all this financial mess is going to affect us, I would have to say we’re all going to be just fine.

Tags: On a lighter note

Skittish about the current real estate market?

Take a number.

Many of my buyers are actively looking for property but they’re still not convinced that NOW is the time to buy.  They’re looking for a sign …

I read a lot of real estate blogs and at times will offer a comment or two.  For those looking for a sign, I offer the following post for your reading enjoyment -  read Jeff Corbett’s post on Agent Genius.

Is the real estate sky going to collapse?  The answer is flatly no.  In fact, the most recent news may actually accelerate stability to home prices.

These are the signs that I think are worth noting:

1.  When the Fed stepped in to bailout Fannie and Freddie Mac - the creators of the secondary mortgage market, the Fed converted lender paper to treasury paper, that means the debt is guaranteed by US government - er - basically us.

Why is this a sign?

Guaranteeing the lender paper provides confidence and liquidity to future mortgage originators - banks will continue to have a sustainable secondary market for the mortgages they underwrite and sell, allowing them to continue to loan money for people to buy homes.

Now that the Fed “owns” the outstanding debt, they can workout any loan helping stem the flow of foreclosures.  Because banks prefer performing assets to straight write-offs (foreclosures), we may see many existing homeowners in the foreclosures process able to negotiate workouts or more favorable terms to stay in their homes with a new mortgage.

Fewer foreclosures on the market helps limit the sheer number of units added to inventory AND more importantly will help provide price stability.

If you’re in the foreclosure process, DEMAND A WORKOUT.

2.  The largest holder of the really bad debt, Lehman Brothers, just filed for bankruptcy.

Why is this a sign?

No longer a viable entity for sub-prime origination - essentially nothing left to write off.  The valuable pieces will be purchased the rest is worthless.

3. Fixed rate mortgage rates have fallen dramatically.

Why is this a sign?

For those with stable employment, good credit and cash downpayments you couldn’t be in a better position.

Again - all real estate is local.  If you’re in the condo market in Chicago, be caution.  Some neighborhoods have inventory with a 10 month supply of condos - meaning it will take 10 months for the existing inventory to sell.   Higher inventories typically put buyers in the driver’s seat.

Many sellers in Chicago are getting religion, both in terms of motivation and price.

Take a look at my previous post regarding the market statistics for Chicago.

Chicago did not experience the dramatic property value losses as in other markets.

If you have been waiting on the fence, waiting to jump into the real estate fray, I truly believe that now is the time to start looking and BUYING property.

Talk to a lender first.  If you need a referral, I’d be happy to oblige.  If you’re a well qualified buyer you are should be looking now.

Still looking for a sign?  Want to wait for the bottom?

Are you blind?

Tags: Black Monday, Lehman Brothers, Lending, Real Estate Chicago, Real Estate Market

I’ve got good news and bad news - which would you prefer first?

Well - everyone wants to hear good new - so here it is:  Buyers are coming back to the market - at least I have experienced a marked improvement, both in terms of showing my listings are well as my own buyers calling me up and wanting to see property.

Needless to say, the past few months I feel as if I’ve been unemployed - now I can claim I am underemployed

Ok - the not so good news?  Everyone wants a deal.  Tom - that’s good news, not bad news!  Well - the “deals” that I’ve come across aren’t really “deals”.

I’ve been showing alot of REOs - bank owned property - these are the real foreclosures.  It is important to draw a distinction between properties in foreclosure and REOs.  Not all properties in foreclosure end up as REOs - in fact a good majority of properties do not end up as REOs.

I completely get the concept of a good deal, however, I can give you a few examples why the REO market is not necessarily the best route for bargains:

2124 W Rice - 3 Bedroom, 2 bath new construction unit in a rowhouse-concept - 3 simplex units with a commercial space on the first floor.  This building is included in a number of units just like it along Rice St - great area in East Village.

When originally offered by the developer, this property was listed at $479,000.  Currently as an REO it is offered at $287,900.

WOW!  What a deal!  Well - no.  The property is in need of significant repairs - no surprise for an REO - as well as it is clear that the unit was not completed during the construction phase.  For starters, this property would not pass inspection due to the fact of exposed ceiling joints above the outside balcony.  Further investigation found that the city department of Building and Permits does not have permits on record.  Guess who’s responsible for creating the correct audit trail for the city?

*Jeopardy theme music*  okay, you have 5 seconds.

*DING!*

The correct answer is, “Who is the buyer?”

CORRECT!

How much did you wager?  Well!  That’s the $64,000 question - or maybe even more - you have no idea how much you just wagered.  Now - if you’re an experienced investor, savvy to the wayward ways of Chicago’s Department of Building and Permits - you would run - quickly - to another available property.

Ok - so - you’re willing to tackle the permit issue with the city - great.  You’ve weighed in on the risk, reward thing and decided to roll the dice.

Ok - so - aside from the physical improvements required, you find out that the building has no condo association, no reserves and are uncertain as to whether or not the building is insured.  Hmmm - no condo docs or association?

Um - no loan - no way, no how.

The physical improvements would have raised a flag with the appraiser and the underwriter, but there are construction loans - so it may have been possible to get financing, but only with a substantial downpayment.  The fact that no association exists, no reserves and possibly no insurance - while banks have made bad decisions, I think you’ve gotten the sense with the current credit meltdown, you’re unlikely to get a mortgage.

The question remains - is this REO a good deal?  For the average home buyer looking for a good deal?  My take - no.  By the time you work thru the issues related to the permits, required repairs to bring the property up to code, cost of insuring the building, forming an association and building a reserve, you may be better off with a property that has everything in place.

To an experienced investor - the trade-off becomes carrying costs and risk - the required repairs could cost you $100,000.  The $479,000 didn’t sell - the correct price in today’s market - probably closer to $379,000.  Is this a deal?  Again, my take - no.

Many sellers in today’s market have gotten the message - price realistically or you simply won’t sell.  I did a market analysis for a client on a property that was priced based on sales in 2004 and 2005 - not the recent sale in 2006 and 2007.  The current price is substantially less than recent comps - I think that seller gets it.

Those are the deals worth going after.

Tags: Foreclosure Search, Real Estate Chicago, REO, Ukrainian Village