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from Local Attorney, Michael H. Wasserman

Wednesday, December 24, 2008

Market Conditions: November Sales Plummet 41.3% Year Over Year

Its not like anyone in the Real Estate market needs numbers to quantify the severity of the pain, but just the same, here Crib Chatter's is a quick, dirty summary of Illinois Association of Realtors' November sales reports:

Chicago home sales continue to plunge, as November recorded the sharpest year-over-year decline in the city in 2008.

Sales of single family homes and condominiums in the city fell 41.3% in November compared to a year ago. Only 1,057 sales closed compared with 1,801 in November 2007.

The median price declined 23.3% to $222,500 compared to $290,000 in November 2007.

“The REALTOR® Association is calling upon the federal government and mortgage industry to address continuing problems that are impeding the delivery of mortgage credit to potential homebuyers.” said David Hanna, president of the Chicago Association of REALTORS®.

“Mortgage insurers need to make sure they have not over-corrected and added unnecessarily strict underwriting standards preventing people from qualifying for a mortgage. The lack of practical and affordable loans will continue to stymie the recovery effort.”

Sales also fell 32.3% in the 9-county Chicagoland area. Year-to-date, sales are down 26.5% in the 9-county Chicagoland area compared to the first 11 months of 2007.

64,445 homes sold through November 2008 compared to 87,624 in the same 11-month period in 2007.

Prices also declined in the 9-county Chicagoland area. Year-to-date, median price fell 4.9% to $242,000 from $254,500 in the 11-month period in 2007.

For the month of November, prices fell 15.9% to $207,745 from $247,000 in November 2007.

Are price declines accelerating?

“The housing market was stalled in November due to a deepening recession which hit our economy with blunt force this fall. No one should be surprised at these figures given what happened with the financial markets in the past few months,” said Pat Callan, broker-owner of Realty Executives Premiere in Wheaton and President of the Illinois Association of Realtors.

“Looking ahead, we are encouraged by the Federal Reserve Board’s action last week to get our economy moving again with the announcement to lower the federal funds rate.”

“The REALTOR® Association has been calling for mortgage rate reductions and recent action to drive down interest rates should be attractive to homebuyers who have been waiting on the sidelines to enter the market. With interest rates the best they have been in 50 years and peak inventory levels, there are unique buying opportunities,” he said.

Sharp Drop in Mortgage Rates Encouraging Sign for Housing Market November Illinois Home Sales Decline Statewide [Illinois Association of Realtors Press Release, Dec 23, 2008]

Monday, December 22, 2008

Mortgage Appraisals

Here's a head scratcher....

My client wishes to purchase a bank-owned property. His mortgage lender orders an appraisal to confirm the property value. So far, so good, right?

The appraiser visits the property, checks for comparables in the neighborhood and reports that the contract price is fully $20,000 below the appraised value. The comps are all higher, too.

Yes, you read that right folks. Buyer would be get the house for less than market value. An instant (paper) gain of at least $20,000. More equity for the borrower/owner. A lower "loan to value" ration. That is a good thing, isn't it?

Apparently not; the underwriter denied the loan. Blames the appraisal.

huh?

Friday, December 19, 2008

Property Disclosures - tales of the Macabre

Back in September, we discussed the emerging trend that requires sellers in some states to tell buyers whether or not a particular property was ever used as a meth lab. Today, our discussion of disclosures turns on quite a different circumstance. This is an actual case decided in the Supreme Court of the great State of Alaska.

Factually folks, this one is pretty gross.

Ida Mae Johnson owned a home in Anchorage. In April, 2003 police discovered Ms. Johnson's body in the kitchen of the home. She had died of a heart attack approximately one month before her body was discovered, and during that time her body had partially decomposed. It was later learned that fluids released during decomposition caused structural damage to the kitchen subfloor. The sellers (Ms. Johnson's surviving daughters) told the buyers that their mother had died in of a heart attack in the home, without mentioning any of the other gruesome details.

The buyers moved into the house shortly after closing. Upon moving in, they investigated a "suspicious" stain under the kitchen stove and discovered blood and urine. They later removed tiles from the kitchen floor and discovered that blood and other fluids had saturated and damaged the subfloor. (.....yuck)

This being America and all, they did what most everyone would expect ---> they sued the sellers for failing to disclose the bit about a decomposing body. The case is reported here, but before you jump away from this web site, (spoiler alert) They lost.

They lost for two reasons. First, they waived their right to receive a property disclosure statement from the sellers. Second, they never asked the sellers about the circumstances of the death.

The Alaska Residential Real Property Transfer Disclosure Statement is in and of itself, a VERY comprehensive. There are 34 specifically numbers representations that must be made with three and one half pages more with 14 additional details that must be addressed. But, for all the detail required, their state law clearly allows for parties to waive those requirements.

I suppose I just do not know much of anything about Alaskan culture or customs and practices, but down here I cannot for the life of me imagine a circumstance where a buyer would want to waive the disclosure requirement.

Then again, even if the disclosure had not been waived, I cannot see any question on the form that would have required a disclosure that Ms. Johnson died and decomposed inside the house. (There are specific obligations to disclose murders, suicides, and burial grounds, but none for deaths of natural causes or decomposition.)

Did the sellers have a non-statutory or "common law" obligation to disclose? No. The old Latin Maxim "Caveat Emptor" still applies. Sellers do not have to reveal information of their own volition. But if asked or volunteered, information must be truthful and not deceptive. Sellers in this case told the truth. Mom died of a heart attack in the house. Nothing dishonest or misleading about that. But these facts do remind us why the oath witnesses in Court proceedings requires them to tell not only the truth but the whole truth.

So what does all of this mean for us here in Illinois? Well, I take away three things:

First, this case reinforces the value and importance of having a home inspection, hopefully with an attentive, experienced and inquisitive inspector.

Second, as I tell my kids every morning before school, you gotta, always, ASK GOOD QUESTIONS. Whenever a buyer learns anything out of the ordinary about a property, they really have to investigate to find out as much as they can about the irregularity (and until they do, sellers should take a page from our armed services; "don't ask, don't tell"

Finally, whenever a question presents itself, whether to disclose a defect or circumstance or not, call your lawyer.

Sunday, December 14, 2008

Pointilism in West Lawn


Here is a fairly sobering graphic. The map shows ONE ZIP CODE on Chicago's South West Side, 60629.

The red dots represent all of the properties in that zip code that are either in pre-foreclosure or are already bank owned. In just the first four months of 2008 alone, there were nearly 600 foreclosure lawsuits initiated in this area. The map was put together by the Southwest Organizing Project and LISC/Chicago. It was the centerpiece of Senator Durbin's testimony to the Financial Services and General Government Appropriations Subcommittee Hearing last week.

Just about every real estate lawyer I know has handled closing involving distressed properties. I certainly have worked on FAR TOO MANY bank-owned properties; foreclosure-pending properties; and short sales. I have seen an unsettling number of other sellers pay money at closing to complete a closing. These are not happy transactions.

But they are each individual tragedies. Isolated deals. Each family suffers the pain once. They rebuild, we in the industry move on to the next closing. In this compartmentalized, serialized way that I see the "situation," it is sometimes hard to put things into a larger perspective.

Which is why I suggest that you go back and take another look at this map for a moment. Now consider the neighborhood you live in. Statistically, its likely that at least one of the homes houses in the hood is "distressed." Maybe more. Consider for a moment what it would be like if every other home or two of three homes were "underwater." What would your neighborhood be like if you had scores of boarded up and abandoned houses; block after block? Stores and restaurants would not be able to stay in business, so you would have to figure that the commercial streets would be pretty empty too. What must life be like under those circumstances?

Now consider the words of Fr. Stan Rataj, Pastor of St. Nicholas of Tolentine Parish, located in the center of this community:

“If several hundred families lost their homes to a fire or a tornado, we would rush to help them,” said Fr. Stan. “This tragedy is just as serious, yet people feel that they have to face it by themselves".
Of course, he is right. Its hard to ask for help when you fall behind on a mortgage. There is no American Red Cross or F.E.M.A. to help out displaced (former) homeowners or tenants.

This neighborhood has been gutted. Fortunately, at least to some modest extent, the community is trying to organize a response. The Greater Southwest Development Corporation; Neighborhood Housing Services of Chicago, Chicago Lawn; and the Southwest Organizing Project, collectively representing 29 southwest side member institutions, have partnered to launch the "Keep Our Homes" Campaign, a community-based housing counseling and organizing effort to stop the spread of foreclosures and help residents on the city's southwest side preserve their neighborhoods.

To learn more about these efforts or how you can get involved in the solution, contact SWOP at (773) 471-8208 and check out the LISC-Chicago program description, here.

Friday, December 12, 2008

Happy New Year (TItle Fees are Going Up Again)

Well, what else would you do if the volume of your business is down; and if the pricing scale for your product is tied to real estate sales prices , and the stockholders are upset that the dividends are being cut? Raise the rates!

Chicago Title announced their annual fee increases a bit early this year. (This is the second increase in just five months). The new fees go into effect January 2.

Watch for the rest of the still viable title companies to follow suit soon.

Compare title rates on my web site, here.

Thursday, December 11, 2008

What the puck? Blago a hit in Las Vegas....



Who knew they even played hockey in Las Vegas? Apparently they do, and oh boy have they got a promotion cooked up. Kudos to their promotions department for getting way out ahead of the rest of the hockey-as-political-satire poser organizations.

The Las Vegas Wranglers face off against the much feared Victoria Salmon Kings on January 30. They will wear vintage prison uniforms, featuring broad, horizontal black and white stripes and a prison issue number that begins "ILLGOV" with the last two characters representing a specific player's regular uniform number.

Those nasty, sweaty frocks will be autographed and auctioned off for charity at the game's end. A seat between the two benches will go to the highest bidder as well.

Sure its embarrassing for us, but the team wants you to have some compassion for the players. Apparently they were forced to wear pink for cancer research last year, and had to grow mustaches and wear light blue helmets to auction for prostate cancer. Management is running the promotion (they say) to give the players a chance to "look a little more sketchy" Glad our governor could helps out with that.

The Wranglers drew national attention for Dick Cheney Hunting Vest Night following his 2006 shooting "mishap." They are also known for playing one game each season that begins at midnight, and an annual Over-18 game that I am told caters to an, ahem, mature audience.

Wednesday, December 10, 2008

The Real Estate Downfall

a cute parody of our "current situation."





a belly laugh good for what ails ya!

Tuesday, December 2, 2008

HOW TO MAKE MONEY IN REAL ESTATE - December, 2008

For the most part, I try to focus my real estate practice on residential properties, but as someone who offices downtown, I was particularly taken aback by two news items reported this morning. Both involve what appear to be real estate plays that will generate sizeable revenue streams, even in this "down" market; We're talking about parking. That's right, parking. Basically, build the parking area and lay down a few stripes. Invest in some payment collection meters or machines, and voila, you can pretty much kick back and enjoy the ride. Its like printing money.

Don't quite believe me?

First off, read (and weep at) this November 17 Sun Times piece on the "skyrocketing" cost of off-street parking downtown. Next, check out the details of the newly announced privatization of on-street parking. (Spoiler alert: the cost of Off-Street parking downtown has gone up 20% over the last three years. On street parking is about to increase 400% over the next five.

Locking your bike to a parking meter is still free.

Thursday, November 27, 2008

FIDELITY & LAND AMERICA - the story continues


"Door Buster" is to Black Friday, as Turkey is to Thanksgiving. And so it will go on the day after the turkey day. Sleep deprived and crowd-worn citizens will set out in hopes of buying the things they want (or think they want, anyway) at a discount to what they had previously been selling for.

Business types (at least certain title insurance types) seem to be more interested in maximizing a four day work holiday this year, so they concocted their own door buster deal yesterday; before adjourning for Thanksgiving. According to news reports, Fidelity is buying LandAmerica's title insurance business after all - after LandAmerica files for bankruptcy protection and sheds off some less desirable assets. LandAmerica will then sell its principal title underwriting units to Fidelity National for a combined $298 million. Chicago Title will buy Commonwealth for $158.6 million, and Fidelity National will buy Lawyers and United for $139.4 million.not all of LandAmerica.

You may recall that on November 7th, LandAmerica & Fidelity announced a merger agreement. (more like a $126 million takeover). Two weeks later, Fidelity cancelled out on the deal during the due diligence period. Yesterday, LandAmerica filed for bankruptcy protection.

How bad were LandAmerica's problems? Fitch Ratings downgraded LandAmerica's financial strength and issuer default ratings and placed LandAmerica and its subsidiaries on "rating watch negative". Now understand that I don't actually know what any of that means, but downgrades from rating services are never good. Especially when your company is also reporting third quarter losses of $600 million and nine month losses of $673 million. Not when stockholders' equity plummet by more than half in that same quarter to $485 million. Not when the New York Stock Exchange suspends trading of your shares (which peaked at more than $106 last June, and plunged to about 25 cents in electronic trade).

And that debt that needed to be trimmed off of the deal to lure Fidelity back to the table?
A $290 million investment in auction-rate securities (ARS) from LandAmericas 1031 exchange business that currently cannot be accessed. (1031 exchanges are tax deferral vehicles used by real estate investors. An intermediary holds the proceeds from the sale of an investment property until those funds are deployed to purchase a replacement investment). Those funds were tied up in toxic debt that could not be freed up to meet cash needs. The 1031 company is also in bankruptcy court, and Nebraska State regulators have intervened as well.

Assuming this deal passes muster with the bankruptcy court, and with the various state regulators, and federal anti-trust concerns, Fidelity will control nearly three quarters of the title insurance market nationally.

The deal may well be completed before the year ends.

Wednesday, November 26, 2008

WHAT???? closing costs are going up?? again??

OK, maybe not everyone's. yet.

The McHenry County Recorder's office has announced an $8 fee increase for each document recording, effective December 1.

The minimum fee per document is now $50.00. Buyers record a Deed and Mortgage. Sellers record releases of all mortgages and other liens that are paid off in connection with a closing.

Monday, November 24, 2008

CONGRATULATIONS LANE TECH INDIANS!

Congratulations to the men of the Lane Tech High School football team, winners of the 2008 (Chicago) Public League Championship. Lane took the crown in a decisive victory over Hubbard over the weekend, with a most decisive 24-7 victory.

Full game highlights, and a nice mention of son number on the Booster Club web site

Next up for Lane, a showdown against Loyola on Friday at Soldier Field, the 75th annual Prep Bowl.

according to wikipedia,
As early as 1927, the Chicago Public Leage football champion met the Chicago Catholic League champion at Soldier Field for the city title. The game would be later dubbed the Prep Bowl in 1934 by Mayor Edward Kelly as a Thanksgiving fundraiser for the city's poor. Until the advent of the Illinois state playoffs in 1974, the Prep Bowl was the main attraction of the fall season, attracting crowds in upwards of 100,000 in its heyday and averaging close to 65,000. Since 1974, crowds have dramatically dwindled with the emphasis switching to earning a state championship. The renovation of Soldier Field in 2003 has seen a steady resurgence in crowds for the game, averaging around 20-25,000.

Go Lane Go!

Friday, November 21, 2008

LandAmerica, we hardly knew you.....

Inman News Reports:

Fidelity National Financial Inc. has called off its plan to acquire troubled rival LandAmerica Financial Group Inc., the companies said Friday, calling into doubt LandAmerica's long-term prospects.

Fidelity and LandAmerica both issued terse statements at 8 p.m. Eastern Time Friday saying Fidelity had exercised its right to back out of the deal during a due diligence period.

LandAmerica lost $599.6 million during the third quarter and was in danger of defaulting on its debts, the company said in a recent regulatory filing.

Fidelity announced an agreement on Nov. 7 to acquire LandAmerica in an all stock deal valued at $128 million

Thursday, November 20, 2008

Guaranty Title & Trust Company bids Adieu

Title Insurance companies are licensed and regulated by each state the they are authorized to transact business in. In Illinois, that duty falls to the Department of Financial & Professional Regulation. On November 7, IDFPR announced the death of one of those companies, Guaranty Title & Trust Company.

Inquiries regarding the GTT liquidation and requests for Proofs of Claim forms should be directed to: The Office of the Ohio Insurance Liquidator, Attn: GTT, 50 W. Town Street, Third Floor, Suite 350, Columbus, OH 43215. The telephone for that office is (614) 487-9200.

SHOULD CONSUMERS TAKE ACTION? Well, that is going to depend on where you closed or who insures your title.

If your title insurance comes from Chicago Title, Ticor Title, First American, Stewart or LandAmerica, or Old Republic (which collectively control roughly 93% of the title insurance markets) you probably don't have any worries. Guaranty was not one of the "big five." Same goes for titles written by Attorneys Title Guaranty, Professional National Title, and as near as I can figure, Greater Illinois, Prairie, Mercury title too.

But if your title came from any other company, you might want to pull out that closing file and check to see if the title insurance underwriter was GTT. If so, pick up the phone and call your lawyer to get make sure you retain some insurance protection.

Title Insurance Company Woes Continue


Most Chicago area home closings take place at a title insurance company's office. Just setting foot into those offices these days tells you all you need to know about the current state of the Real Estate business: Still open, ready and willing to do business, but it's just not happening. Most are pretty lonely places right now.

The numbers seem to bear this out. According to the American Land Title Association and Inman News, All five of the nation's five biggest title insurers lost money during the third quarter.

Those grisly numbers:
  • First American, the nation's largest, reported an $8.3 million third-quarter loss
  • Fidelity, number two in 2007, lost $198 million and closed 115 title and escrow offices
  • Stewart reported $30 million in losses, closed 40 branches, and canceled 1,750 independent agencies
  • LandAmerica lost $599.6 million! which may explain its recent announcement that it was being acquired by Fidelity, and the urgent need for an immediate $30 million in secured credit to keep them liquid).
  • Old Republic was $48 million in the red.
More than 18,000 industry jobs have been eliminated since the market dowturn began.

So what does this mean for consumers?

Well, on the down side, expect title insurance premiums and closing costs to go up. Fidelity for one is reportedly planning 10-20% price increases nationwide. Underwriting standards are going to be tightened down even tighter. Its going to get harder to "work-around" unresolved title issues. I would not be surprised to see more title companies close down and consolidate operations in their suburban and neighborhood offices. This process has already begun. Smaller title agencies are also likely to start shutting down operations as well.

On the bright side, its going to be pretty easy to schedule closings, and when you do get the deal to the table, everyone is going to be real happy to see you there .

Friday, November 14, 2008

A Brief Respite on a Chilly November Morning...

Good News: It took two days of hearings to get there, but an Oregon Judge cleared a man of public indecency charges, following his arrest for riding his bicycle, ahem, unclothed. Riding your bicycle naked (in parts of Oregon, anyway) may well be a protected form of public expression (your right to free speech)! Read the whole Oregon News report here.

Chicago's next World Naked Bike Ride will take place Saturday June 13, 2009

Wednesday, November 12, 2008

HUD TAKES ACTION (sort of)

The body of federal law that governs most aspects of residential closings that involve a new mortgage loan is known as the Real Estate Settlement Practices Act (RESPA). Our US Department of Housing and Urban Development, among other things, issues and enforces the regulations that flesh out andimplement the law.

HUD announced today that it amending its regulations to require mortgage loan brokers to actually give prospective buyers a standardized Good Faith Estimate of their closing cost. OK, the truth is that they already require GFEs, they are changing the format. What was once a fairly incomprehensible one page form is now a three page colorized incomprehensible form, that will come with a fourth page of "explanations"

HUD estimates that the new regulation will save the average consumer $700 at the closing table. Cool right?

Here's the catch:

The reegulation does not go into effect until Janury 1,


2010!

Monday, November 10, 2008

the TITLE INSURANCE pool gets a bit smaller

There are five major title insurance "families" in the United States. Together, they account for roughly 93% of all title insurance here. Last week, two of the five announced a merger. Subject to regulatory and shareholder approvals, Fidelity National Financial and Land America will combine forces, becoming the nation's largest title insurance provider. If so, they will control nearly half of the overall market.

This is not really so much of a merger as it is an acquisition: One of Fidelity's subsidiaries, Chicago Title, is going to bail out Land America with a $30 million in stand-by secured credit to provide liquidity and to help Land America's subsidiaries Commonwealth Title and Lawyers Title pay down other debts.

Conventional wisdom, and historical indications suggest that the title insurance industry is usually a hugely profitable one. In 2003, according to ALTA, the industry paid out about $662 million in claims, about 4.3% percent of the $15.7 billion taken in as premiums. By comparison, the boiler insurance industry, which like title insurance requires an emphasis on inspections and risk analysis, pays 25% of its premiums in claims. Auto and homeowner insurers are said to return about 70% of their premiums to customers in claims.

Times, however, have changed. Title companies have been battered along with most every other player in the real estate transaction process. Corporate dividends have been slashed. Share prices have tumbled. Employee rosters have been slashed and branch offices closed. The remaining offices are, by and large, quite. The days of overflowing reception areas and parties signing loan documents in the break room or on top of the photocopier are distant memories. Gone with them it seems are all those title company profits.

I am an agent and write title with Fidelity subsidiaries Chicago Title and Ticor Title, and Land America's Lawyers Title. I like working with all of them. The good news for my clients as there all three provide excellent service, competitive pricing and have really very nice (and knowledgeable) staff here. There will no doubt be some more pain for them all internally as the merger moves towards completion, but I do not foresee any problems or ill effects for my clients. In the near term, anyway.

In the same way that savvy buyers, particularly investors, are returning to the market, the Fidelities seem poised to gain market share and overall proftability by seizing on opportunities to buy assets while prices are low. The real estate market is cyclical and the turning point may come up on us sooner than many realize. This deal will no doubt pay big dividends to Fidelity in the long term.

Anyone else out there ready to make a similar play?

The Sterling Condos - a follow up

The Sterling residences are just up the street, across the river from my office. I wrote about them some time ago and the high rate of foreclosures there, owing in large part to the developer's creative marketing efforts that fed the greed of many condo investor/speculators.

Here's a pretty grim example of the train wreck that we are all witnessing. The owners of this unit are having trouble selling it at a 40% discount to what it sold for four years ago!

Yikes.

Wednesday, September 24, 2008

PROPERTY DISCLOSURES

Most Illinois sellers are required to give several different disclosures to prospective home buyers, so that those buyers are made aware of various types of possible (or known) defects. Such property disclosures are required in at least 32 states, some are pretty bare-boned, some are 10 or more pages long.

Locally, we have (a) real property disclosures; (b) lead based paint disclosures; (c) radon disclosures; and in the City of Chicago, (d) heating cost disclosures.

Our real property disclosure covers 21 specifically enumerated types of material defects ranging from unsafe drinking water, to defects in the roof or ceiling, to boundary and lot line disputes.

I just learned of a new one that seems to be an emerging trend in some of our sister states. (Mississippi, Missouri, and South Dakota) now require a seller to disclose whether or not a given property has ever been used as a methamphetamine lab! This disclosure must be made regardless of whether the persons involved in the production were convicted for such production. The issue is (quite understandably, I suppose) the possibilities of toxic / hazardous residues being present.

Shouldn't be too much longer before sellers also have to disclose ghosts, poltergeists or other incidents of the occult.

Thursday, September 11, 2008

COOK COUNTY PROPERTY TAX BILLS - the wait is over?

This just in from the Wasserlaw Department of Unconfirmed Facts and Useless Speculation (DUFUS):

2007 Cook County 2nd Installment Property Tax Bills might possibly be mailed out October 3, 2008. That would make them payable on or before November 3, 2008.

This is sourced to a title company closing officer I worked with yesterday and is attributed to a conference call with one of the "higher ups" at the Treasurer's office. The treasurer's web site seems to substantiate the rumor.

I anticipate a rash of louder, more shrill complaints from City of Chicago property owners and from "tax reformer" types when those bills hit peoples mail boxes. More than the usual moans and groans we hear this time of year. We are confronted with a confluence of troubling factors:

For starters, the property tax system is based in part on triennial re-assessments of property values. Chicago properties were last re-assessed for the 2006 tax year, back when property values were (generally) rocketing upwards. Some Chicago neighborhoods saw assessed valuations increase 40 or 50% or more!. Higher assessed values (again, as a general rule) result in higher tax obligations.

At the same time we are confronting higher energy, food, and other costs of living. Day to day living expenses are eating up more and more of our wages (and gulp..... our savings and credit lines, too). These tax bills are going to be the proverbial straws that are going to break many a taxpayer's back.

To make matters worse, at least in terms of sentiment/psychology, most folks have seen their property values head back in the other direction since they were re-assessed (to say nothing of their stock portfolios and bank account balances).

But you say, Mike - what about that "7% Expanded Homeowners Exemption." Isn't that going to save us from spikes in our tax bills? Well, maybe for some few of us, but probably not for many. Its a pretty convoluted formula, but the Homeowners Exemption acts as a sort of offset that effectively lowers the assessed value of a property, which in turn lowers the tax bill. The "Expanded" exemption seeks to dampen the effect of a property assessment increase by limiting how high the increase can ratchet up in a given tax year. Here is the kicker: The maximum exemption actually decreases in each of the three years in the tax cycle. Not only are (many) property owners going to feel the pain of tax levy increases, they are going to pay those levies based on more accelerated increases in their property values.

Oh, one more thing; those bills are going to be payable on the day before election day ! Feel free to speculate on whether or not we will see change in Washington (or if that change will be tinted red or tinted blue). One this will be certain, as we head into the voting booths, change is going to be all the dough left rattling around in our pocketbooks.

HELP FOR TENANTS LIVING IN FORECLOSURE PROPERTIES

As of July, one in every 583 Illinois households was in foreclosure. According to RealtyTrac, there were 8,915 foreclosure pending statewide, 5,378 in Cook County, alone. The July numbers represent a 9% increase over June and is 61% higher than in July, 2007.

By now, just about every real estate lawyer in the area has faced a transaction that has involved a bank selling a property already lost to foreclosure, a seller with a pending foreclosure, or a pre-foreclosure "short sale." Sadly, I've seen them all.

Most of the time, these properties are (or were) the seller's principal residence. Others however have been investment properties. A couple of those investment deals have been complicated by the fact that a tenant is/was living in the distressed property.

There is much uncertainty about tenant rights in a foreclosure action. Most often, the lender does not know that a tenant is living in the building and the tenant does not know that the landlord is losing the building to the bank.

This is, to say the least, a very stressful and disconcerting situation for effected tenants.

Enter the Lawyers Committee For Better Housing, in Chicago. LCBH has created a new task force to focus on this very issue: tenants' rights in regard to foreclosed property. If you know anyone in this situation, you might want to let them know that they do indeed have rights and can get appropriate guidance from these highly trained and very knowledgable lawyers. The lawyer heading up the Foreclosure interests of LCBH is Mark Swartz. LCBH's telephone number in Chicago is 312-347-7600.

UPDATE: The August numbers from RealtyTrac are not encouraging: 5,980 foreclosures pending in Cook County; that is 1 in 360 households.

Thursday, August 28, 2008

The Current Real Estate Market - Explained in 5 Quick Photos

Your House As Seen By:



Yourself...







Your Buyer...









Your Lender...







Your Appraiser...







Your County Tax Assessor...


Home Buyer / Seller Customer Satisfaction Study

This just in from the Wasserlaw Department of Meaningless Statistics:

J.D. Power & Associates has published its first ever evaluation of customer satisfaction for Real Estate Brokerages.

The inaugural study measures customer satisfaction of home buyers and sellers with the largest national real estate firms. Overall satisfaction is determined by examining three factors for the home-buying experience: agent (65%); office (21%); and services (13%). Four factors are examined for the home-selling experience: agent (43%); marketing (38%); office (12%); and services (7%).

I'll not waste your time (here) citing the winners or losers. Let them brag on themselves if they want to, and you can satisfy your own curiosity by following those links in the paragraph above.

Suffice it to say that I am just not all that impressed with the study or the finding. I know a whole slew of really able and talented (nice) agents working at the "winning" firms and just as many who work for other nationals AND still others (many others) who are independents.

Few of us are buying or selling residential real estate, in large volume, on a national scale, so who amongst us really needs to know (or should select an agent) based on what is happening in Poughkeepsie?

Selecting a real estate agent is a personal matter. Shop local, Buy local. Get referrals. Call me. I'm always good for an opinion.

Thursday, August 21, 2008

Gloom and Doom Report of the Day

Zillow reports that: 29.1% of homeowners who purchased in the past five years are currently underwater on their mortgages (i.e., owe more on the mortgage than the house is worth). We also reported that almost half (45%) of those that bought at the national market peak of 2006 currently have negative equity. Nearly 14% of all single-family homes in the U.S., regardless of when they were bought, are currently in negative equity.

Read more (if you dare) here.

Gov. to Legislature: "Thumbs Down of Thumbprints"


The Governor has amendatorily vetoed Senate Bill 546 (requiring that notaries take thumbprints of grantors signing deeds for Cook County property transfers, to delay its effective date for one year (making it July 1, 2009) and also delay the sunset repeal for two years (making it July 1, 2013). It will be on the General Assembly's this fall for acceptance of the amendatory veto or override.

NOVEMBER UPDATE:
The Senate and House both approved the Governor's changes. The new law becomes effective June 1, 2009.

Wednesday, August 20, 2008

...while we wait



The Illinois Association of Realtors is due to release its July sales statistics next week. I'm staring at the computer waiting, with my hands over my eyes but peeking through my fingers. Can anyone say train wreck?

Its getting hard to post on a real estate blog like this one this summer without whimpering or whining or bemoaning the state of the market. Instead, I've been spending a bit time on the bike lately and reading the occasional blog. Sure I like my work and all, but hey - there are worse things than actually taking time to enjoy the really terrific weather we have been blessed with.

Riding the bike is terrific on many different levels. Having your bike stolen is not. So as a public service, I would like to refer you to an important reference point: The Chicago Stolen Bike Registry; and a couple of irreverent ones: Bike Snob NYC and a wacky U-Tube vid.

In the words of its creators, the bike registry exists:
  • To provide a public forum for the distribution of information about stolen bicycles, in the hope that bicycles can be returned to their owners, and that resale of listed stolen bicycles will be more difficult.
  • To provide analysis of bicycle theft data, in the form of statistics and maps, to identify high risk factors for bicycle theft.
Read a couple of entries and you will be unable to avoid learning from the mistakes of others.

Bike snob is just flat-out funny. OK, maybe you need to be a bit of a cycling dork to really appreciate these musings, but I do not necessarily think that I am such a dork and it tickles me just the same. Whatever your own dork factor, have a look - particularly Today's installment. Here is a photo of an "as yet un-stolen bike" that is just crying out to be pilfered:


Notice how the only part of the bike actually locked to the rack is that crappy front quick-release wheel. Flip the switch and take the frame. Could you make it any easier to give the bike away? Again, a few minutes of effort may well spare you the need to enter your own mishap into that stolen bike database.

And lest any of you think that bike theft requires a special skill set, dark-of-night stealth, or bike owner/operator error, check out this video from the Neistat Brothers of New York City. Yikes!




For the record, I employ both a two-lock strategy and keep my bike even dirtier than that new york snob (its not that i am competitive - which i am, it is just so much easier to spritz more chain lube onto the drive train than it is clean the dang thing).

Whatever and however you secure your ride, the main thing is that you take the time to do it right. It beats walking.

Thursday, July 31, 2008

END OF MONTH CLOSINGS

As a general rule, more closings happen at the end of any given month that at any other time, and most of those closings would happen on the last day (or perhaps the last Friday).

So it being the end of July and all, I would ordinarily expect to be closing files with completed transactions. I am still closing lots of files this month, only the number of closed files due to mortgage companies (a) denying loan applications or (b) rejecting short sale proposals, is out-running the number of loan funded.

We are still fighting the good fight, but oh my goodness, how things have changed.

Thursday, July 24, 2008

CT ANNOUNCES TITLE INSURANCE FEE INCREASES

Starting August 1st, it is going to be a bit more expensive to buy and sell real estate in the Chicagoland area; title insurance and escrow closing fees are going up.

Chicago Title's new rate structure includes a $50 bump up on all owners title insurance policies (a seller cost) and $50 more for all escrow closings (typically a buyers charge). The charges for "title indemnities" and (Chicago) water department full account payment certifications are also being increased.

I will not be surprised to see similar announcements from other title companies in the not to distant future.

Kudos to CT for kicking up that TI fee, effective August 1, pure nefarious genius there. Property tax bills are supposed to be mailed out on August 1st - payable September 1. When Mortgage Companies expect a tax bill due, they demand that the title insurance company guaranty payment of the taxes. Title company are happy to oblige. They collect money from the buyers who will be responsible to pay the taxes and set up escrow accounts to hold that money until the tax bills are actually issued. And - back to that genius part - the title company charges the buyer a handling fee (a newly increased fee) for the TI. The hapless buyer has no say in the matter. The lender demands it. The buyer pays for it. TIs will be imposed on most transactions until those tax bills are issued and I don't know about any of you, but for myself, just don't see anything out there to suggest that they will come out any time soon.

To be sure, a $50 on either side of the transaction is not going to kill the market or gain much notice in most circles. Yawns no doubt. But, if you place these increases into context by reflecting back on the overall roll-up of closing costs in recent months, you can see that its not just the declining market prices or the tightened lending standards that are depressing the number of contracts closing or the overall malaise in the marketplace.

-> Seller paid City of Chicago transfer tax levied at $3.00 for each $1,000 of the sales price
-> Cook County Recorder's fee increase for mapping and computer document systems
-> Processing fees associated with title company State Predatory Lending Database compliance in all Cook County mortgage transfers
-> City of Chicago Water Department full account payment certification fees increased
-> Cook County Property Tax Homeowners Exemption laws have changed reducing the dampening effects - likely accelerating tax increases
-> City of Chicago's announced increase of the local tax rate.
-> increased premium rates for Mortgage Insurance - when available.

Its not only harder to buy and sell real estate right now; its also costlier.

Tuesday, July 15, 2008

NEW NOTARY LAWS in COOK COUNTY


Stand-by for a neat little change to the Illinois Notary Public Act that will likely impact the way we transact real estate closings here in Cook County. Both houses approved SB 0546 as the recent legislative session ended and we are awaiting the Governor's signature. This change, if implemented will require anyone who is selling residential real estate in Cook County will have to present proof of identity, including a thumb print image.

It will fall to the Notaries who witness closing documents to collect this information. We will be obligated to prepare newly devised
"Notarial Records" that will include the "signor's" personal identity information, the aforementioned thumb print and even a certification that the transfer involved "residential" real property (Looks like all those childhood hours with a Dick Tracy Crimestoppers Club Junior Detective kit did not go to waste... where'd I put that thumb print pad anyway?)

The form itself promises to be a fairly simple, but long form and it will slow things down, in my office or at the title company. Don't be surprised when notaries start charging to cover the new paperwork, we can charge up to $25 per record.

Notaries will have to then forward the Records to either the title insurance company or the County Recorder for 7 years safekeeping. The Recorder will (by this law) charge a $5.00 fee to receive the record. The title companies have not yet announced what fees they will charge fees.

This program should reduce the incidences of fraudulent transfers significantly. Then again, there could also be a surge in (ugh) thumb amputations, we will have to just wait and see.

One curiosity wholly unrelated to the merits of the bill: The Governor has not yet signed it into law, but it takes effect July 1. Go figure.

Monday, July 14, 2008

Getting to the FInish Line - the hard way

Its that time of year when my morning work efficiency and intensity is slightly diminished whilst I watch the flash reports of the daily tour de france bike races on velonews or eurosport. THE most dramatic sporting even of the year (please don't get me started....)

So here is a link to the everyday athlete blog piece on a completely unrelated bike race, the Cascase Cycling Classic and Chris Horner's remarkable Stage Five finish. For those who care about such things, Horner finished 82nd, nine minutes behind winner Moises Aldape, who won the stage. Billy Demond finished with the same time, in 83rd.


(Thank you to friend and chicago cycling club mate Rob Sindelar for the head's up on this one)

Good one Chris!!

Tuesday, July 1, 2008

BOB DYLAN in the SUPREME COURT


The legal (and music) world is abuzz in response to Chief Justice John Roberts citing Bob Dylan in his dissent in Sprint v. APCC Services. From the New York Times:


Four pages into his dissent on Monday in an achingly boring dispute between pay phone companies and long distance carriers, John G. Roberts Jr., the chief justice of the United States, put a song lyric where the citation to precedent usually goes.

"The absence of any right to the substantive recovery means that respondents cannot benefit from the judgment they seek and thus lack Article III standing," Chief Justice Roberts wrote. " 'When you got nothing, you got nothing to lose.' Bob Dylan, Like a Rolling Stone, on Highway 61 Revisited (Columbia Records 1965)."

Alex B. Long, a law professor at the University of Tennessee and perhaps the nation's leading authority on the citation of popular music in judicial opinions, said this was almost certainly the first use of a rock lyric to buttress a legal proposition in a Supreme Court decision. "It's a landmark opinion," Professor Long said.

Rolling Stone named "Like a Rolling Stone" the best song of all time. Roberts, or the clerk who provided the citation, has good taste, but poor attention to detail. A double negative has gone missing; when Dylan sings it, it is "When you ain't got nothing..." Rolling Stone points out that Roberts is the first baby boomer SCOTUS chief. It may be true that we'll see more musical legal citations by those raised on the political music of the 60s.

In the lower courts, according to a study Professor Long published in the Washington & Lee Law Review last year, Mr. Dylan is by far the most cited songwriter. He has been quoted in 26 opinions. Paul Simon is next, with 8 (12 if you count those attributed to Simon & Garfunkel). Bruce Springsteen has 5.

Both Dylan and Springsteen had three songs nominated for ATL's Top Ten Law Songs list, though Dylan was the only one to make the final cut with "Hurricane." Johnny Cash had the most songs nominated. Why aren't the courts showing Cash citation love?

RETURN of the ILLINOIS ANTI-PREDATORY LENDING PROGRAM


Its back!

Today marks the effective date of the new Illinois Anti-Predatory Lending Database Program. From this point forward, title companies must record a certificate of exemption or compliance with all residential mortgages. Here's one over here --->

Got this sucker at a purchase this morning. Gotta figure its one of the first ones to be issued, given that the law went into effect only hours ago. Cost my clients $50 (a title company charge to handle the paperwork) plus an additonal buck to the County Recorder for the additional page to be recorded. Tacked about twenty additional minutes onto the closing, but all in all (so far) not too bad a disruption of the closing process.

Of course, the real test will be when compliance (non-exempt) certifications start making their way through the closing pipeline. This may not begin for another week to 10 days as compliance certifications will only be necessary for certain specified types of mortgage loans applied for on and after July 1.

I understand that the new program requires title companies to undertake a fair amount of data collection and reporting to the State of Illinois. How big is the burden? Title companies are creating and staffing whole new compliance departments and buyers are going start paying roughly $150 per loan to pay for the effort. We'll soon see how much longer closing appointments will be.

Tuesday, June 17, 2008

MORE ON AMERICAN INVSCO CONDO FORECLOSURES

Way back in March, I posted some comments on the foreclosure troubles at the Sterling Private Residences, a near-north high rise apartment building that American Invsco converted to condominiums. Today Crains gives statistics to something I "knew" and reported anectdotably back then: the foreclosure problem extends to many of its other conversion projects as well.

According to the story, eight of American Invsco's downtown towers have accounted for 57.7 percent of all foreclosure cases brought against original buyers in all 76 downtown condo projects of 175 units or more since 2001. (Invsco accounted for 12 percent of the homes sold in big downtown projects over the same period of time.)

Crains picks up on the same issue I did in this Spring (and back when clients were showing me contracts to review):
"Why do American Invsco buildings lead downtown Chicago in foreclosure cases? One explanation may be the role of investors, buyers who intend to flip or rent out their units rather than move in. Though most downtown developers courted investors during the recent condo boom, American Invsco crafted an incentive package with special appeal for investors. Not only did the developer offer to pay condo assessments and property taxes on its units for two or three years, in some cases it promised to pay rent as well, guaranteeing investors a revenue stream to help defray monthly mortgage payments."
the complete & gruesome story here.

Monday, June 16, 2008

NEW ILLINOIS MORTGAGE COUNSELING PROGRAM BECOMES LAW

Ray Cohen of Revere Mortgage sent out the alert this morning.

Starting July 1, every mortgage closed and recorded in Cook County must carry a "certificate of exemption" or a "certificate of compliance" for the State's new mandatory mortgage counseling program. Counseling will be required for

  1. ALL loans where all the borrowers are deemed "first time home buyers" (anyone who has not owned a home in the past three years); and
  2. All refinancers, who are taking a loan that include prepayment penalties, interest only payments, negative amortizations interest rates that adjust in 3 years or less, OR where fees, YSP and points exceed 5%.
Ray goes on to note that jumbo adjustable rate loan for lenders with pre payment penalties are currently 2% cheaper than those without penalties. Thus as a practical matter all Jumbo adjustable buyers will need to submit to this (massive waste of time
and money).

The program will cost $300 and will only be offered between 9:00 a.m. and 5:00 p.m., Monday thru Friday. IN PERSON. Ray goes on to predict that the counselors will be quickly overwhelmed with the volume of borrowers who will "need" this counseling and that delays will be a near certainty. Buyers will need to have all loan documents AND all supporting documents, (i.e. W-2s, paystubs, bank statements, etc.) The counselor will give the buyer a certificate which must be presented at closing.

"After July 1 even an Harvard MBA who runs a hedge fund and are buying
a multimillion dollar house, have to put up with this".

(I think you can tell, Ray thinks this a lousy idea.)

Chris Covalle at Countrywide was kind enough to comment as well.

I believe some of the info you received regarding the bill may be incorrect so wanted to give you this cheat sheet.

Essentially, first time home buyers or clients refinancing their primary residence only have to go to counseling if one of the following conditions from section A & B at the top of page 3 are met. With all the changes to industry guidelines, the only one I see which may pose a counseling session would be interest only. Neg am's are gone/ high cost should be a non issue/ 3 year ARM's and under stink as far as pricing/ pre-payment penalties are scarce.


Any stated income deals are automatic counseling, but again, these are also becoming rare.

The larger issue is the time required to enter all this info into the state database (some 70-80 items of info) and receive your certificate of exemption.


Finally, if someone does trigger one of these criteria, they only have to go to counseling if they are working with an entity which is not federally chartered (i.e. most brokers). Right or wrong, places like C'wide, Chase, etc. will also have a certificate of exemption, regardless of the scenario.

Saturday, June 14, 2008

DO I REALLY NEED A LAWYER FOR MY CLOSING?

Far be it from me to answer that question. Too much self interest to be objective or unbiased. But here is a cautionary tail from Sunny Florida that might (or might not) persuade:

"Bill Prekker has been planning to build his retirement home on land he owns in Cape Coral for the better part of three decades.

Then, he discovered someone else had already built a home on his property, and the 1,900-square-foot residence has been there for 11 years."

Thursday, June 5, 2008

LENDERS BUNGLING THEIR FORECOLOSURES - part 2

The lenders, as a group, seem to be doing a good job at screwing things up even before they get to their orders of foreclosure. They are making it harder and harder for distressed owners to offer compromise or "short sale" proposals. In just the past month, I have seen three contracts canceled in situations where the mortgage holder has taken too long to decide whether to accept a short sale or out-right dis-approved the sale.

Short sales are a necessary and utile solution for owners (and their lenders) where the value of the property is less than the amount owed on the mortgage. The owner, if they can sell for the current market value can get out from under the mortgage obligation without having to resort to foreclosure or bankruptcy and at least minimize the damage caused to their credit ratings. The lender can get back much of the mortgage money lent without having to incur costs of a foreclosure or the time delay involved in a foreclosure.

But the lenders are either unwilling or unable to make timely decisions on short sale requests.
The phenonenon is detailed in a CNN Money article posted last week .

LENDERS BUNGLING THEIR FORECOLOSURES - part 1

Any looking to understand how and why the mortgage companies got themselves into the financial mess they are in will appreciate the experience a client of mine had recently while trying to buy a foreclosure property from the bank.

The property in question was one of three units in a condominium building. For whatever reason, all three units are now owned by the three banks that foreclosed on the three mortgages used by the three original unit owners.

Each bank undoubtedly made their borrowers covenant to maintain insurance on the condominium common elements. After all, if the building were to burn down, the lender would want to either see it rebuilt or to apply the insurance proceeds towards the loan repayments. Each of those banks also insisted that, in the event of an insurance policy lapse or cancellation, they would have the right to purchase insurance - at their borrowers expense - to prevent such losses. Standard procedure there. No surprises.

BUT, now that the banks took control of the three condo units, guess what? Each stopped paying the monthly assessments. There is no condo association. That "master" insurance policy on the building? Long since lapsed. They are all uninsured!

Worse yet, no one who wants to purchase any of those units (and use a mortgage loan to do so) can buy one until insurance is in place! Or until an association exists, in order to get necessary lien waivers from the association.

We spotted this problem early and canceled the contract.

The only buyers who will likely be able to purchase any of these units are going to be cash buyers who are willing to also buy insurance for the whole building, or speculators who are able to buy all three units in order to re-establish the condo association.

How many buyers can possibly qualify to do this? who knows. until then, this property will sit idle and empty.

Friday, May 30, 2008

CONSUMER "CONFUSION" LEADS TO HIGHER LOAN CLOSING COSTS

Yesterday, the United States Department of Housing and Urban Development released a study conducted by the Urban Institute that suggests that "[m]any American consumers overpay by thousands of dollars in total closing costs when they purchase their homes. There are significant and unsupported variations in loan charges, title fees and other closing costs charged to unsuspecting (most typically minority) home buyers.

The study found significant disparities in closing costs even when it compared borrowers with identical credit scores, loan terms and mortgage amounts. Variations appeared to be based on education level, geography, race and ethnicity.


Of course, in an information-era, free market system this shouldn't happen. HUD mandates that all mortgage loan applicants receive two critical documents: a "Good Faith Estimate of Closing Costs" and a "Truth in Lending Disclosure Statement" (the "TIL") that should enable consumers to compare the costs of any given loan program to any other, by showing (a) projected closing costs and (b) the APR, which in turn can demonstrate the impact those closing costs have on a loans "effective" interest rate.

This information is critically important to a consumer trying to choose a given lender or loan program, but I fear that most people have no idea what the TIL means. At closings, I am prone to mis-identify it as the "Confusion in Lending Disclosure." Frankly and without only a few exceptions, the only clients who grasp its meaning before we review it are bankers, financial analysts, and the occasional accountant.

For what its worth, HUD recently proposed a revised format for the good faith estimate. At first blush, it looks pretty cool, but go on and take a look at it. Let me know if you think it makes things clearer or murkier. I just have my doubts that most people will read through to the end...

Some of the key / startling statistics (and my snide observations):
  • Total loan fees can vary by thousands of dollars from borrower to borrower even for the same loan amount. (Yes, unscrupulous loan officers will charge what they can get away with. High quality loan officers just do not do this, but the key is in finding an honest broker)
  • Loan charges and title fees vary considerably from state to state even for similar loans. Even in the same state, disparities in title costs among identical borrowers can be more than $1,000.(Strict office policy in my practice to guard against title company "mark ups" - another reason why I cannot conceive of going to closing without an attorney)
  • On average, borrowers see no reduction in out-of-pocket fees when they agree to higher interest rates. Ideally, consumers ought to receive a dollar-for-dollar credit for paying a so-called "yield spread premium" that results from agreeing to a higher interest rate loan. In fact, many borrowers see no reduction at all and even pay more in total loan fees. (Yikes!)
  • African-American families pay an average of $415 more in total loan origination fees than non-minorities.
  • Hispanic borrowers pay an average of $365 more in total loan origination fees than non-minorities.
  • Consumers obtaining loans for which comparison shopping is easiest, so called "no-cost loans," enjoyed an average cost savings of $1,200 (it just does not really matter to most people what any closing cost is called - its easier to compare competing loans by "bottom lining" those lender-charged closing costs, anyway.
  • On average, borrowers who completed college are charged $1100 less than borrowers who did not go to college at all, other things equal. (thanks for pushing me, mom & dad)

Thursday, May 15, 2008

FBI: ILLINOIS IN THE TOP TEN STATES FOR MORTGAGE FRAUD (again)

The FBI has released its "2007 Mortgage Fraud Report." Its a fascinating study and quick read. It covers all the basic types of mortgage scams and cites statistics from several different sources. An excellent overview of the scope and magnitude of the problem, including a particularly fascinating description of "short sale" and "mortgage rescue" scams that are particularly popular in the current market climate.

Illinois (again), makes it into the national top ten for states most effected by such criminal activity.

Friday, May 9, 2008

CHICAGO TRANSFER TAX takes ANOTHER BITE OUT OF BUYERS

Nothing should be simpler than a real estate closing. The buyer shows up with money. The Seller has a deed and some keys. They shake hands and trade. Nice.

Turns out (over and over) that in the Venn Diagram of life, "simple" and "closing" seldom intersect. We learned of yet closing-related complication this week, courtesy of our friends at the City of Chicago, Department of Revenue. The Department is charged with "maximizing revenue collections to support the City's "vital" infrastructure.

One way they are doing this is by scrutinizing tax declarations filed with the County Recorder, every time a deed or other document is recorded of record. The Department is, apparently, checking the transfer tax declarations to see when they are dated and then comparing them to the dates when the transfer tax stamps are actually purchased.... and they going after purchaser's who may not being paying the tax in a "timely" fashion.

For better or for worse, Investigations have long focused attention on certain FHA related foreclosures that buyers (erroneously) thought were exempt from the City real property transfer taxes, and divorced couples, where one spouse "got the house." In the later scenario, the City asserts that the home "winner" must pay tax on the value of the share transferred). Lovely letters from the City. They demand the tax and, of course, late fees and penalties. Threats of lawsuits, that sort of thing.

The timing issues is a new aspect of the heightened scrutiny (at least new to me). Transfer taxes are due is due upon the earlier of (a) the delivery of a deed or (b) its recording, (see section 3-
33-030) and is payable through the purchase of stamps. (Never-mind the logical incongruity of a deed being recorded before it is delivered to the buyer).

In NEARLY EVERY transaction I work on, a title company acts as the closing escrow agent, they receive and disburse all the funds and the deed for recording, once it is delivered by seller to buyer. If the City does not get paid at the time of the closing, the tax is (they say) has been paid late.

Here's the example given to me today: The buyer and seller transact the sale of a Chicago property from New York. The deed and related closing documents are sent to the title company, who then records the deed 4 days later. Too late Mr. Buyer, sir. You did not pay the tax at the time of the transfer. Penalty, please too. Too bad Mr. Title Company who assured the buyer that the tax obligation had been satisfied: a $125,000 claim on the title policy!

This shouldn't be a problem for most of my clients; we close Chicago properties at reputable title companies that have facility to purchase tax stamps on the actual date of closing. On the other hand, this all came to my attention today when an underwriter from one of those reputable institutions asked my buyer to acknowledge potential liability for late fees that could result from a delayed (dry) closing today.

Wonder what is going to happen for Chicago closings at smaller title companies or in the outlying offices. There are either going to be a lot of disgruntled buyers or title claims.... or both.

Thoughts anyone?

Tuesday, May 6, 2008

NEW CAR CONTRACT FORMS now online!

Our good friends at the Chicago Association of Realtors have published new stock contracts for local real estate transactions. It had been about five years since the last set of revisions. At first blush, it seems like some good work.

Then again, one of the occupational hazards of being a lawyer is the compulsive need to read all the fine print and I'm still reviewing mine to decide how happy (disgruntled) There is at least one silly gaffe on the condo contract -> sellers are supposed to purchase surveys for their buyers? Fat chance that. But until my colleagues pick up on that one or the board revises the revision, I am looking forward to poking some seller lawyers in the sides when they show up at closing without....

Thursday, May 1, 2008

MORTGAGE FRAUD & MONEY LAUNDERING


I help a lot of buyers slog through stacks and stacks of mortgage loan documents at closings. Anyone who has sat through a closing with me has heard "the routine" my explanation of the various disclosures and certifications that lenders subject their customers to.

Buyers produce photo ID to the closer. A whole lot of trees give there lives to help the lenders and title companies verify borrower identities and to warn borrowers of the penalties for mortgage fraud. Multiple promises that the borrowers have told the truth. Affidavits attesting that the Buyer is using his/her true signature. Stern warnings that the lender is going to comply with the Patriot Act. Even the scary FBI notice over on the margin here. Cynical me. I tend to poke fun at a lot of these documents, and all the redundancies, and the silliness attendant to them.

Turns out, I may be wrong for making light of these issues. Inman news reports today that:

About one in five suspicious activity reports banks file with federal regulators over concerns about a residential real estate transaction show signs of money laundering or tax evasion, according to a new Treasury Department report.

The report found evidence of money laundering or "structuring" -- transactions involving incomplete or falsified records -- in 20 percent of suspicious activity reports involving residential real estate transactions between 1996 and 2006.

The Treasury Department's Financial Crimes Enforcement Network also detected a steep increase in the incidence of filings that might involve money laundering after 2004, to more than 50 percent.

The most interesting point in the article? Speculation that money laundering in residential real estate is probably an even bigger problem than as reported; Banks don't file complaints when the loans are being repaid - and most laundering operations use the laundered money to pay the loans.

The complete Financial Crimes Enforcement Network report, dated April, 2008 is available here


No closings for me until tomorrow morning. I'll still probably crack wise about the anti-terrorist and anti-fraud disclosures, but I'll probably have an eye on buyer too - just in case.

PLM Title Shuttered

Title insurance is a critically important part of any real estate transaction; or at least it should be. The title company guaranties the "quality" of an owners interest in the property - that there aren't any (unknown) liens or defects. No buyer that I work for will purchase a property without it.

Title insurance is only as good as the insurer. We want to know that the insurance company, like the Rock of Gibraltar, will always be there. We want to sleep easy at night, knowing that the client is protected.

That said, it was a bit distressing to see that PLM Title Company shut its doors, without any forewarning last week. Worse still, this morning's news is that there is a criminal investigation underway - and that we do not yet know why. Old timers like me shudder with memories of the great Intercounty Title debacle five years ago. Here's to hoping that this one is nothing like that one.

Set aside the problems involved trying to make a claim against a defunct title company. What about the banks and buyers (and sellers) that had money being held in escrow by that title company? Or had deeds and mortgages waiting to be recorded with local county recorders offices? Or who had escrow closings scheduled there to consummate their transactions? Big mess

Any good news in this for my clients? I suppose the "good news" is that, (a) I have had only two buyers in the last five years purchase title insurance from PLM; (b) their insurance was underwritten by Guaranty Title & Trust Company, still a viable and presumably well capitalized company, and (c) three years ago, I instituted an office policy that we will only accept title insurance from a short list of the strongest title companies, in order to problems of the sort presented when "the Rock" crumbles.

UPDATED: Nov. 20, 2008: I erroneously identified PLM's underwriter as Guaranty National when this message as originally posted. The correct entity, Guaranty Title & Trust Company was liquidated on October 27, 2008 by Ohio state regulators. All insurance policies, commitments and certificates of insurance issued by GTT, are cancelled, effective November 26, 2008. Inquiries regarding the GTT liquidation and requests for Proofs of Claim forms should be directed to: The Office of the Ohio Insurance Liquidator, Attn: GTT, 50 W. Town Street, Third Floor, Suite 350, Columbus, OH 43215. The telephone for that office is (614) 487-9200.

PLM's other underwriter Pacific Northwest Title Insurance, remains a viable entity.

Tuesday, April 22, 2008

March Home Sales Report - Now What?



The Illinois Association of Realtors released data today on the number of existing home sales for March, 2008. To me, there are two ways of looking at the this data. One - the cup half full. or, as Woody Allen said in the movie Scoop - a cup also half full; with poison.

In Chicago, median prices on homes sold
(single family and condominiums) increased 5.3% comparing March 2008 to March 2007. But then again, only 2,045 homes sold, 11.5% fewer than last year.


For the larger, Metropolitan Statistical Area (Cook and surrounding counties), there were 5,753 total sales in March, 2008, up 33.5% from February. But then again, that March number is down 29.0% from last year.

There is a small part of me that wonders how much of the statistical bump-up from February to March can be attributed to those Chicago home buyers and sellers who wanted to "beat" the City's transfer tax increase, versus a typical Spring market effect versus overall economic recovery (or malaise). Probably won't know that answer until next months data is released. But these numbers certainly illustrate something we all know already, far to clearly. for the time being, there are simply fewer deals being made right now compared to last year.

Fortunately, the vacuum created by the declining number of transactions is being filled with what I like to call the increasing "drama to contract" ratio in the remaining deals. But that is another story for another day.


Wednesday, April 16, 2008

Let's Roll

Its sunny and near 70 degrees. Time to get out of the office and go for a ride. But first, a word (or two) from our (new) good friends at Transport for London.

Bike safety!



video



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Monday, April 14, 2008

UPDATE: Mortgage Appraisers Regain some Indenpendence from the Mortgage Brokers that hire them

Back in February, I posted about an IRELA conference I attended in which two mortgage appraisers described the current market conditions from their vantage. They both expressed concern that Mortgage Brokers were demanding that appraisers find the "right" value for properties in order to get mortgage loans approved, and were threatening to stop doing business with those appraisers who would not "play ball"

On March 3, 2008, Fannie May, Freddie Mac, the NY Attorney General and the Office of Federal Housing Enterprise Oversight reached agreement to address this problem. Effective January 1, 2009, mortgage brokers will no longer be able to order "Made as Instructed" appraisals (requests for appraisals that contain instructions for a report to match the purchase price, or that have real or implied th
reats that continued business orders will only be made if the appraiser establishes a property's value "as instructed."

After December 31, only specially trained broker employees will be allowed to order appraisers and brokers will be prohibited from exerting any type of pressure on appraisers to influence their findings.

Saturday, April 12, 2008

Slow Real Estate Market? Blame your Real Estate Agent - Part II

Back in January, I wrote about the disgruntled home buyer who sued her real estate agent for not telling her that other properties in the neighborhood sold for less than the one she bought. That case went to a jury trial. As reported this week by Stefan Swanepoel over at RealBlogging, took the jury only two hours to decide that the Buyer was just plain wrong.