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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.