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from Local Attorney, Michael H. Wasserman

Thursday, December 27, 2012

CHANGES COMING AT THE CITY OF CHICAGO WATER DEPARTMENT?

Changes afoot at the City of Chicago, Department of Water Management may be having (adverse) impacts on real estate closings.  Over the course of the last several weeks, I have seen an uptick in closings being delayed as some Sellers are finding it harder to some required paperwork from the City. One source described a six week backlog for some certification requests. At least two contracts have been outright cancelled because of the delays. Buyers simply could not, or would not wait any longer.

In order to close on home purchase or sale involving Chicago real estate, the Sellers must present a "Full Payment Certification" to show that the water bill is current. These certificates are typically obtained directly from the water department's basement lair at the DePaul Center, 333 South State Street. If you have never been there, the offices are uninviting, inhospitable, and doing business there has long been (for my, anyway) unpleasant. Slow and unfriendly to say the least. Things as 333 South State seem to be going even slower than usual. I think we finally know why.

Last month, the City sent pink slips to 34 workers in the water department billing center. They lay-offs all go into effect on January 4. At the same time, the City has out-sourced the billing center work to NTT Data, a Japanese corporation. The City expects to save $100,000 annually with this privatization move.

Ben Joravsky at the Chicago Reader has written about this story here and here. Otherwise, I have not seen any other media coverage of the move. Joravsky focuses his inquiry on the loss of full time jobs for City residents, being replaced by employees who will (apparently) receive lower part time wages, taking jobs with no benefits. You can & probably should read his stories to learn more.

What does this mean for buyers and sellers going forward? It will be hard to say until we see how NTT and the City handle the transition to privatized water department billing. Hopefully, things will go smoothly and NTT will hire enough workers to clear up the backlog of pending certification requests.


Certain select title companies and clerking services have direct on-line access to the water department and can generate the paperwork directly, without requiring a trip to DePaul Center. Smart sellers should insist that their attorneys work with such title companies & clerking services. Best that they also make application earlier, rather than later in the process. Buyers should be a bit more pro-active too, to try to encourage their sellers' attorneys to do so to, and to try to sport potential delays early in the closing process.


Sunday, December 9, 2012

Re-Habber's REJOICE: FHA Extends "Anti-Flipping" Waiver

by: Michael Wasserman

Good news for anyone interested in buying & flipping single family homes. The FHA has extended it's "90 day anti-flipping" waiver for another two years. The extension leaves open some great money-making opportunities for individuals and enterprises interested in real estate transaction. It should also be a benefit to communities burdened by vacant/run down/abandoned housing stock. (Not bad for those of us who facilitate home purchases and sales either).  In this context, "flips"  are two-step real estate deals where a distressed home is purchased cheap, fixed-up quickly and then resold at a profit. The art of the deal involves finding the right homes at the right price, making the right repairs, and then reselling as quickly as possibly to minimize the "carrying costs" associated with owning the property. 

THE PROBLEM WITH FLIPS:


Historically, flipping can be a very profitable enterprise. Unfortunately, many such profiteers made their money by committing mortgage fraud. Unscrupulous sellers could (and did) inflate prices on homes by single or multiple sales & resales, typically having done little or no rehab work at all. Unsuspecting buyers paid higher prices and mortgage lenders made loans for amounts far in excess of actual (fair) property values. 

As Ken Harvey from Inman News summed up:
Those flips frequently involved collusion and fraud by teams of mortgage loan officers, realty agents and appraisers -- even straw buyers who defaulted and disappeared without making a single payment -- and racked up significant losses to FHA's insurance fund. Neighborhoods suffered because the properties remained empty and in bad physical condition, depressing values of houses in the immediate vicinity. 

Thursday, December 6, 2012

Closing Cost Increase Alert - Zoning Certifications

by: Michael Wasserman

The City of Chicago Department of Buildings has quietly announced a January 1st increase in the cost of a Zoning Certificate of Compliance. In the new year, the fee will rise from $90 to $120.

The certificate is required at the time of closing for all single family homes and multi-unit buildings with up to five residential dwellings. It does not apply to the transfer or sale of condominiums or cooperative buildings.

Chicago Zoning Certificate
A Seller applies for the certificate at the Building Department's City Hall offices (room 905), stating the number of residential units Seller believes exist at the property location. The Building Department either "agrees" with the Seller's representation and certifies, or denies certification as it believes another number may exist. The purpose here is to prevent buyers from acquiring property with illegal dwelling units. The process notifies both the seller and the buyer as to how many lawful units exist on site.

On the up side, the last time the City bumped the fee up, it went up 80% (from $50 to $90). This time it is a "mere" a 33% increase.

Tuesday, December 4, 2012

Fannie & Freddie to Halt Foreclosures over the Holidays

by: Michael Wasserman

The Federal Home Loan Mortgage Association and Federal Home Loan Mortgage Corporation have both announced that they will halt mortgage proceedings during the holidays. 

While this will not suspend pre-foreclosure collection or loss mitigation activity, at least delinquent home owners can have some peace of mind knowing that they will not likely loose their homes altogether, or be evicted before years's end. 

JP Morgan Chase & Citibank are expected to also announce a Holiday moritorium. Bank of America recently also made a similar announcement. 

Fannie and Freddie halt foreclosures for the holidays

This is somewhat comforting news coming out, considering that the New York Times is reporting today that the fastest growing demographic for foreclosure/delinquency activity is widows 50 years old and older, who's late husbands held home mortgages in their names alone.  

UPDATE:

Following suit, US Bancorp, PNC Financial, SunTrust, Wells Fargo & Bank of America have all also announced their annual holiday suspensions foreclosure activity.