Chicago's expensive "Gold Coast" overlooks Lake Michigan and Oak Street Beach

Conventional Loan Limits Set Low in Illinois

Did you know that there are 250 zip codes across the country that have higher conventional loan limits than those in Illinois? These loans are given out through local banks and then packaged up and sold to the secondary market. Conventional Loans are backed in the secondary market by Freddie Mac and Fannie Mae and are not jumbo loans. In Illinois, conventional loans are available for less than $417,000. Within this price range, the loan requirements stipulate less money down and a lower interest rates for buyers. A jumbo loan would be for any amount over $417,000 that would require a high down payment and higher interest rate for the buyer.

North Shore Homes Dominate Expensive Illinois Zip Codes

In the State of Illinois, there are eight zip codes that Forbes includes in its list of the 500 most expensive zip codes list. Four of these eight areas (#62 Kenilworth 60043, #149 Winnetka 60093, #201 Lake Forest 60045, and #210 Glencoe 60022) are in their top 250. In comparison, Kentucky has just one zip code with a conventional loan amount of $729,000? But why have Chicago neighborhoods been left out of this particular ranking? According to the Chicago Association of Realtors, the average sales price of a single family home in 2008 in the Lincoln Park neighborhood (60614) was $1,763,826. In the historic Gold Coast neighborhood (60610), the average price was $3,071,473. Across the city, the median home prices are hovering around $500,000, well above the conventional loan standard of $417,000.

Boost Conventional Loan Limits and Spur the Housing Market

We can help spur the economy here in Chicago if conventional loan limits were increased.  By raising them, buyers in the market just above $417,000 would need less money down and benefit from the record low interest rates. More property would change hands, demand for home improvement projects would jump, transfer tax stamps would be added to city coffers, and more jobs would be created by this increase in selling and buying.   Increasing the loan limit means creating jobs and repairing the broken economy.

At the ground level, we need to educate and organize local Realtors and especially their clients on this issue. There seems to be a disconnect between the Realtor and individual buyer who may not know how current regulation are affecting their purchasing power. Realtors should inform perspective buyers, especially those looking to buy up, to lobby government officials, regulatory bodies, and private real estate associations to change the current limits. Part of this can be accomplished by directing buyers to local, state, and national Realtor Associations to voice their concerns and lend their support to lobbying efforts. At a national level, buyers and Realtors working together should also contact their House and Senate members to amend current regulations so that people living in Chicago or the North Shore may have a more level playing field with states and metropolitan areas that have higher conventional loan limits.

We would like to thank Serge Melki for sharing today?s photo via the Creative Commons License.

The Old Post Office was used extensively in the last Batman movie

The Postal Service has decided to auction off the site of the old post office at 433 W Van Buren. Built in 1932, this building straddles the Eisenhower Expressway and is on the National Register of Historic Places. It was the largest postal facility in the US, but was vacated in 1995 when the USPS moved this facility to a nearby location on Harrison St. This structure is 14 stories tall and over 2.5 million square feet.

Since 1999, The USPS has attempted to sell the old post office to Walton St. Partners. Walton St. has developed a $300 million plan for the building which would include a hotel, office space, condominiums, and a park. They have spend a great deal of time to obtain plans, rezoning, public subsidy, and financing. Due to the current market, financing this endeavor has been a challenge. The USPS has a budget deficit and is paying several million each year to maintain this empty building. They are no longer willing to wait for Walton St. to finalize their plans.

2.5 Million Sq. Ft. in Downtown Chicago for the Price of a Condo?

When a property is unique and difficult to price, an auction is often the best way to receive the best price in the shortest amount of time. The Postal Service has hired Rick Levin & Associates to conduct an open auction for this site on August 27. The suggested opening bid is $300,000 and the building must be sold.

We’d like to thank FHKE for sharing today’s photo via the Creative Commons License.

Lake Shore Drive Is Home to Many of Chicago's Co-ops

There aren’t many co-ops in Chicago, but occasionally one comes up in an MLS search and my buyers always ask about them. I know of several along Lake Shore Dr and in Hyde Park, one in Ravenswood, and a few in Rogers Park.

Until the most recent condo boom, co-ops were the most prevalent form of ownership in Manhattan, but now the condo buildings have taken over a large part of the New York real estate market. The history of co-ops in New York was well documented in Michael Gross’ book 740 Park: The Story of the World’s Richest Apartment Building.

Why Do Buildings Set Up as a Co-op?

Each co-op building has its own individual history, but many were originally apartment buildings. At some point when a landlord wanted to sell a building, the tenants would buy the building as a cooperative group (and often at a discounted price) in order to avoid being forced out by a new owner who may raise the rent, convert to condominiums, or tear down the structure.

Another reason why co-ops were formed was in order to have more control over who your neighbors are. At one time, co-op boards used their power to reject prospective owners based on race or social status. Today, co-op boards can reject a prospective owner as long as they do not discriminate based on age, sex, race, or marital status.

In a Co-op You Own Stock

Co-op’s are a different form of ownership than condos in several ways. Condo owners own their individual unit and have a percentage share of ownership in the building’s common areas based on the size of their unit. When you buy in a co-op, you are buying shares of stock of a corporation that owns the entire building. The number of shares you own is based on the size of your unit. When you own a condo, you pay taxes on your individual unit. A co-op has one tax bill for the entire building that is paid as a group and is typically included in your monthly assessments.

Co-ops Have Different Rules

Every communal living has rules and regulations. Many condominium buildings and cooperative buildings have similar rules. However, it’s not uncommon for a co-op to have more rules than a condo. A buyer with an accepted offer will need to meet with the co-op board before they close, and the board has a right to refuse to sell them stock in the company that owns the building. Another rule that makes co-ops unique is that they are typically 100% owner occupied. That means that if your situation changes, you can’t rent your home out.
Co-ops generally have a lower purchase price and much higher assessments. The assessments include much more (for example, taxes, etc). Many co-ops require a higher down payment than condominium loans because you are receiving a different type of loan that only certain banks can provide. Many co-op boards require a higher down payment than what the bank requires because they want to ensure that their owners are financially capable of this purchase.

Co-ops can often be found at a good price, and with that good price comes community. There is pride in co-op owners, and many residents occupy their units for longer than the average condo owner.

Whether you are buying a condo or a co-op, be sure to learn the specific rules and regulations for the building you are interested in.

We would like to thank John Beagle for kindly sharing today’s photo via the Creative Common’s License.

Seldom Is Anyone Happy About a Short Sale

The state of the current real estate market has made short sales more prevalent than ever before. When I started selling real estate five years ago, I rarely encountered a short sale. This past Sunday while out with buyers, two of the seven homes we previewed were short sales. Having just finalized a short sale as the listing agent, I must say that the listing agent must be in constant communication with the bank, as well as the buyer’s agent and the seller’s attorney.  Short sales take more time and effort than a regular sale, but good communication skills from the listing agent will facilitate a smoother and possibly faster transaction.

What Is a Short Sale?

A short sale is when the property’s value is less than what the owner owes their lender. Although many homes are currently down in value, a short sale may only occur when the owner can prove some kind of extenuating circumstance that has negatively affected their financial situation. A short sale may help homeowners avoid further collection activity or foreclosure.

When analyzing short sale eligibility, the value of the property, the cost of foreclosure, and the owner’s financial condition are taken into account by the lender. Sellers must submit a hardship letter explaining why they can no longer afford the property, along with bank statements, and a financial worksheet noting all income and expenses.

Should I Buy a Short Sale Property?

If you are considering buying a short sale property, there are several things you should consider. There is a notion that you can get a great deal on the price. In many cases you can pay less than market value, but short sales require a tremendous amount of patience from all parties involved in the transaction. A seller can accept your offer, but their lender must approve the sales price. Lender approval requires having the property appraised, and the entire process can take any where from several weeks to several months. If your lease is up in a month, I do not recommend attempting to purchase a short sale property. The buyer has no say in when the closing will occur. The property will close once the lender approves the sale. Wells Fargo Home Mortgage estimates that the total short sale process takes approximately 37 business days. Typically, short sale approval is good for 30 days. If the closing fails to take place within the given time frame, the entire process may need to start over.

What Does The Buyers’ Agent Have to Do?

When representing a short sale buyer, a Realtor must be patient but diligent.  Providing the listing agent with as much information as possible at the time of the offer is essential.  Be sure to include a pre-approval from the buyers’ lender for this specific address or proof of funds if it is a cash offer.  Any time there is information missing from the package to be sent to the bank, days could be added to the transaction’s timeline.  A listing agent should be in touch at least once a week with an update.  I don’t recommend calling them every day to obtain information, because they are just as anxious to hear from the bank as you are.  If you are representing a buyer and there are multiple offers on the property, I advise you to treat it like any other multiple offer situation.  Provide the listing agent with the buyers’ highest and best offer.  There may not be an opportunity to counteroffer, so go in strong at the beginning.

I’ve heard agents worry that in a short sale they would not receive their commission.  This is not typically the case.  Banks do place a cap on the amount they will pay out to for Realtor and attorney fees, but the bank is not looking to rob you of your commission.  There is a net proceed amount that the bank must receive in order to approve the transaction.  If the commissions, tax prorations, title fees, transfer taxes, and any other fees add up to more than the amount that the bank will approve, the Realtor commissions and attorney fees may be reduced in order to ensure that the property closes.  If the sales price covers the spread between what the bank receives and all of the additional fees, your commission will be what was represented in the MLS.

Find an Experienced Team

Whether you are selling a home and short sale is your only option, or you are considering buying a short sale property, I highly recommend surrounding yourself with an experienced team. A real estate agent and real estate attorney who have short-sale experience will not only make the entire transaction easier, but it will also increase your chances of closing the sale.