WBEZ | housing market http://www.wbez.org/tags/housing-market Latest from WBEZ Chicago Public Radio en Morning Shift: Rental competition heats up in some of Chicago's emerging neighborhoods http://www.wbez.org/programs/morning-shift-tony-sarabia/2014-07-29/morning-shift-rental-competition-heats-some-chicagos <img typeof="foaf:Image" src="http://llnw.wbez.org/main-images/discosour.jpg" alt="" /><p><p>We talk about the USDA&#39;s push for healthier school options. And, we look at the growing competitive rental market in Chicago. And, how climate change impacts the cultural identify of some Indian Americans. Plus, sounds of traditional Son Joracho music.</p><div class="storify"><iframe allowtransparency="true" frameborder="no" height="750" src="//storify.com/WBEZ/morning-shift-rental-wars-in-some-of-chicago-s-pri/embed?header=false&amp;border=false" width="100%"></iframe><script src="//storify.com/WBEZ/morning-shift-rental-wars-in-some-of-chicago-s-pri.js?header=false&border=false"></script><noscript>[<a href="//storify.com/WBEZ/morning-shift-rental-wars-in-some-of-chicago-s-pri" target="_blank">View the story "Morning Shift: Rental competition heats up in some of Chicago's emerging neighborhoods" on Storify</a>]</noscript></div></p> Tue, 29 Jul 2014 08:27:00 -0500 http://www.wbez.org/programs/morning-shift-tony-sarabia/2014-07-29/morning-shift-rental-competition-heats-some-chicagos Venture: Flipping houses in a post-bubble world http://www.wbez.org/story/venture-flipping-houses-post-bubble-world-94309 <img typeof="foaf:Image" src="http://llnw.wbez.org/story/photo/2011-November/2011-11-29/susie&#039;s house_demien.jpg" alt="" /><p><p>The real estate market is moribund. Prices have plummeted. So who knew that people were still making big bucks from flipping properties?</p><p>Turns out, speculators have found new ways to profit amid the wreckage of the housing boom. And some real estate agents are navigating this post-bubble world for large profits - in some cases, at the expense of taxpayers and end buyers.</p><p>We stumbled into this world of post-bubble flipping by accident. <a href="http://www.wbez.org/story/venture-buyers-market-buyer-friendly-89183">WBEZ’s Susie An reported in July</a> on her own experience as a first-time homebuyer purchasing a house. She found herself as the buyer on the tail end of one of these flips.</p><p>In March, An and her husband saw a 100-year-old, Victorian-style house in Chicago’s Avondale neighborhood and right away realized it was a lot better than anything else they’d seen.</p><p>“When we walked in, I think both my husband and I just had that feeling, that tingle inside that yes, we could live here,” An said.</p><p>The house was listed for $240,000, but they put in an offer of $250,000. An says it was listed as a pre-foreclosure. Their real estate agent told them that meant it was a short sale.</p><p>A short sale occurs when the value of a home has dropped below the value of the mortgage, and the bank that holds the mortgage agrees to take a loss and let the property be sold.</p><p>Almost a quarter of U.S. homeowners are underwater, and that has led to a wave of short sales – the housing data firm CoreLogic says the number of short sales has tripled in the last two years.</p><p>After they put in their offer, An says she and her husband didn’t hear anything for a month. They started looking at other places, but then they heard back from their real estate agent saying that now an investor was buying the property, and the investor wanted to quickly resell it.</p><p>An says they were told if they were still interested, that they should put in their best and highest offer and to do so quickly, because there was competition for the property and the investor wanted to get it done fast.</p><p>“A lot of rushing, a lot of rushing, and so we went with $285,000,” An said.</p><p>Their offer was accepted. But An still didn’t know what the investor had paid for the property – it hadn’t yet been posted on the Cook County Recorder of Deeds web site.</p><p>When she and her husband got to the closing table in late June, they found out in passing from their attorney that the investor had purchased the house for $160,000 in cash. She says at first she didn’t trust her ears – she had the lawyer repeat it and she wrote the amount down.</p><p>“We were shocked,” An said.</p><p><strong>Housing flips redux</strong></p><p>Why would the bank have accepted an offer that was $90,000 less than her and her husband’s offer of $250,000, even if the lower offer was in cash? Granted, real estate agents say that cash deals are often preferred these days because they can be closed quickly. But still, An says that didn’t seem to justify accepting $90,000 less.</p><p>And here’s another puzzle – An discovered that the investor she bought the house from, Marcie Schmidt, is a Realtor who works for Exit Strategy Realty, the company that had listed the house.</p><p>That raised all sorts of questions.</p><p>Because the Realtor and investor work in the same office, it seems like they can get first crack at these properties. And then the other question is: Who is the Realtor really working for if the investor is a coworker? Is the Realtor trying to get the best deal for the homeowner or the investor?&nbsp;</p><p>Their interests may not be aligned. But state regulators say there’s nothing that bars Realtors from acting as investors.</p><p>After An’s story ran, we got comments from listeners saying the circumstances sounded fishy. We decided it merited a follow-up story. But we emphasize that we didn’t choose to continue the story out of any desire to settle a personal gripe of An’s on the air. We felt that it was newsworthy and wanted to understand how these transactions work.&nbsp;</p><p><strong>The mystery deepens</strong></p><p>And we soon learned that this wasn’t an isolated transaction. CoreLogic tracks ‘suspicious’ short sales, which it defines as short sales that may have caused unnecessary losses to the lender, because the properties were resold quickly for profit, without allowing enough time to do much rehab to justify a higher price. CoreLogic forecasts that ‘suspicious’ short sales may cost banks as much as $375 million this year.</p><p>“There have been a couple of industry surveys of fraud, trying to identify fraud in short sales, and this practice of flipping houses is the practice identified as being most harmful to banks and to the ultimate investors in mortgage loans,” said Diane Thompson, an attorney with the National Consumer Law Center.</p><p>I contacted Schmidt as well as the Realtor who listed the property. Neither of them responded to my emails or phone calls. I also contacted the original homeowner, who declined to comment.</p><p>I called Citibank, which held the original $370,000 mortgage on the property, to ask why the bank would accept a much lower cash offer than a financed offer.</p><p>The spokesman, Mark Rodgers, told me that the bank wasn’t aware of a higher offer and their policy is not to accept a cash offer instead of a higher financed offer. So that deepened the mystery – why was the bank not told of An’s offer?</p><p>While trying to understand these transactions, I discovered someone else with Exit Strategy Realty who has done quite a few more of these deals.</p><p>His name is Mike Cuevas, and he calls himself the <a href="http://www.superagentsummit.com/">“top short sale agent in the U.S.”</a> He’s a young guy – around 30 – who says he decided early on in the housing crisis to concentrate on short sales. Now he offers training workshops to Realtors all over the country on how to do short sales.</p><p>Cuevas presents himself as a white knight, helping people avoid foreclosure by doing short sales. Short sales are less damaging to people’s credit than foreclosures. He says in his online bio that he’s closed almost 1,000 short sales.</p><p><img alt="" class="caption" src="http://llnw.wbez.org/story/insert-image/2011-November/2011-11-22/10 E Ontario pic 1 smaller.jpg" style="width: 335px; height: 445px; margin: 8px; float: right;" title="Mike Cuevas bought and quickly resold two condos in this building at 10 E. Ontario for a total gross profit of $92,500 (WBEZ/Ashley Gross)">“You know how many people send us cookies, hugs, cupcakes? People call us crying,” Cuevas said in an interview. “People say you saved my financial future and my kids are now going to be able to go to college because I can now get the credit to give them a student loan.”</p><p>What Cuevas doesn’t talk much about in any of his webinars I watched is his own role as an investor buying and quickly reselling short sales.</p><p>According to records on the Cook County Recorder of Deeds web site, Cuevas has bought and quickly resold at least 13 short sales, for combined gross profits of more than $800,000. He didn’t hold them very long. In many cases, the short sale and the subsequent sale were recorded on the same day on the Recorder of Deeds web site.</p><p>For example, he purchased a condo at 10 E. Ontario St. in downtown Chicago for $118,500 and then resold it for $185,000. Both transactions were recorded on the same day – Nov. 8, 2010.</p><p>He bought a home in north suburban Park Ridge, Ill., for $466,000 and then resold it for $543,000. Both transactions were recorded on Aug. 17, 2010.</p><p>Maybe about now you’re saying, so what? So he profited from real estate – isn’t that what investors try to do? That’s what Cuevas says.</p><p>“That’s what capitalism is,” Cuevas said. “That’s what America is.”</p><p>But this is a story of winners and losers. In a short sale, someone has to eat the loss. At first glance, it looks like banks are losing out. Naturally, in these days of joblessness, foreclosure and Occupy Wall Street protests, there’s not a whole lot of sympathy for banks.</p><p>But really, the losers are the investors who hold the mortgages – and here’s where this pertains to all of us. In many cases, taxpayers are the ones losing out when a short sale sells for less than it could fetch on the open market.</p><p>Fannie Mae and Freddie Mac, which are financed by taxpayers, own or guarantee about half of all home mortgages in the U.S. So when they take an unnecessary loss on a short sale, taxpayers are the ones getting hurt.</p><p>Cuevas says he’s helping the market by getting these properties sold as short sales, preventing them from going all the way into foreclosure, which he says would further drag down home prices. He says that as an investor, he’s also lost money on short sale transactions.</p><p><img alt="" class="caption" src="http://llnw.wbez.org/story/insert-image/2011-November/2011-11-22/3221 N Racine pic 2 smaller.jpg" style="width: 333px; height: 249px; margin: 8px; float: left;" title="Cuevas bought and quickly resold this building at 3221 N. Racine for a gross profit of $125,000 last year (WBEZ/Ashley Gross)">And he vehemently defends the role of investors in buying and reselling short sales. He says cash investors provide a service to the end buyer that justifies a premium.</p><p>Short sales are notorious for taking a long time to close, because banks are loath to take a loss on a property and also because there are often second mortgages or homeowner lines of credit that need to be settled, and that requires negotiating with multiple banks.</p><p>Cuevas says cash investors can better handle these negotiations, in some cases by paying additional cash to a second lienholder as a way to get them to agree to the short sale. Investors also settle other liens, such as overdue water bills or homeowner association dues. Because of all these extra expenses, Cuevas says his net profit is often a lot less than his gross profit, but he declined to give any specifics.</p><p>He says settling all those liens simplifies the process for the end buyer, who can then quickly buy a home with a clear title, instead of having to deal with the short sale rigmarole.</p><p>But in An’s case, Schmidt’s gross profit totaled $125,000, and she specifically sold the property “as-is,” with no rehab or renovation. She only held the property for a few weeks. So are deals with such a huge spread legitimate?</p><p>If short sale flips are done the wrong way, they can get a real estate agent and an investor in legal hot water. In Connecticut, a real estate agent and an investor, who was also a real estate agent, were convicted of bank fraud last year for a short sale flip. They put in a low offer to the bank that held the mortgage, while at the same time concealing that there was a higher offer for the property.</p><p>The bank approved the short sale at the low amount, and then the investor turned around and resold it for the higher amount. He shared the profits with the real estate agent. Both pleaded guilty to one count of bank fraud.</p><p>Cuevas says what he does is completely different from what happened in Connecticut. &nbsp;The way he does these deals legally, he says, is that he uses an option contract that he signs with the homeowner.&nbsp; Then, he says he submits his offer to the bank to get the short sale process rolling.</p><p>He says the option contract gives him the right to list the property as if he already owns it, so he can line up a buyer for the subsequent sale. He says he has no obligation to give those subsequent offers to the bank as long as his offer was the first one in. Cuevas says what’s most important is that he tells everyone – the homeowner, the bank, the end buyer – that he’s an investor seeking to profit.</p><p><img alt="" class="caption" src="http://llnw.wbez.org/story/insert-image/2011-November/2011-11-22/1410 W Ohio pic 3 smaller.jpg" style="width: 350px; height: 262px; margin: 8px; float: right;" title="Cuevas bought this property for $345,000 and resold it for $390,000. Both transactions were recorded within a week of each other. (WBEZ/Ashley Gross)">“One, it’s plain out in English disclosed on the contract. You must disclose, disclose, disclose to stay within legalities,” Cuevas said. “Two, you record your notice of option, so it’s public record. Okay, there’s nothing hiding here, no one’s trying to deceive anybody. It’s right there. Third, it should also be disclosed on the listing agreements.”</p><p>He declined to show me one of the option contracts.</p><p>Lawyers I spoke with said without seeing the documents, they couldn’t say for sure whether the way he’s done these short sales is legal. But they said as long as he discloses to everyone that he is an investor, and as long as he puts his offer in first, before any other offers are on the table, then he’s probably done it correctly.</p><p>Cuevas says he’s done everything by the book.</p><p>“Not only by the book, but beyond and above the book,” he said. “I’m not hiding anything. There’s nothing funny going on.”</p><p>But even if option contracts are a legal maneuver to flip short sales, that doesn’t mean banks and mortgage holders like the use of such contracts. Freddie Mac, for example, warns banks that an option contract in a short sale is a red flag.</p><p>Kathleen Cooke, one of Freddie Mac’s fraud investigators, says the problem with many investors who use option contracts is that they don’t disclose what the resale price is. She says it’s not enough disclosure to just say you’re an investor seeking to profit.</p><p>Cooke stresses that she isn't making a legal pronouncement, but she says the use of option contracts is something the company doesn’t like because it costs them money.</p><p>“Freddie Mac considers it to be a deceptive business practice that deliberately omits crucial data to the short sale lender,” Cooke said. “Omission of higher offers causes short sale lenders to approve transactions without all the facts and we take a higher loss than we should.”</p><p>So last year, Freddie Mac started requiring banks servicing its loans to include forms that everyone involved with short sales, including Realtors, has to sign. They must attest that there are no hidden deals and that the sale is an arm’s length transaction. Many banks have now followed suit. Some require that the buyer hold the property for 30 days or even 90 days before reselling it.</p><p>“The banks got wise, got more restrictive with their language and cut this off,” said Greg Braun, a real estate attorney in Chicago.</p><p>Because of that, Cuevas says he hasn’t done any deals lately. The last one I could find on the Cook County Recorder of Deeds site was from March.</p><p>“The spread deals are dead,” Cuevas said. “You can’t buy and sell property for short-term investors. Any Realtors today who want to work and stay out of trouble, if they’re going to work with an investor, they have to sell to an investor who’s going to buy it, close on it and be ready to hold it for 90 days.”</p><p>There's another potential loser when a short sale yields less than it could on the open market – and that's the original homeowner.</p><p>A homeowner doing a short sale doesn’t make any money off the deal because he or she owes more than the house is worth, so all the money goes to the bank. So the homeowner may think that it doesn’t matter what the home sells for.</p><p>But, in Illinois, banks have the right to go after the homeowner for the difference between what the house sells for and the mortgage amount. That’s called the deficiency.</p><p>And Thompson of the National Consumer Law Center says banks are increasingly pursuing homeowners for deficiencies after a short sale.</p><p>“It’s become a big problem for homeowners because they agree to enter into a short sale because they think it means they’ll be able to get out from under the debt and then they can get a debt collector banging on their door six months later,” Thompson said.</p><p>Cuevas says he never steps in as an investor unless the lenders waive all of the homeowner’s deficiencies.</p><p>“Any investor that we’ve ever worked with, our rules are you can buy the property as long as you don’t profit at the expense of the homeowner,” Cuevas said. “It’s that plain and simple.”</p><p>The homeowners I reached who sold their homes to Cuevas backed that up. They said their deficiencies were forgiven by the banks.</p><p>But Ralph Schumann, an attorney who heads the Illinois Real Estate Lawyers Association, says people have to be very careful about promises from Realtors and investors that their deficiencies will be waived.</p><p>“I have seen so much fraud in this area, and I guess this is the bottom line, show me the documentation that says the deficiency is waived,” Schumann said. “Let me vet it. Let me make sure it’s really enforceable and valid and won’t be an issue down the line, and then I might be willing to tell my client, ‘Oh yeah, go ahead and do it under the circumstances.’”</p><p>As for Susie An, she and her husband are settling into their house. They’ve repainted the walls and ripped out the old carpeting. They’re excited to see the magnolia tree in their backyard bloom next spring.</p><p>An says no one twisted her arm to make her put in the higher offer, but she says it still rankles her knowing they probably could have bought the place for less. Still, she says it’s not her own situation that bugs her the most.</p><p>“I think what frustrates me the most is the fact that we have this type of market now, where before the bubble burst, people were taking advantage of how the market was set up, and after the market crashed, people are still finding new ways to take advantage,” An said.</p><p>But at least for now, this particular profitable niche in real estate has been closed off.</p><p>Banks – and the investors who hold the mortgages – are no longer willing to leave money on the table.</p></p> Tue, 29 Nov 2011 06:01:00 -0600 http://www.wbez.org/story/venture-flipping-houses-post-bubble-world-94309 Chicago-area foreclosures fall, but experts see little to cheer about http://www.wbez.org/story/chicago-area-foreclosures-fall-experts-see-little-cheer-about-93111 <img typeof="foaf:Image" src="http://llnw.wbez.org/story/photo/2011-October/2011-10-13/IMG_2524.JPG" alt="" /><p><p>The latest numbers from Realty Trac show that foreclosure filings in the Chicago area fell in September. But experts say the crisis isn’t over, it’s just getting dragged out.</p><p>Ed Jacob heads the non-profit group Neighborhood Housing Services of Chicago, which helps people buy homes and stay in them. He said banks are taking more time to foreclose because they’re trying to make sure their paperwork is in order.</p><p>That’s slowing everything down and Jacob said foreclosure cases in Cook County can now take two or three years.</p><p>"It’s a slow slog," Jacob said. "It’s like we’re running through quick sand or we’re running through mud."</p><p>Jacob says many homes stuck in foreclosure are sitting empty, deteriorating.</p><p>"Let’s have an expedited way to get those through the foreclosure process to try to get those units back on the market, because as long as this continues, values continue to drop in some of those neighborhoods," Jacob said.</p><p>He said he’s hopeful about a new program called Illinois Hardest Hit, run by the state. It makes loans to people to help them pay their mortgages if they’ve lost income. Fifteen thousand people have applied so far. The state reports more than 150 people have gotten loans since it started last month.</p></p> Thu, 13 Oct 2011 13:07:00 -0500 http://www.wbez.org/story/chicago-area-foreclosures-fall-experts-see-little-cheer-about-93111 Foreclosure filings in Illinois jump in August http://www.wbez.org/story/foreclosure-filings-illinois-jump-august-92044 <img typeof="foaf:Image" src="http://llnw.wbez.org/story/photo/2011-September/2011-09-15/IMAG1088.jpg" alt="" /><p><p>Foreclosure filings in Illinois jumped 18 percent from July to August, and that means the housing market still has a long slog ahead. The latest numbers from RealtyTrac show banks are starting to move ahead with foreclosures again. They had slowed down a lot last year and earlier this year to sort out problems related to sloppy paperwork and robo-signing of documents.</p><p>Ed Stuart, economics professor at Northeastern Illinois University, says foreclosures are becoming more normal and less stigmatized and that’s changing people’s behavior. "People are switching their focus to making sure their credit cards and auto payments are kept up and not their mortgages," Stuart said.</p><p>In the Chicago area, the foreclosure crisis appears most severe in the collar counties. Kendall, Kane and McHenry counties had the highest foreclosure rates in the state.</p></p> Thu, 15 Sep 2011 20:21:00 -0500 http://www.wbez.org/story/foreclosure-filings-illinois-jump-august-92044 Venture: Is the buyer's market buyer-friendly? http://www.wbez.org/story/venture-buyers-market-buyer-friendly-89183 <img typeof="foaf:Image" src="http://llnw.wbez.org/story/photo/2011-July/2011-07-14/IMG_0125.JPG" alt="" /><p><p>Home prices and interest rates are still low compared to where the market was before it crashed at the end of 2008.&nbsp;It’s created opportunity for new buyers, and buyers who are looking to resell a property for a quick profit.</p><p>My husband Demian and I are packing up our apartment. We’re getting ready to close on our first home any day now.</p><p>Buying wasn’t in our plans a year ago, but we got a little nudge&nbsp;after our landlord swore at us for wanting our water heater fixed.&nbsp;Plus, we kept hearing about how this was the time to buy: low home prices, low interest rates, a buyer’s market.</p><p>Five offers and more than 3 months later, we finally found our house.&nbsp;It’s a 100-year-old Victorian-style&nbsp;in the Avondale neighborhood on Chicago’s Northwest side. It's got a beautiful magnolia tree in the backyard, three bedrooms and 1.75 baths. The 0.25 is a toilet in the basement.</p><p>The packing’s on schedule, but then, just days before our scheduled closing, Demian gets a call. &nbsp;Our loan specialist tells him the closing’s postponed, indefinitely.</p><p>"The short version of it is they do have to get another appraisal," Demian tells me.</p><p>Now, delayed closings aren’t uncommon.&nbsp; But what’s delaying us is how we’re purchasing this house. When we put an offer on the property, it was listed as a short sale for $240,000.</p><p>A short sale can happen when an owner is coming up short on their mortgage loan and can’t pay the bank. Instead of foreclosing, the bank allows the owner to sell at a moderate loss. That hurts his credit less than a foreclosure would.&nbsp;Through a short sale, a buyer can get a house for a below market price, but it can take the bank months to take any action on the buyer's bid. Unless a cash offer comes in.</p><p>Our offer was up against five others including a bid from a cash investor. The bank accepted that investor’s bid.</p><p>"Cash investor is taking precedence here," says Mabel Guzman, president of the Chicago Realtors Association.</p><p>She says this isn't unusual.</p><p>"I worked with a client. We went through 5 separate offers to get to one that actually worked. He was competing really against cash investors," she says.</p><p>Banks like cash because it’s secure.&nbsp;Guzman says based on recent real estate data, 20 to 25 percent of transactions in Chicago are cash deals.</p><p>In our case, before the cash investor officially closed on the house, she asked us other bidders for our best offer. She accepted ours with lots of conditions.&nbsp;She wouldn’t make any improvements to the house. We couldn’t negotiate down price even if we found problems in the inspection.</p><p>"That’s what we call flopping," Guzman says.</p><p>Because we’re buying from the investor, we skip the typical slowness of the short sale transaction, but now we’re paying a higher price.</p><p>"I’m surprised the bank isn’t stepping in and saying you can’t do that. To my understanding in many states they have anti-flopping rules where you just buy it and get someone in place to sell it again," she says.</p><p>What she calls flopping, the U.S. Department of Housing and Urban Development calls flipping. In fact, it has an anti-flipping policy that forbids the resale of a property within 90 days of acquisition. The purpose is to prevent the rapid escalation of the price of a home. Turns out, HUD's waived its anti-flipping policy for some transactions this year to help move distressed properties through the market more quickly.</p><p>So here we are: the cash investor we’re now buying from never lived in the house and owned it less than three weeks before we took possession. But because she paid cash and we had to buy from her, we ended up paying an inflated price.</p><p>"Well, for one, I wouldn’t say inflated. Look, in terms of your neighborhood grocery store. They buy a gallon of milk at a discount," says Steve Smullin, a commercial investment real estate broker.</p><p>I asked him to explain these transactions from an investor's viewpoint. ASKED HIM TO EXPLAIN THESE TRANSACTIONS FROM AN INVESTOR’S VIEWPOINT.</p><p>"Now, is the grocery store an investor? They’re really just a middle man. Somebody who has bought something with the expectation of selling it to somebody else at a profit," he says.</p><p>Smullin says buyers don’t need to concern themselves with who they’re buying from. They just need to make sure the house doesn’t come with baggage.</p><p>"Other people’s business is other people’s business. Your ultimate concern is that you’re buying a piece of property that is not going to fall into a deep hole," he says.</p><p>After the closing stalled, Demian and I didn't know if we'd ever get the house. We put out an emergency conference call to our realtor and attorney.</p><p>At this point, we’ve already wired our 20 percent down payment which happens to be the majority of our savings. We know our money is theoretically safe, but it still puts knots in our stomachs to see the huge plunge in the bank statement.</p><p>"The nuances of this are incredibly frustrating for you guys," says our lawyer Matt Albrecht.</p><p>We discuss the possibility of starting the process all over again with another mortgage company, and the chance that more offers could still come in from other buyers.</p><p>That's because once our closing date is delayed, the investor has the contractual right to put the house back on the market while we’re working out the technicalities.</p><p>"If someone came in with 285 cash, I’m going to be rude here. If someone came in for 270 cash, they’d probably kick us out," he says.</p><p>Demian and I frantically make a list of people we could stay with if the house falls through. Our landlord certainly wasn’t going to let us stay. But before we could even come up with plan B, the roller coaster takes another lurch, and we’re suddenly cleared to close.</p><p>A day later, we’re doing our final walk through of the house with our realtor Jayne Alofs, making sure things are as we saw them when we put our original offer down.</p><p>Alofs tells us three viewings had been scheduled for the few days the house was back on the market. But not to worry, they were all canceled.</p><p>Now, the house is finally ours.</p><p>"I brought some salt because when you get into a new house, to take all the bad spirits and leave only the good ones for your happiness, we go in and we throw salt," says Susan Kogan.</p><p>That’s my mother-in-law bringing us a few home essentials and some good luck as we get started on painting the house.</p><p>By the way, we ended up buying our house for $285,000. The previous residents bought the house in 2005 for $380,000. Sounds like a bargain, until we found out the cash investor got it for $160,000.</p><p>"Through chaos there’s a lot of opportunity for folks," Guzman says.</p><p>Mabel Guzman with Chicago Realtors means opportunity for people like the investor we ended up buying from. But she also means us; people who couldn't have entered the market a few years ago when prices were much higher.</p><p>So in spite of the home-buying rollercoaster, I think we made a good investment. And best of all, we feel right at home.</p></p> Mon, 18 Jul 2011 10:00:00 -0500 http://www.wbez.org/story/venture-buyers-market-buyer-friendly-89183 The cost of owning 150,000 foreclosed homes http://www.wbez.org/story/2011-07-06/cost-owning-150000-foreclosed-homes-88815 <img typeof="foaf:Image" src="http://llnw.wbez.org/npr_story/photo/2011-July/2011-07-07/foreclosed_lawns_001.jpeg" alt="" /><p><p>When you are the nation's largest owner of foreclosed homes, even little things can get expensive fast. Such is the case for mortgage giant Fannie Mae, which as of March 31 had a mind-boggling 153,000 foreclosed homes <a href="http://phx.corporate-ir.net/phoenix.zhtml?c=108360&p=irol-SECText&TEXT=aHR0cDovL2lyLmludC53ZXN0bGF3YnVzaW5lc3MuY29tL2RvY3VtZW50L3YxLzAwMDA5NTAxMjMtMTEtMDQ2NjA2L3htbC9zdWJkb2N1bWVudC8xL3BhZ2UvMTY%3d" target="_blank">on its books</a>.</p><p>One example — mowing the lawn. Two men swoop in on a foreclosed town house in Lanham, Md., quickly mowing and edging the small front yard. Fannie Mae owns this home, so it's paying for the lawn crew to come every two weeks or so to keep up the curb appeal.</p><p>But it's not just this lawn. There are tens of thousands more. Fannie Mae officials won't say how many lawns it's paying to maintain, so we've done some back-of-the-envelope calculations of our own:</p><p>Say only half of the homes have lawns, a conservative estimate, that's still more than 75,000 lawns.</p><p><blockquote></p><p>153,000/2</p><p>X 6 (a six-month grass-clipping season)</p><p>X 2 (mowing twice a month)</p><p>X $40 (a reasonable guess at how much it costs to mow a lawn)</p><p>= $36.7 million</p><p></blockquote></p><p>Again, this is very rough estimate, but that's a whole lot of money to spend on lawn care.</p><p><strong>An Expensive Upkeep</strong></p><p>"This is just one of the costs that Fannie and the rest of us will pay to dig out of a very big hole," says Karen Petrou, who watches Fannie Mae's books closely at her firm Federal Financial Analytics.</p><p>When she says "the rest of us," she means it. Fannie Mae's tab from U.S. taxpayers is up to <a href="http://projects.propublica.org/bailout/entities/158-fannie-mae" target="_blank">$86 billion</a> since September 2008 when it was taken into government conservatorship.</p><p>In just the first quarter of this year, Fannie racked up $488 million in foreclosure-related expenses, including holding costs (insurance, taxes and maintenance); valuation adjustments for changes in market value; gains/loss when the property is sold; legal fees; eviction costs; weatherization costs to prevent the pipes from bursting; costs to secure the property; and repair costs.</p><p>At that town house in Lanham, Md., the repair costs will add up to nearly $15,000. Chipped bold paint colors are covered with a neutral tone; a stolen air conditioning unit and missing copper pipes are replaced; new light fixtures and wall-to-wall carpeting are installed.</p><p>"We want to make sure that we're comparable with the market or with the neighborhood," says Elonda Crocket, an executive at Fannie Mae who deals with managing its massive portfolio of foreclosed properties.</p><p>She says the goal is to stabilize the neighborhoods where they have foreclosed homes and to get the properties to a condition where first-time homebuyers can imagine themselves moving in.</p><p>"We want to make sure that we can maximize our return on the investment," she says.</p><p>In 2010, Fannie Mae did similar repairs on 87,000 foreclosed homes.</p><p>"It makes them — I think — indisputably the largest purchaser of paint and general appliances for these homes they're fixing up," says Guy Cecala, publisher of Inside Mortgage Finance.</p><p>But if you think mowing tens of thousands of lawns and buying acres of new carpet is expensive, Petrou says just imagine the alternative.</p><p>"If they don't maintain the houses, then the neighborhoods go downhill, other people are put at risk and the housing crisis gets worse because you have still more downward pressure on overall house prices," Petrou says. <div class="fullattribution">Copyright 2011 National Public Radio. </p> Wed, 06 Jul 2011 23:01:00 -0500 http://www.wbez.org/story/2011-07-06/cost-owning-150000-foreclosed-homes-88815 Foreclosed homes wait in 'shadows' to go on sale http://www.wbez.org/story/2011-06-23/foreclosed-homes-wait-shadows-go-sale-88290 <p><p>The housing market is still languishing this summer, leading some economists to believe prices won't begin to recover until 2014. Even Federal Reserve Chairman Ben Bernake says the market may be worse than most people thought.</p><p>This is due in large part to something economists call the shadow inventory — or the number of houses that will soon be up for sale.</p><p>On any given day in just about every city in the country, auctioneers are standing on the front steps of homes selling off foreclosed properties. Often no buyers even show up, and the bank takes the house.</p><p>Five years after the housing bubble burst, the numbers are still staggering. Additionally, many houses are still in the foreclosure pipeline and haven't even come up for sale.</p><p>"In a worst-case scenario you're looking at potentially 6 million of these properties," says Rick Sharga, senior vice president at <a href="http://www.realtytrac.com/home/">RealtyTrac</a>, a company that follows shadow inventory.</p><p>He says there are more than 1 million houses in foreclosure that haven't been sold. On top of that, he says there are 4 million seriously delinquent home loans.</p><p>"The majority of those will ultimately hit the market as distressed properties, another part of that shadow inventory," he says.</p><p>Sharga says at the current pace of foreclosure sales it would take more than nine years to sell all of these houses. Until then, they could keep glutting the market and putting downward pressure on prices.</p><p>"The numbers frankly aren't terribly encouraging," he says.</p><p><strong>Moving Out</strong></p><p>Still, most analysts don't think the housing market is going to stay in the dumps that long. One reason they seem a little more hopeful is "household formation" — or when people finish school or get married and move out of their parents' house for the first time, which creates a demand for housing.</p><p>"If you look at the number of households in the country ... that's been growing at a rate of a million to a million and a half a year quite steadily," says Karl Case, an economist at Harvard University.</p><p>However, Case says that during this economic downturn the process of generating new households has slowed down substantially and economists are unsure why.</p><p>Household formation is about one-third of what it normally is. And Case says this is part of the story about why the housing market is so weak.</p><p>"People are doubling up," he says. "They're staying with Mom and Dad," and immigration is down.</p><p><strong>'Pent-Up</strong><strong> Demand'</strong></p><p>Case says problems in the housing market can even affect marriage and divorce rates.</p><p>"There's actually a new paper in the <em>American Economic Review</em> this month that finds the marriage rate sensitive to changes in house prices," Case says. "So this decision to form a household is a major component of demand."</p><p>Economists hope the slowdown in household formation is creating some pent-up demand for housing.</p><p>People want to move out of their parents' basement, or their parents want them out. Young couples want to settle down, get married and get rid of their roommates.</p><p>"One way to think about it is, the longer a household formation stays down the greater the pent-up demand is," says Nariman Behravesh, the chief economist of IHS, a forecasting firm. "And it's like a rubber band — you keep pulling back on it. At some point, when you let it go, it's going to snap back in a very big way. So that's very likely to happen in the housing market. We can debate exactly when it happens, but happen it will."</p><p>Behravesh thinks next summer the housing market could start to pick up quite a bit, but other economists say it won't happen that soon.</p><p>In the meantime, though, the housing market remains a pretty big mess, and there are a lot of people who, for better or worse, can't sell. <div class="fullattribution">Copyright 2011 National Public Radio. </p> Thu, 23 Jun 2011 23:01:00 -0500 http://www.wbez.org/story/2011-06-23/foreclosed-homes-wait-shadows-go-sale-88290 Chicago home prices may drop again in 2011 http://www.wbez.org/story/analyst/chicago-home-prices-may-drop-again-2011 <p><p>Chicago homeowners could see the value of their houses drop another 5.8 percent this year &ndash; a bigger drop than the nation as a whole. That forecast comes from Clear Capital, a company that does home appraisals for big banks. Eric Landry is a housing analyst with Morningstar in Chicago. He said there&rsquo;s still reason for hope that the market is starting to bottom out. <br /><br />&quot;The days of plunging housing prices, you know 20, 30 percent, are very, very far in the rear-view mirror, we&rsquo;re not going to see that again,&quot; Landry said. &quot;There simply has not been enough new construction put in place to constitute such a scenario.&quot;<br /><br />Chicago home prices have fallen almost 30 percent since the slump began more than four years ago. Clear Capital forecasts that home prices will rise in some cities this year, including Washington, D.C., Houston and Honolulu. <br />&nbsp;</p></p> Fri, 07 Jan 2011 06:01:00 -0600 http://www.wbez.org/story/analyst/chicago-home-prices-may-drop-again-2011