WBEZ | real estate

Report: Drop money in the river, watch it float back

Thu, 09 May 2013 15:57:00 -0500

The glitzy towers of downtown Chicago are filled with offices that boast impressive financial returns, but their biggest cash flow may be one they all share: the Chicago River.

A new report commissioned by Friends of the Chicago River and Openlands says each dollar invested in the river provides a 70 percent return. Completed, planned and proposed improvement projects, the report says, amount to 846 new permanent jobs, 52,400 construction jobs and $130.54 million every year.

“Investing in the Chicago River pays us back,” said Lenore Beyer-Clow, policy director for Openlands.

Friends of the Chicago River, which began as a project of Openlands, has championed the once neglected river since it was a “back alleyway full of sewage and trash,” in the words of the new report. Mayors Richard M. Daley and Rahm Emanuel have both called attention to the resource, most recently when Emanuel announced a plan to expand the city’s Riverwalk by six blocks. But Margaret Frisbie, the group’s executive director, said despite recent progress most people still don’t appreciate the full benefits of investing in the river.

The report looked at four major completed or planned projects involving the river over the last 30 years: the deep tunnel stormwater project TARP; disinfection of wastewater at three area treatment plants; $500 million worth of green infrastructure investment citywide over 15 years; and $93 million in projects by the City of Chicago and Chicago Park District.

The benefits came in the form of additional business income, tax revenue and jobs, but also avoided flood damage and sewage treatment costs. Investing in the river boots property values along its shores, too.

Wolf Point and River Point are among the high-profile riverside developments in the portfolio of real estate firm Hines Interests.

“Why are we focused on real estate along the river?” asked Greg Van Schaak, senior managing director for Hines. “It’s very simple: it’s more valuable.” Van Schaak said whereas rent in most towers varies by floor, buildings along the river retain the same value from the first floor through the fiftieth.

Van Schaak added that most of the major companies — Boeing, MillerCoors, BP — who recently opened offices in Chicago did so in riverfront buildings. “I don’t think that’s an accident,” he said.

Money talks, but it’s impossible to neatly quantify many of the benefits that natural systems provide. That may make it difficult to invest strategically even when all parties agree on the overarching value of a natural resource like the Chicago River.

“There are all these ancillary benefits to green infrastructure that aren’t quantified when you only look at economic returns,” said Debra Shore, an MWRD commissioner. Environmental benefits like carbon sequestration, soil retention and fresh air are valuable too, Shore said, but don’t yet appear on the ledger of an economic analysis.

Google puts up Libertyville Motorola campus for sale

Fri, 04 Jan 2013 14:57:00 -0600

Now that the former headquarters of Motorola Mobility in Libertyville is up for sale, who’s likely to buy it?

Before we think about it - consider first that the most recent vacancy rate for similar office space in Libertyville is 28.7 percent - almost twice as high as in the city.

That’s before you take into the account the Motorola Mobility campus in Libertyville. It sits on 84 acres and is more than a million square feet of office space. To give you an idea of the size, the Merchandise Mart - where the workers are moving - is four times that size.

"If in fact this building were to be added to the competitive market it would add approximately 10 percent to the total inventory in that area," said Robert Kramp, who directs regional research for the Great Lakes for Jones Lang LaSalle, the commercial real estate services firm.

Bult in 1992, the property is really designed as a corporate headquarters. It has 3400 parking spaces. But Kramp thinks convincing a company to move or expand to Illinois right will be a tough sell.

"Given the challenges that currently face the state of Illinois in addition the fact that the economy has barely begun to recover - not withstanding the uncertainty that is still associated with the federal budget impasse - it will be a very challenging market for this particular property," Kramp said.

Libertyville Mayor Terry Weppler says the state has already committed to helping find potential tenants.

"I would prefer that there were multiple tenants," Weppler said, adding that it would lessen the chance of another big company coming in and then leaving.

Can a deal put the Congress hotel back in session again?

Thu, 20 Dec 2012 09:25:00 -0600

The Congress Plaza Hotel, a faded South Michigan Avenue jewel best known for its nine-year hotel workers strike could again shine under a plan to convert portions of the historic property into residences and retail.

New Jersey-based newsletter Real Estate Alert reported Wednesday that a partnership led by New York investor David Aim has agreed to pay $275 million for the 120-year-old hotel at 520 S. Michigan Ave. The newsletter said the partnership seeks to "boost revenues at the aging hotel over the next year or two, then redevelop the 1 million-square-foot complex and convert portions into residential condominiums and retail space." Businessman Albert Nasser Shayo has owned the property since 1987.

The deal has the potential to bring good to the once-grand hotel. Built in 1893 as an annex to the Auditorium Hotel (now Roosevelt University) — the two buildings were once linked underground via a marbled-walled passageway called Peacock Alley — the Congress was once among the city's finer hotels. The 11-story edifice was designed by architect Clinton J. Warren, with matching 1902 and 1907 additions by Holabird & Roche. The Congress has a well-written history of itself, particularly those heady early days, on its website.

The latter days have been less kind, however, as the 871-room hotel shows its age. In addition, local members of the hotel workers' labor union Unite Here went on strike in June 2003 over the Congress' plans for a seven percent wage cut. The group has walked the picket lines daily since then.

As part of the Historic Michigan Boulevard Landmark District, the hotel cannot be demolished or significantly altered without city approval.

Report: Home foreclosures push down local housing prices

Tue, 02 Oct 2012 13:48:00 -0500

Distressed homes have pushed down housing prices in the Chicago area, according to a report released Tuesday by the real estate data and analytics firm CoreLogic.

Local home prices for August 2012, including homes facing foreclosure, fell 2.5 percent when compared to numbers from the previous year. The report also shows Illinois prices, including distressed home sales, declined 2.3 percent--the second-largest decrease in the United States.

"The foreclosures and the short-sales have a major impact on our market," said Matt Silver, a director at the Chicago Association of Realtors. In a phone interview Monday, he said buyers are "a little more cautious on the properties they do buy."

But Chicago realtors remained optimistic about the condition of the local housing market, saying that prices are expected to pick back up in the coming months.

"Foreclosures need to be dealt with. But I think generally speaking, people are optimistic that they can buy a house today and in two years it will be worth similar to what it’s worth today," said Chicago-based realty expert Jeff Lowe in a phone interview.

According to the CoreLogic report, excluding distressed homes, Chicago-area home prices in August have increased 1.5 percent since last year. Using the same measure, Illinois prices also rose 1.2 percent.

Meanwhile, home prices have risen nationwide. Including distressed properties, values increased 4.6 percent compared to August 2011.

"Again this month prices rose on a year-over-year basis and our expectation is for that to continue in September based on our pending [...] forecast," said Mark Fleming, chief economist for CoreLogic, in a statement.

"The housing markets gains are increasingly geographically diverse with only six states continuing to show declining prices."

Pitchfork Day 3: Ty Segall, Real Estate, Kendrick Lamar… and (sorta) Lady Gaga

Sun, 15 Jul 2012 18:46:00 -0500

As expected, prolific San Francisco garage rocker Ty Segall took the main stage in mid-afternoon and immediately claimed it as his own with a furious sound and a confident presence that belied his young age or the fact that he’s spent much of his time in the musical spotlight before late recording alone in his bedroom.

Touring in support of the brilliant Slaughterhouse and fronting a tight quartet he calls the Ty Segall Band, he leaned heavily on the songs he wrote for that album with the new group, mixing indelible pop melodies and raucous clangor and stretching some tunes out into expansive but never really indulgent jams that amply justified his description of this music as “evil space rock.” Oh, and he also made the rare concession this weekend to the absurdity of the festival setting by leading a chant of “Oi, oi, oi,” followed by a kick-butt cover of AC/DC’s immortal “Dirty Deeds Done Dirt Cheap.” Now that’s rock’n’ roll.

From that adrenaline rush, the tempo instantly shifted into nap time as New Jersey indie-rockers Real Estate that was perfectly lilting and I dare say even lovely at times. But is lovely what anyone really wants at 4:30 in the bright sun on the middle of a festival bill? The group essentially had one song and one tempo, yet the set went on… and on… and on… and on. Sure, the temperature was in the mid-’90s. But my God, I’d have killed for a cup of coffee.

Per the rest of the weekend, my plan had been to leave the secondary stage to my WBEZ colleagues and catch the reactivated Chavez on the main stage next, hopefully forgiving bandleader Matt Sweeney for his time in the ill-fated Zwan. But the Pitchfork-powers-that-be spread the word that Lady Gaga would be appearing with Compton rapper Kendrick Lamar on the smaller platform, so along with seemingly thousands of others, off in that direction I went.

For all the positive buzz on Lamar, and despite some admittedly impressive freestyle chops, his set was a tremendous disappointment that left no hip-hop cliché unturned. Left side/right side shout-outs, exhortations to chant “f--- that” and wave your hands in the air, a song paying homage to “p---- and Patrón,” countless mentions of weed and blasts from the air horn to hype everybody up—all of it simply was pathetic. But even worse was the fact that Gaga—and several in the know swear it was her (“She’s here! She’s really here!”)—did nothing but stand on the side of the stage, gently gyrating and enjoying being notice.

So much for giving one to the little monsters. Though I suppose we still can hope she’ll sing “Horchata” with Vampire Weekend.

'Hooray for Captain Streeter!'

Tue, 03 Jul 2012 05:00:00 -0500

Though he didn’t find his life’s mission until he was 50 years old, George Wellington Streeter has achieved a kind of immortality: One of Chicago’s swankiest neighborhoods carries his name, all because he originated a local version of the Occupy Movement.

Streeter was born in Michigan in 1837, one of 13 children. He had little formal education, and scuffled through different jobs — logger, miner, ice-cutter, carnival showman, mariner. In the summer of 1886 he got into a scheme to run guns to Honduras.

While trying out his little steamship in a Lake Michigan storm, Streeter ran up on a sandbar off Superior Street. He couldn’t move, so he decided to stay there.

Everything east of Michigan Avenue was then a swamp. Streeter convinced local builders to dump their debris near his ship. Gradually the area filled in, and became land.

Meanwhile, Streeter discovered that his man-made land was beyond the boundaries of both Chicago and Illinois. As a Union captain in the Civil War, he had a right to a homestead. He announced he was establishing the independent District of Lake Michigan, with no authority above him except the U.S. government.

Streeter began selling lots to speculators. Squatters arrived, and built shacks in the district’s 186 acres. Industrialist N.K. Fairbank, who claimed he owned the area, tried the evict Streeter. The Captain ran him off with a load of buckshot.

All through the 1890s and 1900s, there were sporadic attempts to remove Streeter and his supporters. The raids were usually conducted by private detectives working for real estate interests. Sometimes the police did the honors. When things quieted down, the occupiers would creep back.

The Captain himself had a keen eye for public relations. He portrayed himself as a little guy taking on the big-money fat cats. On that basis, whenever Streeter turned up in a news story, most Chicagoans sympathized with him. Besides, he was putting on a good show.

He had good lawyers, too. The various cases against Streeter dragged through the courts into the 1910s. Most of the delays were caused by jurisdictional issues.

Looking back from the safety of another century, the whole matter seems like harmless fun. It wasn’t always. Over the years, an unknown number of people were killed. In 1902 Streeter himself was convicted in the death of an opposition slugger. He was pardoned after nine months in prison.

By 1918 Streeter’s domain was reduced to a few blocks around a tar-paper “castle” when he was arrested for peddling liquor without a license. Shortly afterward, new warrants were obtained by Chicago Title and Trust Company. There was one more raid, and the Captain was again ousted from the lakeshore.

He never returned. Streeter spent the next few years operating a floating hot dog stand in East Chicago. When the old rogue died in 1921, the Mayor of Chicago attended the funeral. So did many of the real estate magnates Streeter had battled over the decades.

They probably came to make sure he was really dead.

Nine bedrooms, full-size court: Michael Jordan's home for sale

Wed, 29 Feb 2012 15:32:00 -0600

Michael Jordan's longtime personal residence in suburban Chicago is for sale for $29 million.

The sprawling estate is in Highland Park, along Lake Michigan, and has more than 56,000 square feet of living space.

That includes nine bedrooms, 15 baths and five fireplaces.

There's also a three-bedroom guesthouse, pool area, outdoor tennis court and three climate-controlled multi-car garages.

An indoor basketball complex features a full-size regulation court with specially cushioned hardwood flooring and competition-quality high intensity lighting. It's also got a sound system set up to provide perfect acoustics within the court space.

The property was put on the market Wednesday by Katherine Chez-Malkin of Baird & Warner Real Estate.

Venture: Flipping houses in a post-bubble world

Tue, 29 Nov 2011 06:01:00 -0600

The real estate market is moribund. Prices have plummeted. So who knew that people were still making big bucks from flipping properties?

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.

We stumbled into this world of post-bubble flipping by accident. WBEZ’s Susie An reported in July 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.

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.

“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.

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.

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.

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.

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.

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.

“A lot of rushing, a lot of rushing, and so we went with $285,000,” An said.

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.

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.

“We were shocked,” An said.

Housing flips redux

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.

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.

That raised all sorts of questions.

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?

Their interests may not be aligned. But state regulators say there’s nothing that bars Realtors from acting as investors.

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.

The mystery deepens

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.

“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.

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.

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.

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?

While trying to understand these transactions, I discovered someone else with Exit Strategy Realty who has done quite a few more of these deals.

His name is Mike Cuevas, and he calls himself the “top short sale agent in the U.S.” 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.

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.

“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.”

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.

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.

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.

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.

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.

“That’s what capitalism is,” Cuevas said. “That’s what America is.”

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.

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.

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.

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.

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.

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.

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.

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.

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?

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.

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.

Cuevas says what he does is completely different from what happened in Connecticut. The way he does these deals legally, he says, is that he uses an option contract that he signs with the homeowner. Then, he says he submits his offer to the bank to get the short sale process rolling.

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.

“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.”

He declined to show me one of the option contracts.

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.

Cuevas says he’s done everything by the book.

“Not only by the book, but beyond and above the book,” he said. “I’m not hiding anything. There’s nothing funny going on.”

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.

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.

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.

“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.”

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.

“The banks got wise, got more restrictive with their language and cut this off,” said Greg Braun, a real estate attorney in Chicago.

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.

“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.”

There's another potential loser when a short sale yields less than it could on the open market – and that's the original homeowner.

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.

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.

And Thompson of the National Consumer Law Center says banks are increasingly pursuing homeowners for deficiencies after a short sale.

“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.

Cuevas says he never steps in as an investor unless the lenders waive all of the homeowner’s deficiencies.

“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.”

The homeowners I reached who sold their homes to Cuevas backed that up. They said their deficiencies were forgiven by the banks.

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.

“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.’”

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.

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.

“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.

But at least for now, this particular profitable niche in real estate has been closed off.

Banks – and the investors who hold the mortgages – are no longer willing to leave money on the table.

Dennis Rodkin updates the rulebook for real estate in Chicago

Wed, 14 Sep 2011 13:53:00 -0500

A lot can change over a decade; and not all of it necessarily good. When Dennis Rodkin wrote "The New Rules of Real Estate" for Chicago magazine back in 2000, the housing market was a hotbed of activity--but no longer. The mortgage crisis put the kibosh on many things – leaving some folks struggling to stay in their homes and others desperate to get out. Thus, the new game needed new rules. So, Eight Forty-Eight asked the author of the old rules to share his annual update of the Chicago real estate rulebook. Rodkin writes the Deal Estate column for Chicago magazine.

The October issue of Chicago magazine hits newsstands Thursday but Rodkin gave a preview on his blog.

Mocean Worker, "Ya Damn Right", from the album Candygram for Mowo!, (Mowo! Inc.)

'Land bank' knocks out some foreclosure problems

Sun, 28 Aug 2011 23:01:00 -0500

Cities have been tearing down crumbling, vacant houses for decades. The money for municipal demolition bills usually comes out of city budgets, but in Cleveland the housing crisis has started to change that equation.

Bill Beavers has lived on Cleveland's Dove Street since 1967. But on a recent sunny morning, Beavers is sitting on a neighbor's front porch, watching something he has never seen on his block before.

Across the street, a huge excavator is tearing through the front facade of a two-story wooden house. The top half of the house, windows and exterior wall fold as easily as cut weeds and tumble to the ground.

"Oh, it's good to see them tear these old structures down because nobody wants to move in them," Beavers says. "It costs too much to fix them up, you know?"

The house went into foreclosure two years ago, and when the family moved out, vandals stole the circuit panel and pipes. Other houses on the block are nicely kept up, but the street is in the 44105 zip code — which in 2007 had the dubious distinction of garnering the highest foreclosure rate in the nation.

Saturated with foreclosures, the lender that took back the house couldn't unload it for even $5,000.

"A property like that, on a street that's otherwise relatively stable but [in a] depressed market, probably needs to come down because it has way too much need on the inside," says Gus Frangos, head of the Cuyahoga County Land Bank, which oversees these demolitions. "If you take these pockmarks out, all of a sudden you stabilize the street a little bit."

Let's make a deal

When the land bank started two years ago, Frangos thought the group would have to pay its demolition bill from its own budget. But then the economy worsened and the foreclosures piled up. Lenders stuck with crumbling houses found themselves on the hook in the Cleveland Housing Court for hundreds of thousands of dollars worth of code violations.

The Cuyahoga County Land Bank, a quasi-government corporation, offered lenders a deal: We'll take your worst houses, if you pay to knock them down. This year, Fannie Mae and some of the country's biggest lenders — including Bank of America, Citibank and Wells Fargo — will help pay for half of the land bank's 700 scheduled demolitions.

Lenders pay $3,500 to $7,500 per house. Wells Fargo's Russ Cross says it's a sensible and responsible business plan.

"We want to make loans on an ongoing basis, and to do so, we need stable to rising home values," he says. "We've got to do whatever we can to protect home values in neighborhoods."

Some lenders are looking at starting similar programs in Detroit, Chicago and Milwaukee. Fannie Mae's P.J. McCarthy says the government-controlled mortgage giant has been donating properties and demolition funds to the Cuyahoga County Land Bank since 2009 because keeping the houses just doesn't make sense.

'Not a cure-all'

"They are not going to sell on the market for much more than a few thousand dollars, and our costs in marketing those properties and preserving them generally exceed the costs," he says. "So the economics of the transaction make sense as well as the intent of the land bank to reduce supply and stabilize the neighborhood."

Dealing with foreclosures is a huge headache for financial institutions. RealtyTrac, an online marketplace for bank-owned property, counted more than 1.6 million foreclosures in the U.S. in July.

RealtyTrac's Rick Sharga says demolition programs like Cleveland's only start to address the backlog.

"Eliminating a handful of these houses really isn't going to be a cure-all in and of itself," he says. "It's one step in a much longer process that's going to be required before the housing market comes back."

In the meantime, cities have to figure out what to do with the newly vacant land.

In South Euclid, an eastern suburb of Cleveland, building inspector Rick Loconti is walking on a brick path through small plots of tomatoes, eggplants and sunflowers and remembers what used to be here.

"The house was so far gone, we couldn't fix it up and get any kind of a return, so we demolished the house, and we put in this community garden," he says. "And it's now become a source of community pride."

Loconti concedes there are more vacant lots than demand for community gardens. So municipalities are also offering newly vacated land to neighbors as side lots and putting other plots away for if and when the housing market improves here.