Chicago Real Estate Blog

The most recent issue of Realtor Magazine reports on the changes in buyer preferences between 2004 and 2007.  The top three feature preferences in 2007 were central air conditioning, a large garage and a walk in closet in the master bedroom.  The next three important features were having a yard or play area, wiring for cable or satellite television and high speed internet access.  The final three areas mentioned in the National Association of Realtors survey were separate showers in the main bath, a patio and fencing.

Home buyers in 2007 are prepared to pay extra for some interior features such as a walk in closet in the master bedroom, hardwood floors, granite countertops, upgraded bathroom features, cable/satellite ready wiring and a sitting area in the master bedroom.  Exterior features that rate paying more include the larger garage, patios and porches and fencing.

Energy efficiency also received strong endorsements as over 90% of survey respondents said this was very or somewhat important.  The older the buyer, the higher the preference for energy efficiency.  I guess paying utility bills gets our attention and we want them as low as possible!  Despite our interest in energy efficiency, we are still buying larger homes.  The average size went up to 1840 square feet, from 1727 square feet in 2004.

The survey also found that preference for luxury items is becoming more widespread.  In just 3 years, preference for granite countertops has risen 6% 23% vs 17% in 2004), whirlpool tubs is up 4% (13% vs 9%) and hardwood floors (28% vs 21%).

The survey includes all areas of the country and all types of settings (rural, suburban and city areas).  The results for your area may differ but trends in preferences evolve as much as fashions in other areas.  Asking our clients preferences is the best way to cusomize the search to their needs.

When buyers are beginning the process of loking for a new property, the process is streamlined if they obtain pre-approval for a mortgage.  This identifies the amount of a mortgage that they could qualify for (assuming the property appraises to justify the sale price) and clarifies the property price range they should be looking at.  Some basic information about financing follows.

Pre-qualification and Pre-approval:

Pre-qualification is a general overview of your financial situation.  This involves you giving the lender information about your income, assets, and liabilities to determine what loan amount you MAY qualify for.  No information is verified and the lender has not investigated sufficiently to offer verification that you are able to obtain a loan to purchase any property.

Pre-approvalis a specific and detailed verification of your income, assets, and liabilities by the lender.  Based on this verification process, the lender states that you are able to obtain a loan for a certain amount of money.  When you are pre-approved by a high quality lender, sellers are more likely to take your offer seriously.  Pre-approval means you are more prepared to back up your offer with an ability to get the loan.

Factors Considered by Lenders:

The lenders primary objective in making loans is to make a profit and reduce their risk that the borrower will default on the loan.  They reduce their risk by carefully evaluating a variety of factors including:

• Down Payment Amount:  The larger the down payment, the less likely a borrower is to default.  20% or more (of the purchase price) is ideal but there are many loans available with a smaller down payment.
• Debt to Income Ratio:  Lenders look at our payment obligations and our income.  If we have a lot of debt and little income, we are more likely to default because our payment obligations are too great. 
• Employment History:  Long term employment suggests that the person will have a steady stream of income to pay the mortgage.  Self employment requires a bit more documentation of income.
• Credit (FICO) Score and History:  Our credit score and history gives a complete picture of our track record handling debt obligations.  This score has a large impact on whether we get approved for a mortgage and our interest rate for all of our debt including car loans, consumer loans and credit cards. 
• Financial Situation:  If we have a huge nest egg of cash or stocks or retirement funds, we may qualify for more favorable terms because we are less of a risk.  Often we can use these assets to make a larger down payment to get a more favorable interest rate.

It is important to work with an ethical and qualified mortgage lender or broker.  Your buyers agent should have a few that are known to be reliable and helpful.

Acceptance:  the date when both parties, seller and buyer, have agreed to and completed signing and/or initialing the contract.Adjustable Rate Mortgage:  a mortgage that permits the lender to adjust the mortgage’s interest rate periodically on the basis of changes in a specified index.  Interest rates may move up or down, as market conditions change.Amortized Loan:  a loan that is paid in equal installments during its term.  Payments on this type loan typically are applied to interest and principal.Appraisal:  a professional estimate of value based on recent sales of similar properties that are located nearby the property.  This is a more detailed process that is similar to a Comparative Market Analysis (CMA).  CMA’s are completed by real estate agents and appraisals are completed by Licensed Appraisers.Appreciation:  an increase in the value of a property due to changes in market conditions or other causes. This is the opposite of depreciation.APR (Annual Percentage Rate):  The total cost of borrowing money which includes the stated interest rate and all other fees charged by the lender.  Comparing APRs between different lenders can reveal who is providing their services at the lowest cost.  The APR is the truest measure of the cost of credit.Assumable Mortgage:  purchaser takes ownership to real estate and assumes responsibility to pay an existing mortgage.  S/he assumes responsibility as the guarantor for the unpaid balance of the mortgage.Bill of Sale:  document used to transfer title (ownership) of PERSONAL property (such as a refrigerator or range) that is not permanently attached to the property.Comparative Market Analysis (CMA):  See Appraisal (above)Cloud on Title:  a condition that means the title to property has some type of problem that inhibits easy transfer to a new owner.  Title companies discover this situation when they undertake the pre-purchase title search and they work to resolve this type of problem.Condominium:  The ownership of a specific unit in a multi-unit building plus an undivided interest in the ownership of the common elements which are owned jointly with the other condominium unit owners.Consideration:  anything of value to induce another to enter into a contract, i.e., money, services, a promise. 

Cooperative:  A residential multi-unit building whose title is held by a trust or corporation that is owned by and operated for the benefit of persons living within the building.  Each “owner” owns a “share” of the trust or corporation and has a proprietary lease on their specific unit.  Financing of a coop is different than for a condominium.Deed:  a written instrument which, when properly executed and delivered, conveys title to real property.Deed in lieu of foreclosure:  A process whereby the borrower, who is in default on a loan, returns the property to the lender instead of going through foreclosure.  This tends to have more favorable effects on the borrowers credit report than a foreclosure.Discount Points:  a loan fee charged by a lender of FHA, VA or conventional loans to increase the yield on the investment.  One point = 1% of the loan amount.Easement:  the right to use the land of another.Encumbrance:  anything that burdens (limits) the title to property, such as a lien, easement, or restriction of any kind.Encroachment:  a building or some type of structure, such a fence or garage, which extends beyond the land of the owner and illegally intrudes on the land of an adjoining owner or a street or alley.Escrow Payment:  that portion of a mortgagor’s monthly payment held in trust by the lender to pay for taxes, homeowners insurance and other items as they become due.Fannie Mae:  nickname for the Federal National Mortgage Association (FNMA).  It is a quasi-government agency established to purchase mortgages from primary lenders such as banks and mortgage loan organizations.  Standards set by FNMA influence underwriting practices by lenders.Federal Housing Administration (FHA):  an agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is insuring residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money.FHA Insured Mortgage:  a mortgage under which the Federal Housing Administration insures loans made by lenders who meet its regulations.Fixed Rate Mortgage:  a loan that sets the interest rate at a specific and unchanging rate for the duration of the loan.  The rate is fixed at one level for the life of the loan.Foreclosure:  procedure whereby property pledged as security for a debt is taken by the lender and sold to pay the debt.  This happens when the borrower fails to pay payments according to the agreement in the mortgage.Freddie Mac:  nickname for Federal Home Loan Mortgage Corporation (FHLMC), a federally controlled and operated corporation to support the secondary mortgage market.  It purchases and sells residential conventional home mortgages.Good Faith Estimate:  an estimate of the costs a borrower is likely to incur in applying for and receiving the loan.  This must be provided to the borrower within 3 days of the lender receiving the loan application. 

Joint Tenants with Rights of Survivorship:  ownership by 2 or more people with any owners share passing to the remaining owners upon their death.Lease Purchase Agreement:  buyer makes a deposit for future purchases of a property with the right to lease property in the interim.Lease with Option:  a contract, which gives one the right to lease property at a certain sum with the option to purchase at a future date.Loan to Value Ratio (LTV):  the ratio of the mortgage loan principal (amount borrowed) to the property’s appraised value (selling price).  Example – on a $100,000 home, with a mortgage loan principal of $80,000 the loan to value ratio is 80%.Market Value:  the most probable price property would sell for in an “arms-length” transaction under normal conditions on the open market.Mechanics Lien:  a lien placed against a property by a contractor, laborer, or material provider who have performed work or furnished materials in the erection or repair of a building.  These liens must be satisfied to sell, refinance, or mortgage a property.Mortgage:  a legal document that pledges a property to the lender as security for payment of a debt.Mortgage Insurance Premium (MIP):  the amount paid by a borrower for mortgage insurance.  This insurance protects the lender from possible loss in the event of a borrower’s default on a loan.Note:  a written promise to pay a certain amount of money.Origination Fee:  a fee paid to a lender for services provided when granting a loan, usually a percentage of the face amount of the loan.Private Mortgage Insurance (PMI):  see Mortgage Insurance Premium.Second Mortgage / Second Deed of Trust / Junior Mortgage / Junior Lien:  an additional loan imposed on a property with a first mortgage.  Typically this loan has a higher interest rate and shorter term than the “first” mortgage.Settlement Statement (HUD-1):  a financial statement provided to the buyer and seller at the time of transfer of ownership, giving an account of all funds received or expended.Severalty Ownership:  ownership by one person only.  Sole ownership.Special Assessment:  a fee charged against a property owner to cover the cost of improvements such as new balconies, a new roof or sidewalks, etc.  This charge is over and above the monthly assessments.Tenancy In Common:  ownership by two or more persons who hold an undivided interest without right of survivorship.  (In event of the death of one owner, his/her share will pass to his/her heirs.Title Insurance:  an insurance policy that protects the insured (buyer or lender) against loss arising from defects in the title. 

The following is a list I give to buyer clients about assuring they are able to qualify for a mortgage. It is somewhat tongue-in-cheek but it has some good basic information to give mortgage applicants a “heads up” about how certain things can damage their chances of qualifying for a new mortgage.

1. Thou shalt not change jobs, become self-employed or quit your job.

2. Thou shalt not buy a car, truck or van (or you may be living in it)!

3. Thou shalt not use charge cards excessively or let your accounts fall behind.

4. Thou shalt not spend money you have set aside for closing.

5. Thou shalt not omit debts or liabilities from your loan application.

6. Thou shalt not buy furniture or new appliances or an expensive pure breed dog.

7. Thou shalt not originate any inquiries into your credit.

8. Thou shalt not make large deposits without first checking with your loan officer.

9. Thou shalt not change bank accounts.

10. Thou shalt not co-sign a loan for anyone.

We could add another commandment too — “Be sure the loan you apply for remains affordable over the long run”. This used to be common knowledge until our industry got caught up in the drug-like effects of huge appreciation in housing prices. We forgot to plan for the rainy day that has arrived. For the MILLIONS of homeowners in default, they are experiencing a financial Hurricane Katrina. The best advice is to work with a reputable and highly experienced mortgage professional who discusses long-term affordability of the mortgage you are considering.

The most obvious “strategy” for avoiding foreclosure is to make your mortgage payment, on time, each month.  The best way to assure that we can do that over the long run is to carefully select a mortgage that will keep payments affordable over time.  This requires consciousness that we may not be able to sell the home or refinance whenever we wish to do so (because the market or our credit score haven’t turned out as we hoped).  The promise of cheap interest for a few years has been turning out to be a nightmare for hundreds of thousand borrowers.

If you find yourself unable to fulfill your obligations to pay your mortgage on time, the most important step is to contact your lender immediately.  Delaying action or avoiding a conversation with your lender makes the situation worse and increases the chance you will lose your home.  The lender does not want to take your home if they can avoid it.  This is especially true now when there are so many homes in foreclosure.  The lender wants you to succeed in paying your mortgage because, if you dont succeed, they lose a lot of money.  (It costs the bank a great deal to foreclose and they often cannot get what you owe them in a foreclosure sale.)

When you contact your lender, ask to speak to the Loss Mitigation Department.  Be ready to provide them with accurate informationabout your financial situation.  Have an “attitude” that conveys that you want to do the right thing (keep current with your payment obligations).  Reflect on what has happened that is preventing you from making timely mortgage payments.

If the situation has been created by loss of a job, serious health problems or some other cause that makes it unlikely you can reverse the situation, then it may make the most sense to contact your favorite realtor at 773-841-6450 and initiate selling your home.  The sooner you sell, the more of your equity you will be able to protect …and avoiding foreclosure will protect your credit report from serious damage.

Contact a HUD-approved housing counseling agency.  You can call HUD at 800-569-4287 to find out about a housing counseling agency near you.  The city of Chicago (call 311 and ask for the foreclosure assistance program) and many other areas have programs to offer advice and advocate for you with your lender.

The National Association of Realtors (NAR) identifies a few strategies available to help you when you face foreclosure.  There is a brochure available from NAR by going online to: www.realtor.org/subprime_lending.nsf/pages/subprime_lending.  NAR also identifies some specific possibilities instead of foreclosure such as:

• Forbearance:  the lender may let you pay less than the full amount owed on your monthly payments or skip a few payments if there is a reasonable plan to catch up on the loan payments;
• Reinstatement:  you can catch up on past due payments when you are in better shape financially;
• Repayment Plan:  the lender allows you to make payments toward the past due balance.  In effect, you have a separate payment each month that goes toward the past due balance.
• Loan Modification:  the lender changes the terms of the loan to help you avoid foreclosure.  This may involve your loan being shifted from an adjustable rate mortgage to a fixed rate mortgage with a lower interest rate.  The Federal Government is making moves to help this process by making FHA loans (loans insured by the Federal Governement) available for borrowers facing foreclosure.

As stated earlier, the most important step is to take the first step.  Don’t ignore this problem!  It is normal to feel embarrassed or ashamed about foreclosure or not having enough money to pay our bills.  Don’t let these uncomfortable feelings prevent you from taking action.  The sooner you act, the better the outcome. 

If you need advice or support, call a trusted realtor and ask advice. 

The number one complaint about contractors and home repair and maintenance companies is that they are unreliable.  The lack of reliability relates to them not showing up to give an estimate (they don’t even call to cancel!!);  promising to start the job or show up to do the work at a certain time and failing to do so; claiming expertise in areas they have no expertise in; assuring us they can complete the job quickly and then taking much longer to do so; and doing poor workmanship and either claiming it is good workmanship (that our standards are too high) or covering up the shoddy workmanship in some way.   There also seems to be a higher than average rate of dishonesty and “sleazy business practices” in this industry.

It sometimes seems the average homeowner with basic skills (and a few hours spent at Lowes or Home Depot) could be successful in home maintenance and repair JUST BY SHOWING UP when s/he promises ….and being honest. 

If you have had enough bad experiences with home maintenance and repair “professionals” then you need to know about AngiesList.  This membership organization is a homeowners dream come true.  Members report on their experiences with a wide range of professionals (not just home maintenance and repair) and their experiences are available in the form of ratings of various professionals and companies.

The ratings include information about the costs, the quality of the work, the consumers inclination to hire this company again, promptness, professionalism, etc.  I have found excellent resources through AngiesList and the companies seem very motivated to be especially responsive since they know we will be making a report to AngiesList after the service is complete.

AngiesList even has a complaint resolution department and they will ask you if you want them to get involved if the report you provide indicates you are unhappy with the company or professional you hired.  The cost for this service is less than $100. per year and I give a one year membership as a gift to my clients after completing a sale. 

If you want to sign up for AngiesList just type www.angieslist.com into your browser and follow the prompts.  It is the best deal available for home owners.  It also lists attorneys, accountants, massage therapists, and almost every other service you can think of. 

In Illinois, the foreclosure process involves court proceedings and typically takes about 12 months to complete. During the first 90 days, the negotiations and discussions tend to be between the lender and the home-owner. In some cases, the owner/borrower who realizes they are not going to be able to pay the loan balance, or catch up on past due payments, may decide to give a “deed-in-lieu-of-foreclosure”. This results in the bank assuming ownership of the property and avoids the bank incurring foreclosure and litigation costs. This MAY reduce the negative impact on the borrowers credit report.

In the absence of a negotiated settlement between the lender and the borrower (after the first 90 days of the process) the lender turns the process over to foreclosure attorneys who begin the judicial proceedings. When the attorneys get involved, the costs to the property owner escalate dramatically, making it difficult to stop the process and retain the property.

The foreclosure process begins (in an official sense) when the lender takes legal action by filing a claim against the borrower/owner in the approriate court. A “notice” of the legal action is given to the borrower via her/him being served with legal papers and/or via a notice in the newspaper. The borrower has 30 days to respond or the lender will continue the foreclosure process by asking the court to make a ruling in the matter against the borrower and in favor of the lender. If the court rules for the lender and against the borrower, the lender can schedule a “public sale” to recover the loan balance and all costs and fees involved in initiating the foreclosure process.

The borrower can terminate the foreclosure process up to 90 days following notification of the court action by paying past due payments and all costs and fees incurred by the lender. The borrower has a minimum of 7 months after notification of court action if she/he pays the entire loan balance and fees and costs.

If the process proceeds to selling the property, a notice must be sent to all owners and other relevant parties. The notice must include: the legal description of the property; the street address; the day, time, location and terms of the sale; when the property may inspected before the sale; the case title and number; the court involved in the process; and a contact person.

The sale has to be announced in the real estate and legal notice section of the newspaper of record used by the court once a week for 3 weeks. The first publication should be no sooner than 45 days before the sale and the last notice should be no later than 7 days before the sale. If the sale must be postponed, new notices may be required.

The sale is typically handled by the county sheriff who conducts a public auction. The property is sold to the winning bidder and after the winning bidder pays the amount they bid, they receive a certificate of sale which will be confirmed by the court.

Upon confirmation of the payment by the court, the winning bidder takes possession of the property unless it is occupied and eviction is necessary. If the property is occupied, an eviction process is untertaken and the winning bidder gets possession after 30 days when the residents have left the property.  

Lincoln Square Real Estate prices range a great deal. This depends on type of property, as we would expect, and yet it ranges quite a bit within type. The variety of places in Lincoln Square allows the area to continue to draw a nice mix of people. This variety makes for a more interesting atmosphere and avoids the “one note” element that some neighborhoods have. Although Lincoln Square is gentrifying it continues to have affordable housing. It also has some amazing luxury with single family homes above 1.7 million dollars.

Price range for Chicago Lincoln Square homes (single family) is quite broad. A 3 bedroom, 1 bath house (4 available) will cost between 390k and 489k. To get a 3 bedroom, 2 (or more) baths the range is 399k to 920k with a median of 620k — there are 18 available.
A 4 bedroom, 2 bath home runs 449k to 699k and there are just 3 of those available. When you get to 4 bedrooms and 2 1/2 baths the prices go between 449k and 1,495k with a median of 729k (31 available). For a 5 bedroom home with more than 2 bathrooms the range is 479k to 1,775k with a median of 995k (23 available).
2-4 Flats range from 419k to 1,499k with a median of 609k with 56 available. For multiunit properties the range is 799k to 3,440k. There are 6 multiunits available with 3 below 1,000k and one at 1,500k, one at 3,200k, and the top of the range at 3,440k for an 18 unit place on Western Ave.

Lincoln Square Condos start around 133k and top out at 625k. For a 1 bedroom, 1 bath (53 available) the prices range from 133k to 285k with a median of 200k. For a 2 bedroom, 1 bath (97 available) the range is 177k to 330k with 230k as a median. For a 3 bedroom, 1 bath (14 available) its 200k to 365k and a median of 235k. For condo units with 2 bathrooms or more the prices range from 200k to 625k for 2 bedrooms (131 available - median of 339k); for 3 bedrooms it is 230k to 579k (median of 400k — 36 available). For a 4 bed, 2 bath condo, the list price is 439k and there is only one available.

Information deemed reliable but not guaranteed (6/21/07)

Replacing a roof can be one of the most expensive home or building maintenance tasks.  Probably major tuckpointing and replacing siding are the only maintenance items that are consistently more expensive.  Although we can’t make our roof last forever, there are some maintenance practices we can do that will dramatically extend the life of our roof.  The ideas below came from a conversation I had with the retired roofer who put the roof on my porch (I replaced the old porch last year).  He was amazed at how few people undertook the inexpensive maintenance efforts and, instead, just let their roof deteriorate.

If you are fortunate enough to have a metal roof then your roof is going to last many many years with minimal maintenance.  This type of roof is expensive at first, then nearly maintenance-free for the next 50-100 years.

If you have a shingle roof then the primary maintenance is to assure that trees are not rubbing against the roof (and damaging the shingles by abrasion) and that trees are not preventing the shingles from drying after it rains or snows.  Continuous exposure to moisture is damaging to shingle roof material. 

When you need to have your shingle roof replaced, be sure to have the roofer use 50+ year shingles.  There is only a small price difference between the cheapest and the best shingles.  This is because most of the cost of reroofing is labor (and insurance for the workers since there is such a high injury rate among roofers).  Using the best shingles also makes your roof more resistant to wind damage since these shingles are rated to withstand much higher windspeeds without blowing off.  The better shingles also have a more three dimensional appearance — they look more appealing.

Most multi-family buildings, including condos, have flat or slightly sloping roofs.  These roofs are most often a made of a rubberized asphalt material.  It is attached to the plywood or other substrate by heating it (which melts the backing somewhat and making it glue itself to the material below) and overlapping it.  This “torch-down” roofing material is black, so it absorbs and holds tremendous heat in the summer.  Heat eventually breaks down the roofing material causing the roof to fail.  Some newer buildings have a roofing surface made from a synthetic material.  These tend to last much longer and require less maintenance.  This roofing material has not come into widespread use at this time.

If you have a flat roof or a slightly sloped roof then it is important to prevent buildup of organic material, such as leaves and branches, in order to prevent moisture from remaining of the roof.  Moisture breaks down this type of roofing material in much the same way as it does on shingled roofs.   

A very important maintenance activity for flat or sloping roofs is coating the roof with a weather resistant material.  These coatings reduce heat build-up — they are usually light-colored — and they prevent degradation of the rubberized asphalt material by placing a protective film between the roofing material and the elements.  They protect the roofing material in much the same way that paint protects wood.

The roofer I spoke to told me that cleaning and coating the roof with a high-quality protective material will extend the life of the roof up to 30 years or more.  These high quality coatings are available at all roofing supply houses as well as hardware stores such as Clark-Devon Hardware. 

Since the injury rate on roof work is very high, especially for inexperienced homeowners, it is best to hire someone to maintain your roof.  Make sure all contractors you hire to work on your roof (or any other area of your home) have worker’s compensation coverage for their employees and subcontractors.  Most homeowner’s insurance policies exclude protection for the homeowner for injuries sustained by individuals doing work on our homes. 

Have you noticed that when you are commuting inbound, toward the Loop during rush periods that you can get seats on the train if you board at the Rockwell or Western Avenue stations?  When I have made the trip downtown during rush periods, I have noticed that commuters from stations closer to the Loop often cannot even board the trains because they are too full.  Meanwhile those  of us from Lincoln Square can always find room on the train and most of the time we have a seat!  Although the Damen Ave. station is in Lincoln Square, it is a bit tougher to find a seat when you board there during rush periods ….but there is never a problem boarding the trains at Damen.  Although this isn’t a huge issue, it is another thing that makes me love Lincoln Square.  Have a seat and enjoy the ride.