Closing Chicago Real Estate

Here’s what I’ve been reading in real estate around the Web…

Home Buyer (11/6/09 version) Tax Credit:  10 Things to Know. I sometimes call myself a real estate lawyer but have been admittedly slow in getting up to speed on the revised tax credit…I do get to celebrate a few holidays, no? For my money the big change is the $6,500 credit to home buyers who have previously used the same home as principal residence for at least 5 of the last 8 years. Also note that military members on extended duty outside the U.S. have until 4/30/11 (a year beyond the rest of us) to take advantage of the credit. For the most part, the “first time” homebuyer part of the credit remains the same expiring 4/30/10 (or 6/30/10 for properties under contract by 4/30/10).

Here and Here are 2 somewhat complimentary stories on the success/not of the Making Home Affordable program…one a more national and the other more Illinois focused. On the upside, mortgage loans ARE now being modified (the lack of modification efforts used to be a favorite rant of mine). But, at least in Illinois only 7% of the modifications are permanent. So, does the program simply serve to lengthen the housing crisis by giving false hope to homeowners who in the end won’t be able to afford their homes in the end regardless??

Don’t Buy a House–Yet. I think the op-ed makes a compelling argument…namely, real estate prices likely haven’t hit bottom and the market’s recovery will be agonizingly slow so what’s the rush? Foreclosure rates remain near their high and banks haven’t even fully released all of their inventory onto the market and the unemployment rate is going to remain around 10% through the end of this year…those are facts.

Town house or condo. The difference isn’t always so obvious. Usually the townhomes are multi-story with the small front/backyard that you actually own whereas a condo is a self-contained unit on a single floor and the rest of the building is commonly owned. But it’s not always so stark…legally look at the declaration, a condo must use “condominium” is the legal title of the association and of course the Illinois Condominium Property Act governs condos but only section 18.5 governs town homes.

And lastly…

Debtor’s Dilemma:  Pay the Mortgage or Walk Away. A fairly lengthy piece from the Journal focusing on people who CAN afford to pay their mortgage loans but are choosing not to based on the property’s plummeting value. Hard for me to empathize too much with these people…I think this debate is centered in futile, American vanity. Namely the focus on your home’s value…if you’re like what 75% of people who aren’t planning on relocating, you needn’t/shouldn’t care if your home value has dropped. Banks aren’t offering lines-of-credit anymore anyways. Sit back, take that mortgage interest deduction, and enjoy the view.

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Comments (1) Jan 16 2010

Well, actually this post and the couple pieces of new legislation below got me to thinking about a favorite story that an editor of mine back in my Washington, D.C. journalist years used to say about how one of the worst things that ever happened was the invention of air conditioning because it allowed for Congress to stay in session for longer periods of time amidst the muggy, D.C. summer and thus create more unnecessary legislation. Might a similar sentiment apply to Springfield, IL? (Judge for yourself below).

A couple changes to the main bodies of law that I’m looking at on a regular basis:

First, the Condominium Property Act amended to provide that for purposes of voting on changing an association’s bylaws a unit owner more than 60 days past due on her assessment payment shall not be counted for purposes of determining a quorum. Of course those persons can still vote on the potential bylaw amendment.

Second, to the Residential Real Property Disclosure Act a 23rd disclosure added regarding knowledge of the manufacture of methamphetamines. What I really don’t like about this one is the new disclosure doesn’t just leave it at knowledge of the manufacture of methamphetamine but it references the Methamphetamine Control and Community Protection Act’s definition of “manufacture methamphetamine.” How many buyers and agents will have knowledge of that and thus aren’t we just wasting paper here?

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Comments (0) Aug 21 2009

Some great posts here, here, and a comment from the wasserblawg regarding that ever moving target that is FHA insured financing. It seems times they are a-changin’ both in Springfield and Washington on this issue.

First, down at the General Assembly while they haven’t been passing a budget, both the House and Senate have approved HB0155 regarding condominium associations exercising their right of first refusal. It’s awaiting action from the Governor. Here’s a synopsis of the bill:

Amends the Condominium Property Act. Provides that in the event of a sale of a condominium unit by a unit owner, no condominium association shall exercise any right of refusal, option to purchase, or right to disapprove the sale, on the basis of the type of financing used by the purchaser.

Sadly, my analysis of this bill is that it’s worthless. Why? The reality is that condo associations NEVER exercise their rights of first refusal even if the most disagreeable potential buyer were set to move in or surely based on financing type. Why? What association wants to spend a few hundred thousand dollars to own a unit that provides no benefit to the general membership? Never happens!

The FHA mortgage letter seems like more of a mixed bag…looking negative in the short -term but good longer-term for condo buyers/sellers & associations. Take a look at Mike’s post for the nitty-gritty but my opinion is based on the elimination of the individual unit FHA “spot” approvals will surely hinder some buyers in the near-term. BUT, the elimination of the right of first refusal restrictions is a big positive going forward for buildings/associations who are on the ball and get their buildings/projects FHA approved.

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Comments (0) Jun 20 2009

So I had a shocking experience at a unit owner meeting of the condominium association where I live regarding amending our declaration to eliminate the association’s right of first refusal which practically would allow FHA borrowers to purchase units in our building. Here’s my previous post regarding a memo I put together on the issue.

Unfortunately we didn’t get enough votes to amend the declaration. Such is life, you win some and you lose some and I’ll do a better job getting the word out for the next go-round.

But what was absolutely eye-opening about the tone of the meeting and some of the comments made by fellow unit owners was the absolute ignorance about FHA loans. Among many older residents apparently FHA loans are only for poor, minorities. Sadly, I heard more than one statement to the effect of “we don’t want those kind of people living there.” I clearly heard code for we don’t want minorities in our building. And without even touching the history of racism in the United States what’s unfortunate is that perception is just plain wrong. The reality is that the FHA program is a real go-to loan option these days for younger, relatively high-income earners who simply don’t have huge savings in place yet.

Good luck amending your declaration!!

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Comments (1) Jun 17 2009

Thought I’d post a note I sent around my condominium association…we’re trying to amend our declaration right now and I’d guess many, many other associations are in the same boat.

I wanted to make sure everyone is clear about the critical importance of our Association’s amending Article 7 of our declaration to remove the Association’s right of first refusal. I would suggest that making this amendment immediately increases the value of our units simply because making the change opens the doors to potential buyers who were previously shutout and are shutout from purchasing into many other condominium associations.

As a real estate attorney who has at varying times represented 90 different condominium, townhome, and homeowners associations and hundreds of people buying residential real estate, I have NEVER seen an association exercise its right of first refusal and actually buy a unit. A good example being our Association’s consideration in purchasing the first floor unit last fall. Few associations want to spend hundreds of thousands of dollars to own units that they have no use for and simultaneously give up that unit’s assessment income. So practically, the right of first refusal currently contained in our Association’s declaration is a power we will almost certainly never use.

The Federal Housing Administration (FHA) Financing Issue

The key issue: If a condominium association’s declaration contains a right of first refusal, potential buyers seeking an FHA-insured mortgage loan cannot purchase into that association (like ours currently).

This issue has risen in importance recently due to the overall economic downturn, the so-called ‘mortgage meltdown,’ and the general tightening of mortgage lending requirements. We didn’t hear about this issue prior to this year much because mortgage dollars were so loose and nearly anyone could get 100% financing from any number of private banks. FHA insured mortgages (96.5% mortgages) have slightly more stringent appraisal standards so people didn’t hassle with them because it was so easy to get mortgages elsewhere. However, what has changed in the last year or so is that money has dried up so now potential homebuyers are left with two primary mortgage options: Coming up with a 20% down payment for a traditional 80% mortgage loan OR utilizing the 96.5% FHA insured mortgages (the government has nothing to do with this lending, it only insures a private banks mortgage making it a better risk for the bank). And in many affordable buildings like ours that are attractive to first-time homebuyers those sorts of people often are younger with good incomes but little in the way of savings. In my experience approximately 25% of the real estate purchases contracts I have been reviewing over recent months include FHA financing. If we don’t amend our declaration we’re eliminating that huge group of potential buyers and consequently hindering the value of all units.

I did not propose this declaration change but I do strongly support it. Contact me to discuss.

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Comments (0) Jun 02 2009

Looking at the picture why doesn’t she just close the drapes? That’s what I do when I stay downtown.

I chuckle but there is a teachable point here which is to educate yourself on a home that you’re thinking about buying at ALL HOURS. Especially in a multi-family housing setting, the environment in a neighborhood or on a particular street is going to be very different if you’re going house hunting only in the evening or on weekends (which is what most people do) compared to say Tuesday rush hour at 5pm. I can think of many complaints of the loud parties from the unit above that may have been discovered if potential buyer visited the unit a couple times on a Friday/Saturday night. I mostly like where I live but I think we erred here to an extent looking at our home only on Saturdays and didn’t really realize how busy and sometimes noisy the street on which we live can be.

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Comments (0) Apr 30 2009

I like that title, I think we’ll use this as sort of an ongoing series providing chunks of news that we see covering the real estate industry. Ok, as Dr. McLaughlin would say, Issue 1:

First this from the Sun-Times:  Irving Park Condo Owner Singing an Angry Tune. Nothing new to readers of this blog…building defects, no association reserves, and a condo developer no where to be found. The Jeopardy answer:  What’s the worst type of property to buy??

A very appropriate piece describing this era in real estate:  There’s No Place Like (Someone Else’s) Home.  I think it’s sort of a creative way one up from home staging…The house is owned by a builder, who hasn’t been able to sell it for more than a year. And while someone really does live here, it’s as part of an elaborate bit of stagecraft aimed at moving Southern California’s echoing inventory of luxury vacant homes.

This $1.2 million seaside pied-a-terre is occupied by Johnna Clavin, a 45-year-old Los Angeles event planner and decorator who has seen business slow. In exchange for giving the townhouse a stylishly lived-in look, she gets to stay there at a steep discount and stands to earn a bonus if the house sells fast.

Finally, U.S. Expanding Foreclosure Prevention. Sounds like the 2nd shoe to drop of Obama’s foreclosure prevention plan…The new measures announced Tuesday would especially help many distressed homeowners who have both first and second mortgages — and can’t afford either. The Treasury Department now wants lenders and their customer-service agents to agree to modify both loans as part of a comprehensive solution.

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Comments (3) Apr 30 2009