Peter Kedzior

Summer is long over but I still remember my younger daughter sticking her toe into the calm waters of Lake Michigan to check if the lake’s temperature is finally good enough for her to jump in. That in turn resembles the behavior of so many home buyers waiting for the prices to bottom out. Is the market still going down? Is real estate still getting cheaper and cheaper? Will the continued unemployment force more foreclosures and devaluate home prices even more?

Nobody knows answers to these questions - all we can do is watch the market and the prices of homes that recently got sold, in increasing numbers. I spent last 9 months “in the field” – showing homes, making offers, negotiating deals and, so often, losing them to other buyers. A year ago, it was almost unheard of that a house would sell over the asking price with 3 or 5 competing offers. Just within the last two months I experienced this scenario at least once a week. Not all homes sell like that, only the “great deals” homes: no major repairs required, in good location, and at unbelievably low prices. So low that prospective buyers were happy to offer up to 10% ABOVE the asking price, just to get the home under contract ahead of others.

So, are there still people who think that home values will continue to drop? Yes, there are – they are still waiting for the prices to be “just right” – in 6 months or even a year from now. Waiting, however, is over for so many others who are actively seeking the great deals that are available here and now. They are enjoying huge price reductions, good quality homes, and low interest rates on mortgages. My daughter’s friends had a long and joyful summer vacation. They did not wait until the water’s temperature was just perfect. They jumped right in and never regretted it. This is what I wish most of undecided home buyers did. Here and now.

Are you staying away from short sale deals? If you do, you may be right after all. It turns out that even after months of negotiations and waiting (mostly waiting), after haggling about the commission, when closing comes, it could not be the end of distressed seller’s nightmare. There come “deficiency judgments”. Reports from around the country indicate that some short sale sellers are receiving “bills” for the unpaid amounts on their loans that thought were forgiven. It turns out that while the mortgage (or the security interest in the property) was released at closing, the unpaid balance on the note (the loan) might have not.

Still owing money to the lender after closing must be the seller’s worst nightmare but it happens. So maybe distressed sellers should not be happily accepting the first “low ball” offer they get. Perhaps if they waited a little longer, another buyer would come at with a better deal thus reducing any deficiency he might owe to his lender?

Not every short sale is doomed and not every distressed seller will still owe money after closing. Still, with a number of foreclosures in Chicago suburbs on the rise, it may be smart to seek a specialized legal advise before accepting any offer on a short sale.

Increased number of foreclosures available at deeply discounted prices caused July 2009 home sales in Chicago suburbs to rise to levels not observed in almost 10 years. The encouraging factor is that a lot of homes were sold to first time home buyers, not just savvy investors taking advantage of deflated home prices. The government tax credit is playing an important role here and, as most involved in real estate hope, will continue to boost sales of existing homes throughout the fall season.

While foreclosed homes sell fast, the inventory of privately owned real estate remains high. Some condo projects (as in this Rolling Meadows, IL subdivision) have over 10% of units listed for sale and very few of them changing hands, except for foreclosures and short sales. Some buyers even refuse to look at any other properties, just waiting until the “right deal” comes along. All types of distressed sales have been deflating prices of homes in Chicago suburbs at 10-15% annually and as long as the supply of bank foreclosures is steady, nobody really expects homes to gain value any time soon.

I want to believe that each economic slow down leads to a prosperity. I want to believe that if you are persistent and optimistic enough, you will eventually ride out every economic storm and accomplish your goals.

The recent years taught us some hard lessons. We learned that it is unreasonable and naïve to expect that home prices will continue to rise, credit will be abundant and everyone will just keep buying houses no matter if they can afford them or not. Now, among all the pessimism and bad economic news, it is hard to be hopeful about the housing market in this country. Let’s not forget however that we are experiencing now a natural and, in many ways, completely healthy economic cycle that will end and change into another one, as all market trends eventually do. Everybody expects that this recession will turn into market recovery – some day. As hard as it is to believe, we all will be looking back in few years and remember how cheap real estate was in 2009 and 2010. Nobody knows exactly when but the market turn around is inevitable.Those Realtors who believe and have the guts to ride out this storm will flourish in the end. Their business will pick up and their hard, lonely and oftentimes, unthankful work will be awarded. So keep up the faith. The end of bad times is just around the corner, wherever and whenever that could be.

Are the old, good days back? The days of scarce “deals”, anxious buyers and multiple offers? Well, not really, at least not for the most homes on the market. There are however listings that are highly sought after. Almost all of them are bank-owned properties, oftentimes listed well bellow the comparable homes in the area. As we all know, the prevailing opinion among today’s home buyers, is that the real estate prices are so much deflated and sellers so anxious to get rid of their homes that basically any offer would "fly", will be considered, counter-offered and, finally – lead to a sale. As it turns, it’s not necessarily the case with the hottest listings on the market, especially - REO properties. These homes are hot bargains and buyers are very much aware of that. There are plenty of people on the lookout for them almost everywhere.

A few days ago I had a buyer who was interested in one particular condo subdivision. For over 2 months none of the homes there came even close to his target price. When finally a REO condo was listed, within 48 hours my client put an offer at about 20% below the list price. Next day we learned that there are 2 other offers on the table and that my client was not the highest bidder. We are now again on the lookout for a condo there. This time my client has learned his lesson and is prepared to make an offer that would be at, or very close to, the list price.

Times are changing and we will see more and more bargain hunters. These leveraged buyers are necessary to bring some stability to the real estate market and reduce inventories. In Chicagoland, the number of bank owned properties is still on the rise. Foreclosed houses and condos represent at least a half of all sold properties this year. More bargain hunters are still needed!