The residential real estate slump has brought us our fair share of bad news. But nothing has been more sobering than has been watching as foreclosure rates across the country, and at home in Illinois, have risen. No one benefits from a foreclosure. And no one in the housing industry wants to see them.
We woke up to some good news this morning, though, as Illinois – and several other states – have reached a settlement of their lawsuits against former mortgage star Countrywide Financial, a settlement that will keep 21,000 homeowners in Illinois from losing their homes to foreclosure.
You can read about the story on the Chicago Tribune’s Web site here.
Basically, Bank of America, which purchased Countrywide earlier this year, has promised to work with struggling homeowners to work out new mortgage loans at interest rates that, the Tribune says, could be as low 2.5 percent. The company has also agreed to pay cash to people who have already lost their homes.
I’m glad to see this. As I mentioned earlier, no one benefits from foreclosure. The banks certainly don’t want these homes. That’s why I always advise homeowners, if they see themselves beginning to fall behind on their mortgage payments, to immediately call their mortgage lenders.
Most times, lenders can work out some solution to prevent owners from losing their homes. We’ve seen far too many foreclosures during the housing slowdown. Hopefully, the Countrywide settlement is just the start of a slowdown in the number of people in danger of losing their residences.
It started in the late 1990s, and escalated during the housing boom of 2001 through 2006: People began looking at their homes as giant piggybanks. 
You know what I mean. People purchased homes, lived in them for a year or two and then sold them for big profits. Everyone, it seemed, was happy.
That’s changed. Housing prices, though still solid in markets like ours here in Chicago, are no longer skyrocketing. In some parts of the country, housing prices are actually falling. According to real estate Web site Zillow.com (www.zillow.com), more homeowners than ever are selling their homes for a loss. In the 12 months that ended June 30 of this year, nearly 25 percent of homes sold across the country sold for less than the sellers originally paid for them. This, of course, is a disastrous transaction for sellers, probably only made under duress. The sellers had to sell now, and had no other options.
What’s the lesson here? It’s a simple one: The new real estate market is one that stresses patience. If you want to do well in it, you should purchase a home that you like, one in which you want to spend a significant amount of time. If you want to boost your odds of making a large profit when you sell your current home, be prepared to stay in it for five, seven or 10 years, at least. The days of looking at homes as quick moneymakers should be over.
The good news is that Chicago buyers, if they’re patient, will see their homes increase in value, even as the real estate market works through its current slump. During the housing boom, markets on the East and West coasts saw property values shoot sky-high. In Chicago, we saw healthy gains, but not unrealistic ones. That means our market isn’t struggling as much as others right now. If you don’t want to be thrown for a loss when it’s time to sell, exercise some patience. If you purchased in the last year or two, wait a few more, if possible. If you purchased five, seven or 10 years ago, you can sell with confidence: Your Chicago home has most likely appreciated significantly.
The best seller is one who is highly motivated. A highly motivated seller is more likely to sell his or her house at a lower price, insist on less contract stipulations, and allow for a shorter closing time. It also helps to determine why a home-owner may be motivated to make a quick sale; learning these motives will help you make a reasonable offer and help the seller get what they want: a timely sale.
When given the opportunity to meet with sellers, ask them why they are selling. The reasons could be anything from a job change, to a need for more space, to financial problems. If you can solve their problem, whether it stems from time or money, do so. For example, if the sellers are highly motivated because they need to move quickly, give them a fast sale - and a lower price. If you can make an offer (even a low one) that gives them cash in a short amount of time, they are more likely to accept. There are also some sellers that you should avoid. Not every seller is as genuinely motivated as they make themselves to be. Some possible hints:
1) They stall on having the home appraised or inspected
2) They are unable to clear up liens against their property
3) The seller does not own 100% of their property
4) They push back the move-out date
5) The seller does not have a replacement property or back up plan etc. etc. etc.
It is impossible to find the perfect seller, but it is possible to find out which sellers are legitimate, and which ones will amount to nothing more than a headache and lots of time wasted!
I always tell people how fortunate I am to sell residential real estate in the city of Chicago. Unlike in the large metro areas on the East and West coasts, the housing market in Chicago and its suburbs is a fairly steady one: We don’t see huge upswings in housing prices. At the same time, we don’t see the stomach-churning drops that markets such as San Francisco and San Diego have seen recently.
I was reminded once again about my good fortune when I studied the latest housing statistics from the Illinois Association of REALTORS®. Total home sales in Illinois – which includes single-family homes and condominiums – jumped a healthy 8.5 percent from March to April.
The Chicago area itself was particularly strong. According to the state real estate association, the median price of a home in the city increased 3.4 percent in April to $300,000. One year earlier, that median stood at $290,000.
This means that Chicago sellers can still, despite the gloomy reports they read in the media, expect to see solid appreciation when they move their residences. This isn’t the case in other parts of the country, where median prices are dipping, sales times are increasing and sales themselves are faltering. Chicago, despite its many amenities, doesn’t see its housing prices rise and fall as wildly as other markets. While we don’t then see the dizzying heights, we’re also spared the big falls.
If you’re a seller, this means it’s OK to put your home on the market here. You will sell it if you set a fair price. And you will make a solid profit. If you’re a buyer, it means there are still a number of good homes from which to choose. Remember, it’s great to be a real estate agent in Chicago. This means it’s also great to be a buyer or seller here, too.
I’m beginning to understand how lawyers must feel. The news lately has been filled with negative stories about the residential real estate industry. I cringe when I read these because I know from firsthand experience that the vast majority of real estate agents practicing in Chicago are good, hard-working, honest people. They are people who only want the best for their clients.
It gets hard to convince others, though, when front pages of local newspapers carry the news that dozens of Chicago-area residents are now facing federal charges of mortgage fraud. That bit of depressing news is what I, and countless other Chicago-area residents, read last week in the Chicago Sun-Times.
The 67 area residents arrested are among more than 400 across the country whom have been charged as part of Operation Malicious Mortgage, a nationwide campaign designed to battle fraudulent home-lending schemes. Prosecutors are saying that more than $170 million in illegal home mortgages have been issued by lenders across the country, and then secured by several hundred residential properties in Chicago and its suburbs.
The operation made national headlines last week when FBI agents arrested two managers with Wall Street firm Bear Stearns, accusing them of lying to investors about the struggling subprime mortgage loan industry.
Those arrested so far (including those in Chicago) are comprised of mortgage brokers, mortgage loan officers, homebuilders, attorneys and real estate agents. So, yes, it’s a wide-ranging investigation, and one that promises many days of negative headlines for the real estate industry.
But just as all those lawyer jokes aren’t fair to the majority of lawyers who are ethical and hardworking, it’s unfair to paint the entire residential real estate industry with a negative brush. As I said at the beginning of this post, the majority of real estate professionals here – despite those arrested in the Chicago portion of Operation Malicious Mortgage – are trustworthy individuals. They work hard for their clients. They wouldn’t dream of doing anything illegal, anything that would harm the reputations they’ve spent years cultivating.
The best thing home buyers and sellers can do when selecting a real estate agent is to always ask for references. Call those references and ask them about how ethical the agent was, or about how hard he or she worked. If an agent won’t give out referrals? It’s time to move on to a new one.
Mario Greco is the #2 full-service residential real estate agent in Chicago. He has sold over $575 million in Chicago real estate since 2002, and leads a group of 8 agents and 9 office personnel.
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