Real Estate Information Archive

The most important piece of a person’s financial life is their credit score. Whether buying a new home, applying for a job, refinancing your home, paying off debt, or getting utility service, your credit score will drive the outcome. One would think that Americans are all aware of what the scores are measuring and what factors play a part. But, most Americans do not know enough about the three digit rating or what is involved. Do not let these credit score myths get in your way when preparing for the purchase of your next Chicago home.

Myth: Checking a credit report can either damage or lower your score. A credit report can be conducted by you or someone like an employer as many times as desired with out having any impact on your credit score. Reviewing your credit report will never change your credit score. Just make sure that reports are retrieved through the bureaus or a legitimate score seller.

Myth: Age, sex, and income are factors that affect your score. None of this information plays a role in determining your score. A higher income may make it easier to pay off debts, but income and net worth have no impact of credit scores.   

Myth: A credit score can be destroyed by shopping for a loan. When seeking to extend credit, too many inquiries can have a negative impact your credit score. However, when several inquiries are made by the same type of lender with in a 14 day period they only count as one inquiry against your credit.

Myth: Your score can be hurt by credit card offers. When companies offer you their credit cards it does not have any affect on your score. Unless, your take advantage of all the offers and carelessly use all of the credit available. The number of credit cards a person manages does not matter. The important thing is maintain a low ratio of used to available credit.

Myth: Credit scores of married couples are shared. A credit score can only belong to one person, just as one person can only have one score. A married could does not share a credit score, but their scores could have an affect each others. When opening a joint account, the information accumulated from that account’s activity will be reflected on both people’s credit report. If all of the couple’s accounts are joint, then their scores will be somewhat similar.

Myth: Closing unused accounts improves credit scores. Unused accounts most likely contain available credit, which is an important part of a credit score. Closing unused accounts removes available balances from the equation. This causes your ratio of used to available credit to increase, ultimately affecting your credit score.

Myth: Paying off bills is a quick way to boost credit. Over time, a good record of properly paying bills will improve credit. Credit reports reflect your long term history, scores do not change overnight.

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You have most likely heard the term “shadow inventory” and may well have wondered what it means. Interestingly enough, while the shadow inventory will certainly affect the Chicago real estate market, opinions vary as to its precise meaning.

For some the term means that lenders may be holding on to foreclosed properties for fear of flooding the market. Others believe that it describes the high number of homes in the foreclosure process which will eventually go up for sale. And still a third group includes the possible flood of properties which will hit the market when homeowners who have been holding off selling finally decide to do so. It is generally agreed, however, that the shadow inventory of Chicago real estate includes all delinquent loans and real estate owned (REO) properties that have not yet reached the market. In any event, there is a strong belief that a very large number of presently unlisted homes will soon cause an overabundance of available properties and thus directly affect prices.

Is There A Glut?

When this glut will occur or its actual impact is also debatable. The number of homes entering foreclosure has recently abated as owners and lenders have pursued loan modification and short sale alternatives. However, as lenders are more efficiently clearing out the backlog of properties in distress, the foreclosure process has quickened, and more and more REO’s are becoming available for purchase.

Many analysts use the “tip of the iceberg” analogy to describe the current situation, feeling that a massive number of distressed properties and underwater loans sits just below the surface. Some believe that the number of potential homes for sale greatly exceeds the number currently on the market, and a Standard and Poor’s recent report predicts that, at the current rate of sales, it will take at least three years to clear out all shadow inventory.

What Does It Mean?

So what does all this mean for Chicago real estate? Actually, two very different viewpoints are emerging in this regard. The first can be seen in a somewhat positive light: because business will increase in the next year, potential investment opportunities will also rise, and sales, too, will increase. It is also possible that competitive bidding will drive prices up, thus averting a second housing market collapse. On the negative side, however, many industry “experts” predict that the weight of the influx of homes for sale will drive prices down at least another 8% by the end of 2010.

And then add to the mix the unknown variable of the unemployment rate, and the future of real estate sales is really anybody’s guess.

The Home Buyer Tax Credit was set to expire last month, but because of the high number of buyers who purchased homes by the April 30th deadline but were unable to close on their Chicago real estate, Congress has extended the closing date to September 30, 2010. Apparently, the demand to close by June 30^th was greater than expected, thus overwhelming mortgage lenders. In addition, short sales and foreclosure purchases require more time to process, and as their number increased, so did the backlog of closings. The National Association of Realtors estimates that at least 180,000 home buyers were unable to settle by the June deadline and thus missed the opportunity to receive the tax credit.

So what does this mean for you? If you purchased your Chicago real estate by the April 30^th, you now have until September 30^th, 2010, to close on your property. (Note: the new legislation applies only to those who did so. The purchase deadline was not extended.) Other than date changes, the terms of the original program still apply, allowing tax credits of up to $8000 for first-time buyers and $6500 for repeat buyers.

Included in the current bill are special provisions for members of the U.S. military forces, the foreign service, and the intelligence community. For those who fall into these categories and have been ordered on an extended (90 days or more between after December 31, 2008, and before May 1, 2010) tour outside the United States, the new extension allows for a binding contract to be in place on or before April 30, 2011, and a closing to take place on or before June 30, 2011. In addition, a person who is forced to return to the U.S. for medical reasons before completing the 90 day tour may qualify for a one year extension.

What do you need to do to claim the credit for your Chicago real estate purchase on your taxes?

• If your 2009 return has not yet been filed, claim it on Form 1040 for tax-year 2009. While you cannot file this return electronically, you can still use IRS Free File to prepare and print it. When you send it in, you must attach special documentation and IRS Form 5405.
• If you have already filed for 2009, claim the tax credit on an amended return using Form 1040X. Remember to check the above site for specific documents to include with your new return.

• You may also wait and claim the credit on your 2010 tax return.

In the first six months of 2010, Chciago condo sales have dramatically increased compared to the first half of 2009. And June closings were up 26% over May.

According to figures generated by MRED, the regional MLS, year-to-date sales of Chicago condos through June 2010 are:

• Up 42% in total dollar volume, to $1.8 billion

• Up 45% in units closed, to 5,630

• Down 6% in median sales price, to $263,700

• Down 6% in average market time, to 148 days.

Comparing June sales to May:

• Units closed were up 26%, from 1,083 to 1,365 closings

• Dollar volume was up 27%, from $341 million to $434 million

• Median sales price was up 2%, from $264,900 to $270,000

• Average market time was flat, at 144 days

The Home Buyer Tax Credit expired April 30. These purchases had closing deadlines of June 30 which may be the reason for the dramatic incrase in sales for the first half of 2010. The second half of the year will be a better indication of where the market is heading.

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There were 38,718 Chicago foreclosure homes for sale with 3,818 new foreclosures in May 2010. The average selling price of a Chicago home was $279,623 in May and the average foreclosure selling price was $109,668, a savings of $169,954 according to RealtyTrac.com.

Chicago Foreclosure Geographical Comparison

May Chicago foreclosure activity was lower 0.07% higher than national statistics, 0.03% higher than Illinois statistics, and 0.04% lower than Cook county numbers.

Chicago Foreclosure Activity by Month

The number of Bank-Owned Chicago homes decreased from 1,312 homes in April to 1,106 in May. The number of Auctioned Chicago homes also decreased from 1,271 to 907 and Pre-foreclosure acitivity dropped for 1,982 to 1,805. The six month Chicago foreclosure trend is falling.

Are you or someone you know behind on your mortgage payments and facing a Chicago foreclosure? You do have options. A foreclosure is not the only way. A short sale may be the answer to saving you, your family and your home. I am a Certified Distressed Property Expert (CDPE). I have the training, knowledge and experience needed to help save your Chicago home from foreclosure. The clock is ticking. Don’t hesitate. Give me a call for a private consultation.

Learn more about selling your Chicago home.

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So you’ve finally found the piece of Chicago real estate you’ve searched for months! What next? Before you sign a contract, make sure it contains a home inspection contingency, a clause stating that your offer is contingent dependent on the results of a home inspection.

A home inspection is of primary importance because it allows you to obtain an unbiased professional assessment of all the components of the property. It is a step necessary for you to decide if you will stay with your original offer, renegotiate based on documented issues and needed repairs, or back away from the purchase of that piece of Chicago real estate altogether.

Selecting a qualified inspector is vital. Your realtor can provide you with the names of reputable firms, or you can go online to research services offered and credentials. Specific information you should know about the inspector and the inspection process included the following:

      1. Credentials and background: Is he/she licensed in your state? Is he affiliated with any respected organizations such as the American Society of Home Inspectors? Membership in these groups requires that inspectors follow strict guidelines about ethics and continuing education. Be sure to inquire about experience and training. A construction-based background is a plus, as is attending a college with an emphasis on construction or attending a home inspection school.

    2. Fees: Although you don’t want to spend money unnecessarily, this is not a place to scrimp. Your house purchase is a very large investment, and you need to know as much as you can about it. Do remember that money spent on a quality inspection now will be returned to you by avoiding unexpected costly repairs in the future.  The price of an average inspection varies depending on the age, size, and condition of the house. Some inspectors base their fees on the list price of the Chicago real estate. Get estimates from all you contact, but don’t assume that the lowest priced is the best choice for you.

    3. Type of report: Some inspectors use computer generated onsite reporting, some a handwritten checklist, and others a computer generated report you won’t receive for few days. By and large, the last option is in your best interests since it gives the inspector time to review his findings, look up any questions he may have, and send you a detailed, descriptive report. He should also be able to provide you with pictures of the problem areas. Feel free to ask him for a sample report.

    4. The actual inspection: Make sure that you will be allowed to accompany the inspector and ask questions as he checks out the house and grounds. This is a good time for you to become familiar with the home‘s inner workings, locate shut-off valve and breaker panels, and pick up tips on operating and maintaining different systems.

A thorough home inspection of an average home should take between 2 ½ and 4 hours and should cover both internal and external components of the property. Major items examined should include:

            a. Siding, foundation, brickwork, etc.

            b. Insulation

            c. Deck, roof, garage

            d. Attic/basement

            e. Driveway and walkways

            f. Electrical system

            g. Plumbing

            h. Doors and windows

            i. Heater, air conditioner, and hot water heater

            j. Ceilings, walls, and moldings

Having your Chicago real estate inspected will allow you to make an informed decision about the purchase of a house and will provide you with both essential knowledge and peace of mind.

HAFA or Home Affordable Foreclosure Alternatives, is a program initiated by President Obama on November 30, 2009. HAFA helps families in distress who are having difficulty selling their homes. HAFA along with HAMP, the Home Affordable Modification Program, to revitalize the real estate market. HAFA provides incentives to families to take advantage of selling their Chicago home by means of a short sale (the home is sold for less than the value of the loan), or a deed-in-lieu of foreclosure (the home owner voluntarily gives the deed to the lender.  

HAFA helps families quickly sell their Chicago homes by giving them pre-approved short sales terms before listing the property. They are fully released from future liability for the first mortgage debt, and can receive $1,500 for borrower relocation assistance. HAFA also allows investors and servicers to receive financial assistance for administrative costs, processing fees, etc. The program sounds simple, but is actually quite complex with many guidelines and rules. HAFA officially began on Monday, April 5, 2010 and will end on Monday, December 31, 2012.

Here you can watch ‘An Animated HAFA Story’, an informative video explaining HAFA…

I am a Certified Distressed Property Expert (CDPE), trained in helping families in distress avoid foreclosure. Are you or someone you know behind on mortgage payments? You do have options! A short sale may be what is needed to save your, your family and your credit. Please contact me anytime for a private consultation.

To sell or not to sell? That is a question with which many seniors are wrestling these days. One the one hand, older homeowners are faced with rising maintenance costs, personal physical constraints, a desire to live a more carefree and less complicated lifestyle, a realistic look at future needs, such as being near public transportation and/or quality health care, and living in a “too-large” home. On the other hand, they are reluctant to leave a neighborhood where they are known and respected, move further from friends and family, consider downsizing and parting with treasured items, and undertaking the seemingly overwhelming job of emptying one home and setting up another. In addition, they don’t want to give up the security or the memories tied to their current home.

A knowledgeable and understanding real estate agent who is familiar with the needs and desires of the 55+ set, combined with the services of an attorney who specializes in both real estate and estate planning and an accountant who deals with senior tax implications, can be invaluable to you in looking at all aspects of selling your Chicago real estate and helping you determine what is best for you. Senior Expert Margie Behr also advises that you think about taking out a home equity loan before you put your house on the market and that you involve your whole family in the decision-making process.

If you do decide to sell, BankRate.com cautions you to first get a written market analysis and a financial evaluation which will help you and your team of advisors address the realities of the market, your investments, and tax objectives.

Once underway in the selling process, you‘ll have to prepare your Chicago real estate for showing to potential buyers. That includes removing, storing, or giving away some large furnishing, heirlooms, or collections, and making your home as “clutter-free“ as possible. If this task looms too large for you to deal with by yourself, your real estate agent can provide you with qualified, responsible people who will make the burden much lighter. Remember that a well-maintained property with plenty of open space makes the house seem larger and shows off its assets.

The exterior, too, needs attention so that its “curb appeal“ will make shoppers want to come inside and investigate further. Keep lawns mowed, bushes trimmed, and flower beds fresh and colorful. Walkways, siding/brick, and roofs should be in good condition and entranceways must be attractive and inviting.

What and where to buy? Bankrate.com stresses the importance of looking at all your options and comparing them to your physical needs-now and in the future. Carefully consider the benefits to a one-level home or a building with an elevator. Would a condo with no maintenance required be best for you? Have you thought about a retirement community? You’ll need to determine the value of being close to friends, doctors, churches, stores, public transportation, and facilities which foster leisure pursuits. Do you golf? Want to be involved in a recreational senior center? Will you want trails or bike paths nearby? Be sure to visit areas you are seriously considering--often and at different times of the day. Talk with current residents, drop in the stores, walk around the community with family members or a friend. You can also do some reconnaissance online at ChicagoCityHomes.com which give you very useful demographic information re: income, population, employment, crime rate, etc., or you can Google a specific neighborhood.

Two final precautions: 1) don’t commit to a vacate date on the Chicago real estate you’re selling until you have secured a new residence. You don’t want to have to move twice! 2) if family is really important to you, don’t move too far from them. Many grandparents have regretted their move so much that they have moved back to be closer to the children!

As you go through the process of relocating to/from your Chicago real estate, view it as an adventure, a chance to view the world from a different setting, meet new people, and make new friends--and enjoy the journey!

The last few years have seen some of the lowest interest rates in over 20 years. Many people have taken advantage of the phenomenal opportunity to purchase homes at great rates! We have enjoyed the low rates, but there are some indications that they may be coming to an end soon. Federal Reserve Chairman Bernake has said the recession is “very likely over” and there seems to be plans to begin slowing down on lending and bailout programs.  While they did extend the rescue program for Fannie Mae and Freddie Mac on 9/23/09, they did not renew it, despite high unemployment.

So what does all this mean for interest rates and home mortgages? Well, if we are truly coming out of the recession, it means interest rates may soon begin to creep up as the Federal Reserve tries to keep the economy stable. The Fed uses its rate-setting to try to balance unemployment and inflation; normally this means lowering rates during a recession to give the needed boost to the economy and then raising rates during the recovery to keep inflation at bay.  The Fed has bought up toxic mortgage-backed  securities  to help stabilize banking.  As lenders become more stable, the Feds will be less involved and the interest rates will reflect market forces.  This will push up interest rates.

The unknown is when and how much the rates will go up. The time to take advantage of these low mortgage rates is now!

At the moment, rates as low as 4.75% are available at some banks for a 30 year fixed mortgage, with lower rates available for adjustable rate mortgages and higher rate ones available for jumbo loans and FHA loans – if you can put 25% down.

With any loan you choose, you need to be concerned with the total lower cost of the loan to you.  The goal is to minimize your out of pocket expense as much as possible at closing and with your monthly payment.  How much do you have available for a down payment? How much can you pay monthly?  Are their points involved in the loan? Are there other fees involved?  Your credit rate may influence what you qualify for. The chart below shows how wide the spread can be based on a loan of $417,000 for all loan types except the Jumbo ARM, that loan is calculated at $500,000.

As you can see, the range is significant. So how can you know which rate and loan is right for you? It all depends on your situation.

·       If your plan is to stay in your home for the long term, the and have the conventional 20-25% to put down, a conforming 30 year fixed loan will probably be your best choice if you can obtain a package with a low rate, no points, no fees, and a low payment.

·    If you know your circumstances will change in the next few years, the ARM loan is a good choice for you. For example, if you are transferred every four or five years or if you expect your income to increase, you should take advantage of the better rate.  With an ARM, you need to familiarize yourself with a few basic terms:

1. The index rate. Most lenders tie ARM interest rates changes to changes in an index rate. Lenders base ARM rates on a variety of indices, the most common being rates on one-, three-, or five-year Treasury securities. Another common index is the national or regional average cost of funds to savings and loan associations.
2. The margin. This is the percentage points that lenders add to the index rate to determine the ARM's interest rate.
3. Interest rate caps. These are the limits on how much the interest rate or the monthly payment can be changed at the end of each adjustment period or over the life of the loan.

A loan with a 5/1 ARM would be fixed for five years, then adjust annually up to the amount of the margin until it reaches the rate cap.

·   With an ARM, you can get more home for your dollar.  For example, for an $1,800 monthly payment, you can qualify for a $388,000 mortgage with an ARM loan vs. one for $340,136 with a conventional one.  These mortgages have gotten a bad reputation throughout the mortgage crisis for resetting to payments that are unexpectedly high, but ARM are indexed to have a periodic and a lifetime cap; depending on the terms, they may be convertible into fixed rated terms 

·      If your credit score is lower, or you lack the 20-25% downpayment, then the FHA 30 year fixed mortgage is the better plan.

In certain circumstances, you may have to pay points.  Though it preferable to not have to come up worth extra cash at closing. It can be worth it to do so to secure a lower interest rate.  The points are deductible on the current year’s tax return.  It is usually better to pay points than other fees, which are not deductible.

The best interest rates we have seen in years are still available! How long they will last is unsure. If you want to take advantage of these rates before they are gone call Karen Breen Elia or Louis Elia at ChicagoCityHomes! They can help you with information on the current interest rates or mortgage loan types. Even more important, ChicagoCityHomes can help you find the right Windy City home for you!

The clock is winding down on the $8000 Federal Tax Credit that is available to first time home buyers. What some may not know, if you live in Illinois, you may have more than one thing going for you! Illinois has introduced a new program called the Illinois Home Start Loan Program. This program offers two different loans to help first time homebuyers become home owners! The first loan is a Home Start 30 Year Fixed Rate Loan. The second is the Home Start Tax Credit Advance!

If you are a first-time homebuyer in Illinois, you may qualify for both loans. You can utilize the tax credit loan with the Illinois Housing Development Authority's new Illinois Home Start Loan program. The Home Start program offers a 30-year fixed rate amortized loan. If you take advantage of the zero-interest, short-term Home Start Tax Credit Advance Loan, you can use it for a down payment. The Advance loan will be paid back when you earn your tax credit in 2010. The maximum loan amount under the Home Start Advance Loan is $6,000 or 3.5 percent of the purchase price, whichever is greater.

The Home Start 30 Year Fixed Rate Loan is insured by the FHA and serviced by U.S. Bank Home Mortgage. There are income guidelines based on your county. For Cook County, the income guidelines are $74,900 for a Household of 1-2, and $86,135 for a family of 3 or more. The terms of the loan are subject market changes, but on August 18, 2009 the interest rate was at 5.75 percent. Now remember, this can be used at the same time as the second loan: the Home Start Tax Credit Advance Loan. You can purchase a home NOW and use your future tax credit for the down payment.

There are a few other terms to be aware of. The first step is to qualify for the Home Start 30 Year Fixed Rate Mortgage.  Homebuyers must complete an educational course with a certified HUD counselor. The tax advance MUST be paid in full no later than June 30^th, 2010. If you fail to repay the loan, it will be modified to a ten year amortizing loan at 0.5 percent ABOVE the interest rate on the 30 year mortgage. Lastly, Illinois veterans and active duty service personnel do not have to be first time home buyers to qualify.

But time is running out on this program!! These programs end at midnight on November 30^th. Most mortgage brokers will agree, you should have your property under contract at least 45 days BEFORE the deadline, so by October 15^th. The program goes by the date of the closing and not by the date of the signed contract! For information on the Federal Tax Credit Deadlines, take a look at http://www.yourillinoishome.com/.

If you want more information you can check out the Illinois Housing Development Authority, you can also search for lenders in your area. Now more than ever you need an agent with experience in Chicago Real Estate! Call Karen Breen Elia or Louis Elia at ChicagoCityHomes your local real estate experts for Chicago's North Side!