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.

Illinois is blessed to have a more stable market than most other areas of the country.  Although many areas of the country are seeing price declines, Illinois is experiencing longer market times but it is not seeing substantial price declines in any of the market areas.  Some areas continue to see strong sales and some weaker sales.  Many agents are still doing quite well.

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The latest figures from the Illinois Association of Realtors is that the median sale price for homes and condos INCREASED 1.2% over last year.  The properties that are presented well and priced "appropriately for this market" continue to sell.  The number of sales is 17.9% lower than last year (14,349 in August 2007 vs 17,467 in August 2006).  The total number of sales during the first 8 months of 2007 is down 14.6% from the same period in 2006.

The Illinois foreclosure rate is down in August while the national rate is the highest ever recorded.  According to RealtyTrac (as quoted in the IAR Weekly Connection newsletter) the foreclosure rate in Illinois is one for every 827 households which is down nearly 10% from the same period last year.  The national foreclosure rate is one for every 510 households.

I continue to believe that market prices in the Chicago area are low and will continue to increase over the coming decade.  The amenities available in Chicago will continue to attract and retain residents who want a high quality of life and good employment options.  The main challenge to higher real estate prices in Chicago is the uneven quality of the public school system.  The areas of the city that have the best quality schools will see the strongest price appreciation.

 

The City of Chicago has designated the commercial block along the east side of Western Ave., between Lawrence Ave. and Ainslie St. as a Tax Increment Finance (TIF) District.  This means that the area is now under the active control of the Alderman (Gene Schulter, 47th Ward) who can facilitate the transfer of this privately owned property to other individuals (developers) who would build new buildings on the site.  This is similar to the condemnation of property which results in the forced sale of privately owned land for use by the government.  In this case the land sale can be forced onto the owners and then the land can be used by other non-government entities.

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I happen to live on the street that ends in the middle of this block.  When I heard about this plan I reacted that it would be good for the area to have new condos and new storefronts at the end of my street.  It seems it will enhance my access to nice neighborhood amenities and increase my property value.  At this point the existing buildings and stroefronts are ugly and some are vacant.  Other than the Walgreens and the Soccer Store, they are small businesses with no easy parking or access.

The property owners are angry because they feel that they will not get fair market value when they wish to sell because they will be under pressure to sell.  They have built their businesses over the years and resent having to move or become renters from the new owner/developer. 

I have not heard whether the Lincoln Square Chamber of Commerce has weighed in but the Alderman is claiming his goal is to protect these businesses.  I like and respect the Alderman but that sounds like when Ronald Reagan called the latest generation of nuclear missiles "Peace-Keepers".

I still favor the change but time will tell, as the arguments heat up, whether my mind changes.  I like the area to keep improving and looking nicer but it is a drag for the displaced businesses.

The FICO Score is a score assigned by the credit reporting agencies that summarizes their view of how trustworthy (creditworthy) we are.  The score varies depending upon our credit limits, debt load, payment history, number of lines of credit, etc. 

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Credit Score (also known as a FICO Score):

1. Impact our ability to get pre-approved for a mortgage
2. Have a large effect on the interest rate we pay for mortgages and all other credit
3. Affect the rate we pay for insurance for our home and car
4. Influence our down payment requirements

Credit scores range from 300-850 and each credit reporting agency has a different formula to calculate our credit score.  Although our credit score is a contributing factor in obtaining financing to purchase a home, it is not the main factor.  Sophisticated mortgage lenders look at a variety of factors and they are often able to help us get mortgage approval by tailoring the loan to our unique situation.  Even if you feel your credit score is a problem, it still makes sense to speak to an excellent lender about your situation.

Each of us is entitled to receive one free credit report from EACH of the three credit reporting agencies every year.  Although we can obtain our credit report from each credit reporting agency, they will charge us a small fee to receive our credit score.  The free reports can be obtained by logging on to:  www.annualcreditreport.com or by contacting each credit agency individually.  They are Experian.com or 888-397-3742, Transunion.com or 800-888-4213, and Equifax.com or 800-685-1111.

Improving your credit score is a valuable objective.  There are many good books on the subject and the Suze Orman show on CNBC has many great ideas about money management and improving your FICO score. 

There are a number of factors unique to each property that affect the buyers ability to get mortgage financing.  These include:

1. Monthly or Special Assessments:  What are the monthly maintenance fees charged by the condo association and are there any unpaid special assessments the new owner will be responsible for?
2. Down Payment:  Larger down payments make lenders more motivated.
3. Appraisal Results:  Does the professional appraisal of market value support the agreed-upon purchase price?  If not, the down payment must be larger or the price must be renegotiated.
4. Survey results:  Is the property the size it is claimed to be and are there any encroachments or easements granted that affect use of the property?
5. Inspection results:  Discovery of serious problems with a property such as asbestos or toxic substances or structural problems will affect appraisal results and financing availability.
6. Taxes:  What affect will the taxes have on the affordability of the property?  Sometimes the taxes are increased after a property is sold.  The taxes are often included in the payment and affect the monthly payment.
7. Seller Contributions:  Sometimes sellers offer incentives such as paying closing costs or agreeing to finance a portion of the sale to help the buyer obtain financing.
8. Earnest Money:  The amount of money placed on deposit with the broker, and listed on the offer to purchase, affects the seller's perception of the offer.  A larger earnest money deposit conveys a serious offer with sufficient financial resources to get financing approved.

 

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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.

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• 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.

There are 12 neighborhood associations in the Lakeview Area. They have joined together under the umbrella organization known as The Lake View Citizens' Council. The 12 neighborhood associations include:  Belmont Harbor Neighbors  Central Lake View Neighbors  East Lake View Neighbors  Hamlin Park Neighbors  Hawthorne Neighbors  Sheil Park Neighbors  South East Lake View Neighbors  South Lakeview Neighbors  Southport Neighbors Association  Triangle Neighbors  West DePaul Neighborhood Association  West Lakeview Association.