With the first-time homebuyer tax credit deadline having come and gone, you may be asking yourself, “What now?” Fortunately, the door is now open to a new wave of savings: distressed properties.

For many buyers, the term foreclosure brings up images of run-down homes with no heat and rotting wood. While this is still the case for some homes, it’s no longer the standard. In fact, first time buyers are snatching up distressed deals in decent condition for great prices.

According to a November 2009 Keller Williams Research Buying Distressed Properties Survey, 40 percent of all buyers for bank-owned foreclosures (REOs) were first-time buyers in 2009. 50 percent of all short sale buyers were first-time buyers.

By definition, a distressed property is one that was purchased with a loan and the homeowner is no longer able to make their mortgage payment resulting in foreclosure – or if they’re lucky a short sale – meaning they owe more on the home than it’s currently worth. With a 20 percent increase in foreclosures from 2009, distressed properties still remain a large portion of home sales and are going to continue well into 2010 as homeowners continue to feel the effects of an economy on the mend.

If you’re in the market for a home and are prepared for a unique transaction, a distressed property can be a great option. Here’s why:

Prices are low – Buying a foreclosed property is an excellent way to get a home for less. Research shows you can save 10-40 percent over the price of similar properties in a traditional sale.

Mortgage costs are low – With rates hovering near historic lows, financing costs to are favorable. Keep in mind, rates are always changing. It’s important to begin the pre-approval process so that you know how much you can realistically afford.

You have options – The number of homes in some stage of the foreclosure process still remains high. RealtyTrac, a site dedicated to tracking foreclosures across the country, estimates that there are approximately 2.1 million homes in some stage of foreclosure in the United States.

Sellers and lenders are motivated – According to data from RealtyTrac, in April, one in every 387 households in the country has received a foreclosure filing. The bottom line is that many sellers are still feeling the pain of a down economy and are anxious to out get from under a home that is putting stress on their current financial frustrations. While it is still an emotional transaction, these sellers are willing to come down on price or even consider concessions such as helping out on closing costs. Banks holding on to large portfolios of Real Estate Owned (REO) properties want to unload quickly – and price these home to sell.

Your best ally when purchasing a distressed property is an expert. Always have a professional REALTOR® by your side to help you make informative decisions.

If you’re interested in learning more about purchasing a distressed property please call us today at 847-967-0022.

After four months of gains, home prices flattened in October. Worse yet, industry insiders think that they’ll soon start to fall.

Prices have risen more than 3% since May, according to S&P/Case-Shiller.

But most forecasts predict price declines in 2010, with possible losses ranging from anywhere from 3% on up. Fiserv Lending Solutions, a financial analytics firm, forecasts that prices will fall in all but 39 of the 381 markets it covers, with an average drop of 11.3%.

“We’ve seen recent price stabilization because of low mortgage interest rates and the impact of the first-time homebuyers tax credit,” said Pat Newport of IHS Global Research. “But there are really good reasons to think prices will now start going down.”

There are three main reasons for the reversal: a coming flood of foreclosures, rising interest rates and the eventual end of the tax credits.

For Gus Faucher, the director of macroeconomics for Moody’s Economy.com, the huge number of foreclosures that remain in the pipeline is the big problem.

Moody’s upped its estimate of defaults recently because of shortcomings of the government-led mortgage modification programs. Trial workouts are not being made permanent and completed modifications are re-defaulting at high rates.

“There are going to be fewer [successful] modifications than we thought,” said Faucher.

Even so, he added, much of the price decline has already occurred and Moody’s forecast is for only another 8% drop. The worst-hit markets will be the ones suffering the most foreclosures, places like Arizona, California, Florida and Nevada.

Resetting option ARMs (adjustable rate mortgages) will also aggravate the foreclosure problem. These mortgages allow borrowers to pick their own payments, which can be so low they don’t even cover the interest. Balances swell.

For many of the more than 350,000 option-ARM borrowers, it’s time to pay the piper. Their loans will change into fully amortizing mortgages that will carry much higher monthly payments. A very large percentage of these homeowners will default, according to Shari Olefson, author of “Foreclosure Nation: Mortgaging the American Dream.”

“We’ve still only seen the tip of the foreclosure iceberg,” she said.

She also predicts more strategic defaults, people deliberately walking away from even fixed-rate mortgages as the value of their homes dips well below the amount they owe.

Olefson’s forecast is for price declines of 5% to 15%, depending on the area, with a national median price drop of about 10% for 2010.

Also affecting prices will be higher interest rates. Some analysts, according to Newport, think rates for a 30-year mortgage will pass 6% next year as the government curtails housing market support.

The Federal Reserve has helped keep rates low through purchases of mortgage-backed securities. But that program is winding down and will end in March.

“The government is throwing everything at the market but the kitchen sink,” said Peter Schiff, president of Euro pacific Capital. “It can’t prop up housing markets forever.”

Schiff is among the bigger bears. Though he gave no specific prediction, he thinks prices — already down 29% from the peak — are only halfway to the bottom.

As a tool for supporting housing markets and prices, the tax credit for homebuyers is a two-edged sword. It reduces taxes dollar-for-dollar by up to $8,000 for new homebuyers and $6,500 for buyers who already own a home and should support home prices. But it ends at the end of April.

Many buyers will push their deals forward to get in before the deadline and then demand for homes could sink afterward.

One of the few bulls out there is NAR, whose chief economist, Lawrence Yun, is counting on the tax credit to provide temporary support for housing markets until the economy recovers enough to start fueling sales. He predicts price improvement in 2010 of more than 3%.

“The headwind we face is rising mortgage interest rates,” Yun said, “but the compensating factors will be the homebuyers tax credit in the first half of the year and increased job creation in the second half.”

NEW YORK (CNNMoney.com)

Chicago-area home sales soared 71.6% in November compared with the same month last year, according to the Illinois Assn. of Realtors.

The group cited pent-up demand from buyers, low interest rates and the federal tax credit for first-time home buyers as the reason for the fifth straight monthly year-over-year improvement for the Chicago metro area.

Home sales in November and October of 2008 were extremely low as the worst of the nation’s financial crisis was hitting.

“November’s sales surge reflects the rush to beat the tax-credit deadline,” Mike Onorato, the association’s president, said in a press release. The tax-credit deadline was extended from November through April 30, 2010.

Median prices in the Chicago area, however, continued to fall.

In November, the region’s median price – where half the homes sold for more and half sold for less – was $189,000, down 9.1% from $207,995 in November 2008.

Total sales in the region, including single-family homes and condominiums, were 6,826 compared with 3,978 in November 2008.

In the city of Chicago, November sales were up 69.9% to 1,859 compared with 1,094 homes sold in November 2008. The median price in the city was $215,000, down 3.4% from November 2008.

Statewide, home sales totaled 10,361 in November, up 64% from the same month last year. The statewide median price was $155,000, down 4.3% from November 2008.

Last month, the average interest rate was 4.93% for a 30-year fixed-rate mortgage, according to the Realtors’ release, down from 5.0% in October.

The Illinois Assn. of Realtors’ sales figures include new and existing homes. The nine-county Chicago Primary Metropolitan Statistical Area consists of Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry and Will.

Crain

By Eddie Baeb

Mary Ellen Podmolik

Chicago Tribune

At the start of a new year a lot of us get motivated to give our homes a good cleaning. It’s a way to clear the physical and mental clutter and, if you’re selling your home, it’s a must-do to help attract buyers.

According to HomeGain, cleaning up and de-cluttering can gain you thousands of dollars at the time of the sale and cost you as little as a few hundred dollars, if you use experts, to get the job done. Next week, I’ll explore other repair areas that result in the greatest return; but this week, it’s all about getting organized to increase the chances of selling your home.

I recently took on the task and unloaded about 25 trash bags worth of once-prized possessions. It’s funny how, as the years go by, time and lack of room can make you realize that those prized-possessions are just eating up space while serving little purpose. Most of us have more than we need. Having more stuff than you need in a home is not appealing to buyers. It can make them feel cramped, nervous, and overall uncomfortable in your home which may result in a lower offer.

The best approach to de-cluttering is to have an organized plan. Expert organizer Mary Pankiewicz of Clutter-Free & Organized suggests making a list of all the areas that need to be organized; otherwise you run the risk of giving up.

“What people do is they try to do too big of a project and then they get overwhelmed and then they get discouraged,” says Pankiewicz.

So, if you’re rolling up your sleeves and getting started, a good place to start de-cluttering is the hall closet. Why? Buyers are certain to open it up and check it out for space.

“The thing to remember, particularly with closets is, it doesn’t matter how big the closet is — if it looks crowded, the buyer still thinks it’s a small closet,” says Pankiewicz.

De-cluttering a home can be a huge task that can be made even more laborious if you’re not careful. “What people will want to do is haul everything out of that closet and then they don’t know what to do next because they’ve got too much stuff to deal with.”

She recommends a systematic approach to clearing clutter. Pankiewicz tells clients to first start with everything on the floor. Pull those items out and leave everything on shelves inside. Go through the items and get rid of the things that you don’t have a use for. “The golden question to ask is not ‘Will I ever use that?’ That’s what I call the keeper question because the answer to that [question] is ‘Who knows, maybe.’ So then I better keep it,” says Pankiewicz. She says the better question to ask is, “What will make me use this or what will make me need this?”

Pankiewicz says when that question is asked, often people realize that they’re never going to use the item and then are more willing to let it go.

Once you’ve found the stuff you’re ready to get rid of, what do you do with it? Many sellers attempt to store it until they can have a yard sale or they donate the items. If you donate your items, make sure you take a look at the book Money for Your Used Clothing by William R. Lewis, CPA. The book tells you what the IRS will let you take as a tax deduction in 2008 for various items.

“If it’s cluttered before the move, it’s chaos after,” says Pankiewicz. She adds, “The key mistake is people not making a decision before they pack things up.”

That can be a very costly mistake for sellers. “They put stuff in storage and they pay for it year after year and then when they finally look at it, it’s nothing they want,” says Pankiewicz.

“The sooner you get your house ready to sell, the better decisions you’ll make,” says Pankiewicz. She says if sellers wait until the last minute then they tend to hold on to things and pack them up in storage saying, “I’ll look at it later.” That’s how the clutter simply follows them from home to home.

Phoebe Chongchua

The Associated Press
updated 3:46 p.m. CT, Mon., Nov. 10, 2008

The housing market may have gone bust, but many homeowners are still living in a bubble.

Despite dismal housing headlines and reports showing falling prices nationwide, owners in some once-hot areas still believe their home is gaining value or at least holding its own. And by hanging onto too-high expectations, sellers are unwittingly keeping the market from finding a bottom.

Real estate professionals across the country are reporting difficulty convincing sellers the true market value of their homes.
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“It’s like pulling teeth in this market,” said Twyla Rist of Reece & Nichols Realtors in Kansas City, where prices are off between 7 percent and 15 percent. “Even with everything being said, you still have people that think my house is better than everybody else’s.”

A recent Coldwell Banker report showed that more than three-quarters of its real estate agents surveyed said most sellers have unrealistic initial listing prices for their homes.

Likewise, an unscientific study released last week by real-estate Web site Zillow.com found that half of homeowners polled think their home’s price has increased or stayed the same in the past year.

“We expected people to get a little more in touch with reality especially over the summer, because you couldn’t turn on the TV or read the newspapers without seeing that home prices are falling,” said Amy Bohutinsky, a spokeswoman for Zillow.com. “It was very surprising to see this kind of disconnect.”

In fact, the median sales price of an existing home dropped 9 percent to $191,600 in September from a year ago, according to the National Association of Realtors.

It took John Cicero and his wife an appraisal, some convincing by their real estate agent and some hard-to-swallow facts to get them to lower the $525,000 listing price on their five-bedroom home in Valrico, Fla. They closed two weeks ago for about $380,000.

“We didn’t really understand the severity of the market,” Cicero said. “We lost close to $100,000 in equity so we were walking away from real money.”

They built the stucco home four years ago for $380,000 and poured more than $80,000 into it, putting in hardwood floors, granite countertops, ceiling fans, blinds, drapes and a built-in surround-sound stereo system. They also expanded the deck by the pool, turning it into what Cicero called an “executive entertainment area.”

“You think you have this wonderful home and people will want to buy it,” he said, “but you’re wrong.”

Dan Ariely, a behavioral Economics professor at Duke University’s Fuqua School of Business and author of “Predictably Irrational,” said the “better-than-average” effect is at play. And knowing your next-door neighbors sold their house for $500,000 makes it even more imperative for a homeowner to top that price.

“We feel that we’re better than other people. We’re unique. We’re special,” he said. “It stands to reason that our houses are also special.”

The attachment to a house only intensifies the more a homeowner personalizes it, creating an extension of themselves.

“The moment we invest in something, we fall in love with it,” Ariely said, which applies to something as sentimental as children or as trivial as origami.

That puts real estate agents in a precarious position of pricing a house to sell, but not insulting the homeowner by recommending a lower asking price. To a homeowner, a low, but realistic, listing price is “like someone calling your kids ugly,” Ariely said with a laugh.

Nancy Batchelor, a real estate agent at Esslinger Woooten & Maxwell Realtors in Miami, says she usually agrees to list the owner’s asking price as long as they can reevaluate the price in 30 days if the house doesn’t sell.

“I would like to believe their house is different, but I also don’t want to do them a disservice,” Batchelor said.

Joni Herndon, an appraiser in Tampa, Fla., said real estate agents are calling her in to help homeowners grasp the reality of their home’s value. Herndon frequently fields questions from disappointed homeowners after an appraisal, and has to explain how broadly the market is declining and why what a neighbor got two months before for his house doesn’t apply anymore.
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“But sometimes you just can’t get through to people,” she said.

She said homeowners who bought newly built homes at the height of the boom are the most stubborn because they’re trying to get back every penny they spent on customized changes.

One homeowner Herndon did an appraisal for refused to lower her listing price for the third time, insisting that such features like a raised roof and more space between two windows in an upstairs bonus room set her house apart from others just like it.

“It’s the mine is better than yours mentality,” Herndon said.

The homeowner originally asked the builder to move the windows another foot apart and raise the roof by 12 inches so the wall could fit her big-screen television. She also spent $15,000 in extra landscaping and exterior lighting, and $2,900 on designer fans, Herndon said.

“You could have put $1,000 worth of fans in the house and blown just as much air,” Herndon said. “Owners are very concerned about how much they paid for particular changes, but buyers out there don’t value them.”

Herndon appraised the house, also in Valrico, Fla., at $430,000. The seller put it on the market in April at $500,000, and cut the asking price to $469,5000 in July. The home is still on the market, and the seller declined to be interviewed.

The market would bottom out sooner if sellers weren’t so stubborn and didn’t keep prices artificially high, Arielly said.

Homeowners can’t stand taking a loss on their properties, yet keeping their home on the market at an inflated price could wind up costing them more. Homeowners need to look at the larger financial picture, Ariely said, and determine how much there is to gain or lose by keeping a home on the sales block longer.

Real estate agents press this point on their clients, saying no one wants to buy the most expensive house on the block. After the first reduction in listing price, a psychological barrier, subsequent cuts come easier, most agents say.

“Like any type of loss, there’s a grieving process,” Batchelor said. “First, they’re in denial, then angry, then depressed and hopeless. But then they eventually move on if they want to sell it.”

Read more about this topic at http://www.msnbc.msn.com/id/27648884/

Stepping into a mortgage is not always the easiest thing in life to commit to. Cost, value, your position in life, and many other factors all weigh in on whether or not you should make the jump. The following are some things you should be looking at to determine whether or not you are really ready to buy a home.

• You plan to move from the area within the next few years. During the last boom, you could buy and sell in six months to a year in many markets and recoup your buying and selling costs and still have enough cash left over to buy again.That’s no longer the case in a growing number of markets where home prices are inching up, flat or falling.It’s also easier, logistically, to move out of a rental home than a home you own and must sell.
• You are inflexible. Buying is better suited for you when your life is on a steady course. If you are still in your globe-trotting youth and out to see the world, unless you want to also manage house swapping or renting, buy when you’ve settled down.
• You expect a job change or income reduction. Similarly, if you plan to earn enough money to return to college, become a Hollywood celebrity or join the Las Vegas poker circuit, home ownership probably isn’t for you. You can, however, opt to co-own, buy well within your means, say a tiny condo in an affordable community, or use some other affordable home-buying strategy.
• Buying will cost far more than renting. Again, do the math. Some high cost housing markets have gotten so expensive renting makes sense based solely on the mortgage vs. rent difference.

It’s a good time to buy when your finances, planning, goals and lifestyle mesh with the financial responsibilities required for homeownership.