Monday, December 17, 2007

Help just phone call away for anxious area homeowners

A bad problem gets worse when you don't know how to fix it.

The millions of homeowners who hold mortgages adjusting to much more expensive payments and those who are behind on their mortgage payments are often paralyzed with fear and bewilderment.

But answers may be literally around the corner. Chicago is dotted with neighborhood and community organizations with trained housing counselors who can offer suggestions on how to deal with a looming foreclosure. They can also help decipher a mortgage contract, letting borrowers know just how much their payment is likely to go up.

Similar resources are available in suburban areas, too.

Counselors aren't lawyers, underscores Judy Graves with the DuPage Homeownership Center, Wheaton. They can't offer legal advice, but they can explain how the foreclosure process and mortgages work.

For example, a borrower behind on his mortgage payments can request a "work-out" application from a lender, says Graves. The counselor can help fill out the form, which seeks information including the borrower's income and debts.

About 65 percent of the people who seek a counselor through ACORN Housing avert foreclosure, says Michael Shea, executive director. Part of that success comes from counselors' ability to communicate with the lender.

"A lot of these subprime servicers are deficient in customer service," says Shea. "With the larger mortgage [companies], we have a direct phone number and we present what we think is a reasonable proposal."

This is just a partial listing of the resources available. Other local sources may be found through the U.S. Department of Housing and Urban Development's help line, 800-569-4287.



CHICAGO

*ACORN, 209 W. Jackson Blvd. People wanting help with foreclosure must call its hot line, 888-409-3557 to secure an appointment; some help is available via phone. Calls should be returned within 48 hours. Counseling available in seven languages.

*City of Chicago 311 help line. Any city resident can dial 311 and be connected with one of three credit counseling agencies that provide free mortgage help. Calls not immediately taken should be returned by the next business day. Spanish counseling is available.

*Neighborhood Housing Services of Chicago Inc. Each office offers counseling. Call for an appointment -- usually available within two weeks. The central, Back of the Yards and Chicago Lawn/Gage Park locations have Spanish counseling..

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source: chicagotribune.com

Where bubble bursts, vultures soon follow

WASHINGTON - Call them grave dancers, vulture funds, turnaround specialists or the more euphemistic "opportunity investors." However you identify them, the deal is the same: When hyperactive real estate markets lose their sizzle, or property owners no longer can afford to hang on to their houses, well-capitalized investors smell blood -- and move in.

That's happening in most of the "bubble" areas that saw heavy speculative activity and razzle-dazzle financing from 2001 through 2005. But it's also happening across the country in less volatile markets where unaffordable mortgages and economic distress are producing record numbers of panic sales to investors at fractions of former values.

In Miami Beach and south Florida, for example, real estate consultant Jack McCabe says he is advising "hedge funds, high net worth individuals, Wall Street investment banks and groups of doctors and lawyers" who all want a piece of the area's tottering condominium and townhouse sector, where some properties are selling for 50 cents on the dollar.


McCabe, CEO of McCabe Research and Consulting Inc., in Deerfield Beach, Fla., says investment groups with capital "in the multiple billions" are active in South Florida, searching for fire-sale prices on properties with good long-term prospects. In the greater Miami area, McCabe estimates there are approximately 25,000 unsold condos and townhouses on multiple listing services, which he calculates is a 35-month supply at current absorption rates. Another 22,600 units are under construction and 4,000 more are slated to begin construction in the next year or two.

In one recent auction, according to McCabe, investors walked away with three-bedroom condos for $300,000 that originally sold for $550,000 to $675,000. Though not all units are selling at giveaway prices, he says, "Miami is the poster child" for overbuilt, overpriced condo markets dominated by speculators in the boom -- many of whom have returned the keys and left.

McCabe declines to identify any of his vulture fund clients, "who prefer to fly under the radar." But they are out in droves to acquire buildings -- or floors or individual units -- then refurbish them, convert them to different uses, rent them out or hold them and resell at the first sign that the local market is bouncing back. McCabe estimates that for many of these units, this might not happen until 2010 or 2011.

McCabe's segment of the market tends toward big bucks, but around the country there are hundreds of much smaller-scale investors on the prowl for turnaround situations in stable markets. The largest organization of such entrepreneurs is HomeVestors, a Dallas-based franchiser started in the mid-1990s. Its 260-plus franchisee partners are on track to buy more than 7,100 houses in 35 states this year at value discounts of 35 to 45 percent, said John Hayes, president and CEO.

Best known for its advertising slogan "We Buy Ugly Houses," HomeVestors trains its franchisees to spot and capitalize not only on houses that need work, but also on what Hayes calls "ugly situations," people in trouble problems who are motivated to sell for cash. Among the most common are divorce, death, loss of a job, problem tenants and mortgage delinquencies caused by unaffordable financing.

HomeVestor franchisees, typically professionals or small business veterans, pay a $49,000 fee and must have net assets of $200,000 in cash or cash equivalents. They also pay the parent company a flat $775 for every house they acquire, plus interest on credit lines the company extends to enable them to buy high volumes of properties. Some HomeVestor franchisees buy, fix up, rent or resell 100 or more houses a year, thanks in part to high volumes of potential sellers -- more than 200,000 this year, by Hayes' count -- reeled in by the company's advertising campaigns.

Subprime mortgage delinquencies and foreclosures are swelling those numbers significantly, he said, along with plunging prices in some areas. Softening markets are also driving down the expected discounts on troubled houses. Where as in past years, "we might offer 65 percent of a property's expected value after repair, now in some places we're looking at 50 percent" offers, said Hayes.

A $100,000 starter home needing renovations with a seriously delinquent mortgage, for instance, might draw an offer of just $50,000 to $55,000 cash from a HomeVestor franchisee.

"The owner might be offended at the low-ball offer," said Hayes, "but then again, in some situations that might be the only offer they get."

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source: chicagotribune.com

When buying from scratch, there is a lot to consider

WASHINGTON - In most new-home communities, buyers can select from not only several floor plans and exterior elevations, they also get to choose the lot to put it on.

Typically, buyers select a lot based on size, foliage and view. But there's much more to picking a home site than that.

Take positioning.


Daniel Van Epp, executive vice president and chief operating officer at Newland Communities, one of the nation's largest developers of master-planned communities, suggests that before you choose the site, you should see how your home will receive sunlight, its main source of heat.

"The orientation can make as much difference in your energy bills as building a home that's meant to be energy efficient from the ground up," says Van Epp, whose privately held company is based in San Diego.

Generally, the house should be positioned so the kitchen has an eastern exposure for natural light in the morning and the living areas face west to get the afternoon sun.

Here's a short course on the other things you'll need to consider:

*Size: The size of your lot will probably depend on cost: the larger the piece of ground, the more you can expect to pay. After that, buyers tend to base their decisions on emotion.

While a large lot may be appealing, think about who is going to tend to the grass, trim and prune the shrubs and rake the leaves. Not only is it more expensive to keep a large yard shipshape, it also will cost more to landscape.

Large lots also are more taxing, as in property taxes.

From a purely investment point of view, however, nationally recognized architect and land planner Quincy Johnson says that, as a general rule, pick the smaller lot in a neighborhood of larger ones. All things equal, houses on small lots tend to appreciate more rapidly than small houses on larger lots in the same subdivision.

*Terrain: Trees are nice, but in many places, they shed -- and someone has to rake up or blow away all those leaves.

Besides, there's more to the topography than trees.

For example, an uphill lot not only provides better drainage, it also displays a house more effectively. "Psychological studies have shown that people feel more secure when they look down at the street rather than up," says the Boca Raton, Fla.-based Johnson.

Also, perspective will trick the eyes, making a house on an uphill lot or one that sits further back on the lot seem larger and more impressive. Conversely, one that is on a lot that slopes away from the street will seem somewhat squatty. But the farther back a house sits, the more expensive it is to build.

*View: What you see out your windows is important, whether it's water, woods, mountains or even an impressive skyline. But don't let the current picture bewitch you. Things change.

A water view may not be a water view later when the area is completely developed. And that stretch of meadow on the other side of the road may be a shopping center or gas station one day. So investigate the future of your area before making a decision. Master-planned projects, on the other hand, are put together as a single entity, so "there's a little more reliance on what you see is what you get," Van Epp says. "Also, while master-planned developments tend to have a variety of different housing types ... they all fit together."

Either way, though, it's a good idea to study the plan for the area to determine what, if anything, is penciled in -- for next door and down the road.

*Orientation: There isn't much wiggle room in most subdivisions. Aside from "flipping" the floor plan -- reversing the plan so what's on the left is now on the right, and vice versa -- a builder usually can't position a house on the lot much differently. So if conservation is your bag, you might want to pick the lot first and the floor plan second.

Another consideration is your family's lifestyle. If you or your spouse is a late riser, for example, don't pick a lot where the sun comes streaming through the bedroom windows at the crack of dawn.

Overall, though, Van Epp says buyers should focus on the lot first: "The market value of the house is most affected by the lot, not the layout."

*Location: If you need to make a fast getaway in the morning, consider a lot near the entrance of your new community. But if you have small children and traffic is a concern, go for one toward the rear.

Cul-de-sacs are out of favor with big developers because they suggest a less-connected community. "The whole art and science is back to a more gridlike pattern, which is more walkable," Van Epp says.

Still, if traffic and privacy are important, consider a house on a balloon-shaped lot where there is no through traffic.

*Shape: Sites come in many configurations -- square, rectangular, irregular and pipe stem, or flag-shaped -- each with advantages and disadvantages.

Flag lots are wonderful on the water or in a rural setting, where the stem, or pole, provides an estatelike entry. But in a typical suburban location, you not only would be sharing your driveway with one or more neighbors, your house could be sitting in their backyard.

Corner lots tend to be the most prized. But, then, they are usually more costly.

*Timing: The earlier you buy in the subdivision, the more choices you will have. But , if you want an established community or know exactly what's going to be around you, buying later might be best.

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Write to Lew Sichelman c/o Chicago Tribune, Real Estate, 435 N. Michigan Ave., 4th floor, Chicago IL 60611. Or e-mail him at real estate@tribune.com. Sorry, he cannot make personal replies. Answers will be supplied only through the newspaper.

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source: chicagotribune.com

Paint these bungalows 'green'

The city's Bungalow Expo will have a green flavor this year, providing attendees with guides created by Chicago's Department of Environment that offer money-saving tips and energy-efficient rehab projects.

Free on-site certification by the Historic Chicago Bungalow Association also will be available at the Oct. 27 expo for bungalow owners who bring photos of the front and rear of their homes, proof of address and real estate tax I.D. number.

Association certification qualifies owners for a number of city-sponsored incentive programs, including energy-saver grants and tax credits.


In addition, the expo will feature more than a dozen how-to seminars with home-renovation and green-building pros.

The Historic Chicago Bungalow and Green Home Expo, held at Merchandise Mart, 222 Merchandise Mart Plaza, is free and open to the public from 10 a.m. to 4 p.m.

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source: chicagotribune.com

Ivy Zelman's template of doom, gloom

Ivy Zelman blew through Chicago recently to sprinkle a little gloom on the remodeling industry. She tried to be gentle, but there was no way to sugarcoat her view of housing.

"I've never seen the market as bad as this," said Zelman, who became a national force in the housing industry in the last decade as a widely watched market analyst at Credit Suisse Group. "I'm thinking it's going to get worse."

Zelman, who left Credit Suisse this year and last month set up her own company, is one of the growing number of voices suggesting that housing's neurosis isn't going to clear up any time soon. In her forecast, the market, nationally speaking, won't even hit bottom until 2009.

"Please don't shoot the messenger," she told attendees of the fall meeting of the Home Improvement Research Institute in Chicago. I didn't see anyone reaching for a revolver, but the sighing in the crowd was hard to miss.

The messenger, whose clients have included many of the nation's largest builders and at various times has been listed among the 50 most influential people in the industry by Builder magazine, is also widely regarded as one of the earliest analysts to warn about the market overheating.

She gained Wall Street notoriety in December for asking Toll Bros. chief executive Bob Toll, who had said he believed the slump had bottomed out, "Which Kool-Aid are you drinking?"

Among the thoughts Zelman delivered to the remodeling group:

*At the height of the boom, conditions in home building earned an "A," or a score of 14, in a proprietary monthly grading system she developed. In January 2006, it had slid to 8.7 on her scale, or a C. Since then, it's been a steady trek into the cellar: Currently, the score is 3.8 -- a D-minus, principally because of the huge inventory of homes for sale;

*Her firm forecasts 604,000 new-home sales in 2009, "and that might be bullish," she said. Compare that with the 804,000 likely to be built this year, as forecast by the National Association of Realtors.

*A better day lies ahead, for those who are patient: Zelman expects builders to work through their glut of homes by 2009, and sales then will begin to grow again in 2010, reaching 705,000. Sales will trend upward steadily to 841,000 in 2012, she said;

*"Existing-home sales are much stickier," complicated by the ballooning numbers of foreclosures, she said. She predicts those sales, too, will reach bottom in 2009, dropping from her estimate for this year of about 5.7 million sales to -- ouch -- 3.4 million. The recovery for existing homes will be more gradual than for home builders, inching up to 4.4 million sales in 2012, according to her forecast.



Now for something completely different: The National Association of Realtors says conditions in the mortgage market are improving, which should help to release some pent-up housing demand early next year.

The trade group's chief economist, Lawrence Yun, expects the nation to see 5.78 million existing home sales this year (just slightly ahead of Zelman's forecast). He expects new-home sales to slide to 752,000 next year.

The Realtors' latest forecast says existing-home prices will slip 1.3 percent this year and will make up that same 1.3 percent in 2008.



Playing the blame game: For those in denial about the scope of the housing market quagmire who are fond of saying "all real estate is local," there's this bit of new research, conducted on the heels of the Federal Reserve's rate-cut in September: One third of adult Americans plan to reduce their spending because of the effects of the subprime mortgage crisis.

The survey, from the TNS research firm, said consumers expect to cut their home-improvement and major furniture purchases, travel and entertainment.

Whose fault is this subprime business, anyway? Apparently, we have layers of blame: Seventy percent in the survey said lenders created it; 60 percent blamed the real estate industry; 58 pointed to the borrowers; 57 percent blamed investors.

The researchers, who consult with the financial-services industry, suggested, "it is an opportune time for financial institutions to recalibrate their brand image and client interactions by tailoring services to address their financial anxieties."

Translated into English, this probably means that bankers ought to be on the lookout for clients exhibiting symptoms of Mortgage Rage -- and should be standing by with warm milk, a blankie and a pre-approved, fixed-rate loan.

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source: chicagotribune.com