Category Archives: Featured

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Quality Control Week #1: What Affects Building Quality?

You probably know that there are different grades of quality when it comes to food. The USDA has three different grades for poultry, eight for red meat, and hundreds for fruits and vegetables. Similarly, building materials come in four different official grades: building, quality, custom and ultra custom. I would add “commercial grade” to those standard four. As the quality goes up, so does the cost; in some cases it increases exponentially. Homeowners must always walk a fine line between material quality and cost, but many are unaware of the differences and how they affect the bottom line.

Condo boards also face tough decisions when it comes to major capital improvement projects. Expensive materials will last longer – in fact, they may well outlast the current residents’ tenure in the community. Convincing condo residents to take on large special assessments for maintenance that they won’t be around to use is a difficult task. (more…)

Talking Trash

Chicago garbage pickup (or “scavenger service” as we Realtor wonks like to call it) is a bigger deal than you’d think for landlords. It tends to get overlooked by newer landlords, and even the experienced ones don’t like to spend too much time dwelling on the topic of handling other people’s junk. However, there are some laws to keep in mind and best practices to follow when it comes to dealing with your tenants’ trash. Today I’ll be reviewing the basics for you.

Trash pickup is also called "scavenger service." This little guy is also a scavenger, but of a different kind.

Trash pickup is also called “scavenger service.” This little guy is also a scavenger, but of a different kind.

First off, the city sanitation ordinance can be found here. Additionally, the recycling regulations can be found here.  Regardless of the size of your building I’d recommend that you give it a glance. Violations are penalized with tickets from the police.

Who Pays for Trash Pickups in Chicago?

If your building has four units or fewer, the city will pick up your trash as if it was a single family home. You pay for this service through your property taxes and sales tax. This also goes for individually rented condos in buildings with up to four units.

If the building has more than four units, you will have to hire a private hauler to collect your tenants’ trash. There are several private haulers that work the Chicago grid – most are Teamsters. Larger condo developments will also have to hire private haulers – this is paid for out of the owners’ assessments.

The most common private haulers that I see around here are Waste Management, Lakeshore Recycling, Groot, Allied/Republic, Flood Brothers and Veolia.

Either way, tenants in Chicago expect landlords to pay for scavenger service.

How Much Trash Is There?

The trash carts supplied by the city for small buildings hold 96 gallons of waste, or a little less than half a cubic yard. Based on my observations, a family of three will fill approximately one of those carts per week with regular trash, and another one every two weeks with recyclable trash. (If you have a bunch of dirty hippies living in your building it may be the other way around.) The last week of the month in moving season will see far more trash, as will the holiday season.

If you’re buying an apartment building, the prior owner will probably have trash containers out back that you can use to gauge how many you’ll need once you take over the reins. It’s possible that the trash contract may be passed over to you at closing. It’s a good idea to check out how the trash looks on the last day of a month to gauge if more containers are needed. Overflowing dumpsters lead to tickets – it’s always better to err on the side of too much space and downsize later if it isn’t needed.

It’s important to communicate with your tenants regarding how they handle trash if you want to keep the ticket brigade at bay. Make sure that tenants know to bag their trash and secure the bags firmly. Make sure they know that trash needs to be removed from the building regularly, not left to pile up inside their apartments. Take time to inform them about which materials are considered to be hazardous – this includes batteries, toner cartridges, paint and lighter fluid. If you allow cats in your building, make sure your tenants dispose of the cat litter with the trash instead of flushing it.

Also make sure that they notify you if the dumpster is too full. It’s better to head over and pack down the trash or schedule an additional pickup than to incur a $200 fine because a nosy neighbor got annoyed and called 311 on you.

What About Recycling?

According to city ordinance, renters must have recycling options made available to them, even if you’re in a small building in an area without blue cart service. The recycling method you provide must allow for separation of recyclables at your building. You also need to make an effort to educate your renters on what items to separate. Unfortunately for the planet, the recycling ordinance is pretty toothless and rarely enforced. However, it’s important to remember that the tenant pool tends to consist of younger residents with very eco-conscious leanings. A visible recycling program is not only good for staying on the good side of the law, but it’s also a great marketing tool.

Blue recycling carts in their natural habitat. (Photo by Mick Dumke, Chicago Reader)

Blue recycling carts in their natural habitat. (Photo by Mick Dumke, Chicago Reader)

Most private haulers will offer specifically marked recycling-only dumpsters. If you’re hiring regular dumpsters make sure you also provide a separate container for recyclable items.

How about Big Stuff?

Sometimes your tenants will need to discard larger items. Without proper preparation, this can lead to a big mess in your alley. Furniture left outside of dumpsters can lead to broken glass littered across the alley, thieves picking over the items, and the general enmity of your neighbors. Mattresses left lying out are a sign of a bedbug infestation, which can cause panic among your other tenants even if no problem actually exists.

Therefore it’s important to communicate to your tenants in the lease and explicitly in conversation that large items need to be placed in the dumpster. If they have something that’s too big to fit, they need to warn you immediately so that you can schedule an extra pickup with the city or with your private hauler.

Similarly, if you’re planning on doing any renovation work or clearing out an apartment formerly occupied by a hoarder, you may need to hire an extra dumpster on your own even if the city provides pickup. These types of projects create far more trash than your standard equipment will be able to contain.

By the way, if you do schedule a last minute extra pickup with a private hauler, be prepared to pay them in cash with a nice tip for going out of their way for you. Even if you have a contract for regular service, these kind of trips are above and beyond a trash hauler’s normal duties.

What About Shops and Restaurants?

If you’ve got a mixed use building, you’ll probably wind up with a few retail shops or restaurants renting from you in the commercial spaces. Unlike residential renters, most commercial tenants in Chicago are expected to pay for their own scavenger service (along with all the other utilities). Sometimes a very small office can piggyback onto your dumpsters, but any business that requires a sanitation license will probably be required to demonstrate that they’re in charge of their own trash collection.

This is about as close as you ever want to get to a grease dumpster. (Photo by TrashMonkey29 on Flickr.)

This is about as close as you ever want to get to a grease dumpster. (Photo by TrashMonkey29 on Flickr.)

If you’ve got restaurants, doctor’s offices, hair salons, catering businesses, childcare facilities or anything that generates a lot of icky trash, you’ll want to ensure that you leave enough space in the rear of your building for each business to provide their own dumpsters. Restaurants in particular may need space not only for a regular dumpster and a recycling container but also a grease dumpster.

Grease dumpsters require their own special precautions – while they’re designed to contain liquid waste, it’s easy to spill when you’re pouring hot grease in the dark. Hosing down the ground around a grease dumpster is actually illegal. You’ll need to make sure the ground nearby is fully cleaned with detergent to keep rats away and make sure the alley doesn’t become a skid hazard for passing cars.

What if There’s No Alley Access?

In order for trash to be collected, it needs to be accessible. For most buildings in Chicago this is an easy task. Dumpsters live in the alley, trucks pick them up there. No fuss, no muss. However, there are a few locations in the city where alleys do not exist, or if they do, there is no way to get to them from the house without a very long walk.

Before you purchase a rental property you need to consider how trash pickup is handled. If there is no way for you to leave trash containers in a place where both tenants and trucks can access them, you will need to make plans to haul the trash out to the street for pickup on a regular basis. Unless you’ve got a good crew of workmen on hand or plan to live on site, I guarantee that this will get old really fast. In theory you could offer a barter deal to a reliable tenant to haul the dumpsters out on trash day, but you’ll still want to follow up regularly to make sure they’re actually holding up their end of the bargain. This is probably not a situation that you will be able to resolve on your own, either. You can’t just go adding alleys on your block.

Should I Chain My Dumpsters?

Yes. Illegal dumping – that’s when other people put their trash in your containers – is a “three strikes and you’re out” offense in Chicago. The first two times you get a ticket, the third time is a felony with jail time. Building contractors in particular are notorious for dumping their construction debris in any nearby unsecured container. Make sure it isn’t yours.

Additionally, dumpster diving is not just for thrift shop loving hipsters anymore. Identity thieves have a field day rummaging through tenants’ discarded papers. Grease theft from grease dumpsters is also common, since grease is used to make biodiesel and can therefore be resold at a high price. (Most grease dumpsters are designed to have higher security than your normal dumpster for just that reason.)

However, before you go chaining up your trash containers make sure you’ve considered the tenant training you’ll have to do to make this kind of precaution successful. Tenants will need to have keys to the chains’ padlocks. They will also need to be instructed to re-secure the dumpsters after depositing their trash. Your success rate will depend a lot on how well you convince your tenants of the necessity. Better pest control and protection against identity theft should be your two biggest talking points on that front.

Private Hauler Gotchas

Long Term contracts. Wouldn’t it be nice if you could sign your renters to a five or ten year lease that allowed you to raise their rents arbitrarily at any point? Well, private trash haulers do exactly that. And they generally require four to six months advance notice to get you out of the contract. Make sure you negotiate heavily before you select a hauling company.

Graffiti. You’d think that for the cost of service, the haulers would regularly swap out dumpsters that get tagged, right? Unfortunately this is not the case, and the taggers know it. Dumpsters are one of the most popular locations for graffiti, since landlords assume that the haulers will clean them and vice versa. If your building’s dumpsters are located close to the street or an alley intersection they will be particularly likely targets for tagging. Make sure that you keep some paint on hand to cover any tags.


 

Next week I’ll be doing a three part series on the quality of building materials. (Trust me, it will be more interesting than it sounds!) See you then!

What Happens If Your Landlord Dies?

In previous articles I’ve addressed what a landlord should do if a tenant dies in the middle of a lease. However, I’ve not discussed the topic from the other side. So what happens to a tenant if the landlord dies?

Regardless of how you feel about your landlord's death, you probably have some questions about what's going to happen to your lease.

Regardless of how you feel about your landlord’s death, you probably have some questions about what’s going to happen to your lease.

I’m not an attorney, and I certainly cannot cover every possible scenario. However, I can address some of the basic questions that may arise. As always, the discussions here pertain to apartments in the Chicago area.

Question 1: Do I have to move out?

No. Your lease is part of the property, just like the refrigerator, the garage and the roof. If the owner sells the building, he/she sells your lease along with it. If the owner dies, your lease continues. You do not have to move out automatically. Your landlord’s heirs cannot suddenly kick you out because they want to move in.

Question 2: Where do I send my rent?

You should continue to send your rent to the address listed on your lease. Once the landlord’s estate is settled, the probate attorney and/or the new owners who have inherited the property will send you written notice of any changes.

If your rent check comes back as undeliverable, hang onto it unopened in the envelope as proof that you tried.

If your rent check comes back as undeliverable, hang onto it unopened in the envelope as proof that you tried.

Question 3: Who’s the new owner?

This is probably the most complicated question. It may take some time for the new owner to be determined, depending on how the property title was held. In other cases, the new owner could be able to step in within a matter of days. In the interim, the executor of the estate will become your main point of contact. This could be someone named in the landlord’s will or a court-appointed probate attorney. Either way, until you are notified in writing of a change in ownership, make sure all dealings regarding your apartment are handled in writing to the landlord’s address as listed on your lease.

If They’re Incorporated

If your landlord was incorporated – either as a corporation or LLC – with other partners, then you have nothing to worry about. The company will survive the death of the landlord. However, if the landlord was the only partner in the company, the entire company’s assets (including your lease) will pass on to the landlord’s heirs.

If They Have Heirs and a Legal Will

Provided the will is legal, the property goes to whoever is specified in the will. For all you know, it might even be you!

Provided the will is legal, the property goes to whoever is specified in the will. For all you know, it might even be you! (Maybe you should be nice to your landlord after all…)

If the landlord had a legal will and designated heirs, the property and your lease will pass on to the heirs specified in the will. These heirs will become your new landlords automatically, although it may take them some time to figure out who will be handling your specific concerns.

If They Have Heirs and No Will

It’s highly unlikely that your landlord will die without a will (“intestate”) but if so, the ownership will be determined through Cook County probate court. Illinois has a very specific order of preference for distributing property among remaining family. Children and living spouses are the first option, followed by parents and siblings, grandparents, great-grandparents, and if all else fails, the property goes to the next closest surviving relative. However, the property may well be distributed evenly among many relatives, so your property could wind up the subject of dispute between squabbling relatives. The most important thing in this case is to remain in close contact with the probate attorney appointed to handle the estate, as any official changes in ownership will come to you from them.

If They Have No Heirs and No Will

escheat happens

Again, this scenario is highly unlikely, but in the case that your landlord had no will and no surviving family, your building will become property of Cook County. (In legal terms, the property “escheats” to the county.)

If The Landlord Owes Outstanding Debts

What if your landlord died while still owing money to somebody? Regardless of what the will says, the landlord’s creditors have to be paid first. This may mean that your apartment will transferred in order to settle a debt. Three common situations where this could occur would be if the landlord had a mortgage on the property, if they had not yet paid contractors for major renovation work at the building, or if they had unpaid back taxes. Either way, the creditor gets your building and you along with it.

Question 4: Can I use this as a reason to break my lease?

Not really. The new owners who inherit the estate probably wouldn’t fault you for wanting to head out early, but since your lease is still valid and your apartment is still intact, you’ll have to follow the same lease break routine that you’d have followed if your landlord was still alive. Please be gentle with the relatives of your landlord when you go to discuss leaving – it is always a delicate and difficult situation.

Question 5: What if the owner lived on site?

All of the above is pretty much consistent if the landlord lived in the same building with you or not. However, if the landlord died in the building (I know, ew!) then you may have grounds for breaking your lease. A death on the property requires special clean up and care. Your property may be sealed for investigation by the coroner. If you can’t get into the property or it’s a health hazard, and the problem continues for over 72 hours, you do have a right to break your lease. The only problem is that you have to provide written notice to your landlord asking them to correct the problem, and figuring out who your new landlord is within 72 hours can be difficult.

Regardless, the most important things in this situation are to find safe substitute housing immediately – a hotel if you have to – and to cooperate with the authorities and the heirs in order to find out when you can safely return. This sort of extreme scenario would merit a call to an attorney to ensure that your needs remain prominent in the minds of those dealing directly with the death.

Question 6: What if my lease expires before the estate is settled?

Complicated estates can take months or even years to parcel out between heirs.

If you’re on a one year lease, it may well be that your lease expires before everything is resolved. Your lease expiration date, like all other aspects of your lease, remains valid even if the owner dies. In Chicago, a landlord has to provide you with at least 30 days written notice if they don’t intend to renew your lease. Unless your landlord did so before death, you have the right to stay in your apartment on a month-to-month lease.

If you choose to move out at the end of your lease, your course of action should be to send a letter stating as much to the same address where you send your rent, at least a month before the last day of the lease.

Question 7: How do I get my security deposit back?

This is probably the most complicated of all of the questions. The first step should be to provide your forwarding address to the executor of the estate when you move out, along with a reminder that they must return a list of itemized deductions within 30 days, and the balance of your deposit, with interest, within 45 days.

If the estate does not return your deposit before the deadline, you do have a right to sue them to get the money back.

Overall the most important things to remember in this kind of situation are:

  • Make sure your voice is heard. It is very easy in the process of settling an estate for the heirs to forget about the deceased’s renters. As soon as an executor is appointed, you must remain a firm presence in the process so that your needs are not forgotten.
  • Be kind and patient. The person who inherits your building may not have any experience as a Chicago landlord. Our landlord-tenant laws are some of the most complex in the country. It takes a while to learn how we do things around here. You’ll have to take some time to read up on the rules yourself, and you may have to gently coach your new landlord on how to do things the right way. Remember that they just lost a family member – please don’t take their inexperience as a reason to take advantage of them.
  • Seek help if you need it. These sorts of complicated situations are why professionals exist. You may deal with grief yourself over the loss, even if the landlord was not a good friend. If the estate spends a long time in probate you may need to consult with an attorney. Like it or not, the death of your landlord means that changes are headed your way, and not all of them will be predictable.

The First 10 Things You Should Do After Closing

So you’re about to close on your first house. Congratulations! You’ve come a long way and it’s probably been a big hassle to get here. Saving money, filling out paperwork, viewing house after house… now that it’s over, what’s next?

There’s bound to be a lot of silliness that comes with getting your first house. You can dance around in your new empty living room and call up all your friends for a housewarming party, but there’s a few very important things you’ll want to take care of before you pop the cork on that champagne.

Make Copies of your Closing Documents. If you’re a first time buyer, the documents handed to you at closing are probably the most expensive pieces of paper that you have ever encountered in your life. The first stop you make after closing should be your local copy shop. While all the documents are still together and in order, take at least one copy of everything.

(more…)

10 Mistakes Made by First Time Landlords

Last year I did two articles about mistakes made by first time renters and first time buyers. Today we’re going to look at errors made by first time landlords.

1. Setting Arbitrary Rent Rates

The price a tenant will pay has little or no bearing on your monthly costs. They will compare what’s available and, if your price is reasonable, they will rent your unit. If your price is too high, they won’t even look at it. If it’s too low, they will wonder what’s wrong with it or take you to be a sucker.

Apple can get away with pricing higher than anything else. You cannot.

Apple can get away with pricing higher than anything else. You cannot.

(more…)

Rental Site Review: Zillow

A couple of months ago, I posted a review of SearchChicago.com, the Sun-Times online classifieds page. I concocted a scoring method to rate rental websites on a 40 point scale based on diversity of listings, listing freshness, listing legitimacy, and ease of use. SearchChicago scored 14 out of 40 – 35% of the maximum, a dismal failure. Today we’re going to use the same criteria to rate another, more well-known site: Zillow.

Zillow is best known as way to search for homes for sale. Their claim to fame since the beginning has been the “Zestimate,” or their estimated value of a home based on sale data from the area. For conventional homes, it can be reasonably accurate. For homes that deviate even slightly from your standard cookie-cutter architecture it is frequently wildly out of whack. Zillow recently expanded into listing apartments and homes for rent, and they brought the Zestimate along with them. It’s just as unreliable for rentals as it is for homes, but what about the rest of the site? Is it something your average Chicago apartment hunter should be using to find their next place?

Zillow scored 24 out of 40 possible points. Here’s why.

On the surface, it looks like Zillow has a ton of rentals in Chicago. And they do, but it isn’t as diverse as you’d think. In the 60640 zip code (Uptown), they list 910 rentals. The MLS has 79. In the 60625 zip code (Lincoln Square/Albany Park), they list 388 rentals while the MLS has 38. However, once you start picking apart the listings you realize that the surface data is misleading. Looking closely, over half of the listings are either duplicates or similar apartments in the same large buildings.

Even so, if you cut the total listings on Zillow in half, they still handily trounce the MLS. There’s all sizes and styles, from studios to five bedrooms and from houses to high rises. Rents range from $500 to five-figures and all different types of landlords are represented.

In terms of listing diversity, Zillow gets an 8 out of 10.

Zillow does not charge landlords or agents to post rental listings. This means that everyone and their brother can post an ad, regardless of whether or not they have the right to do so. Sites that do not charge advertisers are generally rife with questionable postings, and Zillow is no different on that front. A quick search this evening uncovered a fake copy of one of my own listings, which I reported using their handy “report” button. After reporting it, the listing disappeared from my search results, but I could still bring it up by typing in its direct address in my browser. I’m pursuing other routes to have the listing taken down.

In my search through the 60640 and 60625 zip codes, at least half to 3/4 of the listings used the ominous “undisclosed address.” Many used photos with watermarks from the apartment locator services, which are known for posting bait listings to free marketing sites. Others had no photos at all.

The apartments with actual addresses are more likely to be legit, but Zillow’s checking for unique addresses needs a little work. In the case of the scammer who copied my listing, he simply left off one digit from the apartment number to fool the system into thinking he was posting a different apartment.

Zillow gets 5 out of 10 possible points for listing legitimacy.

SearchChicago got a measly 2 out of 10 when it came to ease of use. Their slow, clunky site made for a totally dismal experience. By contrast Zillow comes out smelling like a rose. The site loads quickly, the back button works properly, and the mobile version takes me from a Google search result to an actual listing with only one annoying nag window about downloading their app.

Their mapping feature is decent, with nice neighborhood sectoring and the ability to draw your own boundaries. I’d have liked to see the ability to do a radius search in a circle around a specific point as well. Unfortunately, the map cannot be turned off unless you click through to a listing, and once you zoom in beyond a certain point you cannot switch from satellite to street view. On the map view, search results are displayed to the right in a list with basic data. However, the “basic” data on many of the listings is overly simplified, which leads to a lot of excessive clicking. Of course, Zillow being advertising-driven they want to be able to demonstrate that they’re generating lots and lots of clicks. Their approach seems to be to provide as little information as possible as a reward for each click.

A listing detail page dedicates about the top 1/4 of the page to the information obtained from the landlord or agent. The next 1/2 of the page is spent on Zillow’s useless “Zestimate” and price history tracking. Finally, the last 1/3 of the page is spent on school scores inlined from Greatschools, which is of marginal use to apartment hunters in Chicago who tend to be just barely out of school themselves.

The search feature is quick and dirty, but asks some strange questions. It’s obviously copied over from the home-for-sale search feature with little regard for the specific needs of renters. It allows the user to specify date of construction, lot size and square footage – most of which are omitted from rental listings altogether – but doesn’t allow the user to narrow their search by more important criteria like minimum lease length, security deposit, non-smoking buildings, or number of units in the building.

Overall in terms of ease of use, I’d give Zillow a 7 out of 10.

Finally, we’re down to the criterion that pretty much killed SearchChicago – listing freshness. If you recall, 72% of their listings had been off the market already for at least 3 months. Now, I’d like to say that Zillow did better. The MLS average market time for an active rental listing in 60625 and 60640 is between 40 and 56 days, so if Zillow comes in anywhere near that or better they’d be doing fine on the freshness factor.

Unfortunately, I just can’t tell how fresh the listings are.

See, if you look at the map page you can sort by “days on Zillow.” If you do so, you’ll see that the oldest listings are 34 days old. This makes Zillow look really good on the surface, until you start clicking through to the listing details. That’s where it all falls apart.

This is the teaser on the map page...

This is the teaser on the map page…

... and this is the detail page. Notice the difference in listing age?

… and this is the detail page. Notice the difference in listing age?

This means that short of clicking the detail pages for over 1000 listings, there’s no way for me to tell the actual age of the listings on Zillow. The oldest I found in a cursory search was 92 days – that’s a two month difference between the index page and the detail page!

Speaking as an agent who syndicates listings to Zillow, I can vouch that my listings take about 3 days to get picked up from the MLS. This is a very bad delay in a fast-paced market. I had a 3 day listing a few weeks back that didn’t even appear. However, they do tend to be very good about removing inactive listings promptly once they’re notified.

In terms of listing freshness, Zillow gets a 4 out of 10.

So, Zillow just barely passes with 60% of the maximum achievable score. If you’re comfortable with using maps, you can use it to search for Chicago apartments, but proceed with caution. Make sure to background check any landlord you find on Zillow. Also bear in mind that as the new kid on the block, most agents will post to multiple other sites before they think to post to Zillow, too.

Field Guide to Chicago Apartments: Studios

fieldguideIt’s been a while since we pulled out the old Field Guide for a humorous look at some of the different types of Chicago apartments. Last summer I gave you an overview of garden apartments and coach houses. Today we’re going to look at another common species of apartment with many quirks: the studio. As the economy starts to recover, many renters who have paired up with roommates through the recession will be able to move out on their own again. Studios, designed for single occupants, will be their next logical stop.

Habitat: Restricted

Unlike the previous two species we studied in the Field Guide, the studio apartment (apartmentus minisculus ecubiculus) cannot be found throughout Chicago. In fact, their territory is quite constricted. Studios can only be spotted in areas that currently attract large numbers of single residents, or in areas that attracted them in the past. They tend to flock together in high rise buildings along the lakefront and close to major transit hubs. Their slow appreciation makes them of little interest to condo developers. The ones that exist inland are usually converted from former hotels or clustered around college campuses and hospitals. (more…)

Exploring the Taboo against Prices on “For Sale” Signs

Once Upon a Time

Buyers agents as we know them in modern Illinois did not always exist. There was a time (and in some states it still exists) when agents were expected to represent both sides in home sales. “For Sale” signs with phone numbers were meant to give you access to the sellers’ agent, who would show you the property and serve as an intermediary in negotiating the purchase contract. In the days before the internet, this was one of the few ways you could find out price information, other than stopping by a real estate office or reading the Sunday paper.

If the price did not agree with you, the agent in question could take you out and show you other properties represented by their office. Before the advent of MLS systems, this was all they would show you. Back in those days when agents controlled access to all the listing information, the signs were a very important route for generating business. So, those real estate signs would never list prices. They would only list the name of the agency and a telephone number. Buyers would call in, have a chat, and get upsold. Brilliant.

This For Sale sign tells a great story, but still omits the price. What gives?

This For Sale sign tells a great story, but still omits the price. What gives? (Sign by Elle Zober of Greatfamilyhome.com. Worth a read.)

Of course, nowadays we have the internet. If you see a sign in front of a property you can look it up on a smartphone, or maybe scan a QR code, and you’ll get all the info you need. However, the internet also brings its problems. Scammers can co-opt listing addresses with fake ads, so that the information you get could be legit or fraudulent. Since many scammers make their money by posting copycat listings at too-good-to-be-true prices, one would think that the best safeguard would be to simply print the price of the listing right on the “for sale” sign, or perhaps in a little brochure in a box attached to the sign. Unfortunately, taboos exist against both of these options.

Once Upon Another Time (more…)

What’s Your Sign? (How to Tell if YOUR Housing Market Has Recovered)

If you’ve been following the housing market at all, you’ve probably seen articles about how the housing market is recovering, mortgage rates are slated to rise, and prices are climbing again. However, as the inimitable Dennis Rodkin recently pointed out in Chicago Magazine, the Chicago housing recovery is happening in fits and starts.

Oh really? (Cover © Chicago Magazine)

Oh really? (Cover © Chicago Magazine)

As we’ve discussed before, even if you live in Chicago, when it comes to housing you don’t live in Chicago. You live in a district of Chicago with its own boundaries, attractions and demographics. Those districts in turn contain many different types of housing, not all of which are truly comparable to your current home or the one you want to buy. Statistics that may be useful on a national or citywide scale are useless when it comes to determining the right time for you to buy or sell.

Today we’ll be looking at how you can determine what section of the market you should be watching and how to figure out whether or not the market has recovered.

What’s Your Market?

Much like your personality can theoretically be affected by the motions of the stars, planets and other cosmic bodies, there are also many factors that contribute to a home’s real estate horoscope.

Local Attractions & Neighborhood

The name recognition of a neighborhood will do a lot to dictate when your market recovers. Trendy neighborhoods that everyone recognizes will come back faster than the ones nobody knows about. Areas closer to the El trains and Metra stations will come back faster than those that require a car. Give some thought to which type of neighborhood you’re in and base your comparisons on similar areas. In other words, if you live in Hermosa you should not be using Wicker Park as a barometer.

Single family/Townhome/Condo

Condos and townhomes are popular among younger families, older folks and singles. There’s different types of condos to consider, too. Skyscraper towers with their $700+ assessments attract a far different population than small, self-managed walk-up conversions.

Single family homes generally attract an older, more stable population. But some will target ranches and split levels while others will want bungalows, Georgians or Victorians.

Uniqueness

Do you own/want a Prairie Style house in a neighborhood full of Colonials? Or a vintage walk-up on Sheridan Road? A 3 story loft built into the chimney of a Chinatown noodle factory? Or this contemporary beauty that’s nestled in the middle of pre WWII brick in Lakeview? The market for non-conforming properties is always the toughest to gauge in terms of speed and price. If you’re trying to sell or buy something that’s out of whack with its surroundings you need to be aware that the market statistics in your immediate surroundings only marginally apply to you. They’ll have an effect on price, but less impact on market time.

Beautiful story, but that would have been a very hard house to sell.

Beautiful story, but that would have been a very hard house to sell.

Age of Property

New constructions and rehabs fresh out of the developer’s hands are in a totally different market from owner-occupied homes. Buyers interested in one will have a very hard time shifting gears to consider the other.

Current buyers are used to seeing nothing but rehabs on the market, since it’s been dominated for years by conversions of distressed properties while homeowners waited out the downturn before listing. Meanwhile, sellers who have occupied their homes through the downturn may have pushed too-small homes to their limits, or run short on funds to maintain them. If you’re trying to sell your home of the past ten years, you cannot consider the performance of the prefab Green Tech home they just built down the street.

Nearby Schools

As poor as Chicago’s public school reputation may be, proximity to a good school (public or private) will still buoy up the surrounding neighborhood. NorthCenter and Edgebrook have both largely survived the downturn with minimal loss in value due to their strong public schools, while their neighbors Irving Park and Jefferson Park took a tumble without similar strength to anchor them.

Lender vs Cash

Who is likely to buy your building? Someone who needs a loan or someone with cash? At low prices and very high prices, cash buyers can cause a feeding frenzy. In the middle price ranges you find mostly buyers with mortgages, especially between about $150k and $450k. Cash dominant areas are going to seem to move more quickly because it takes less time for a cash deal to close.

Price

This should be a no-brainer, but you really do need to consider your budget/target sale price as part of determining your specific market. The markets under $100k and over $1m have been on the upswing for several months already. In the middle we’ve seen slower growth.

Politics

The politics of a neighborhood will affect how quickly your market recovers. Some folks don’t want to live in TIF districts. Others may shy away from high property taxes in a particular area, or only want areas with blue recycling carts. Given the long history of some members of the City Council some folks may have sworn to never again live in Alderman So-and-So’s ward. The city, county and state also court buyers into some neighborhoods with down payment assistance and lower loan interest rates.

Figuring out what portions of the market to watch is like finding your Chinese astrology symbol on a placemat.

Figuring out what portions of the market to watch is like finding your Chinese astrology symbol on a placemat.

What to look for

So you’ve determined that you should be watching for new construction single family homes in the Bell school district, or perhaps you’re looking for a 1960’s condo along Harlem in Montclare. Now that you know what types of homes you should be watching, what signs should you look for?

  1. Shortening market times. This means how long it takes a property to sell. You can find this information on many real estate sites. Just look at the date the listing was posted and when it went under contract. An average of 3 months is good. Anything shorter is great. Anything longer and you’ve still got a long way to go.
  2. More resales. As owners surface from underwater status, more of them will list their currently-occupied homes for sale. When you start seeing homes on the market while the owners are still living in them, that’s a very good sign.
  3. Fewer renters. In a rising market, the homes temporarily occupied by renters will return to the sales market. A good chunk of those renters will convert to buyers. Many of them were waiting for their credit to recover after short sales in the late 2000’s.
  4. Homes selling at list price or higher. Realtors aren’t going to turn around and start listing homes at higher prices. They will let buyers in multiple offer situations bid the prices up over list. For a long time now we’ve seen the average sale prices of homes at anywhere from 50-95% of their list prices. When that tips over 100%, your market is on its way back.
  5. Homes sitting under contract for 60+ days. A house is “under contract” if the seller has accepted an offer but the deal has not yet closed. For years now, contingencies in sales contracts have been plentiful but one specific type of contingency has been largely absent – the home sale contingency. This means that the purchase of a new home is contingent on the buyer selling their prior home. In the slow market, most places have been under contract for 30-45 days even when lenders are involved. If you start seeing homes under contract for 2-3 months, you can bet there’s a home sale contingency involved. This is a very good sign.
You cannot simply price your house higher than the market and hope to lead the market recovery.

You cannot simply price your house higher than the market and hope to lead the market recovery.

What does this mean for you?

If the market is starting to come back, then the price for your home of choice (or your current home) will be rising. However, sellers should not assume that they will immediately surface from being underwater, nor should buyers panic and think that prices are going to skyrocket out of reach. There are still a lot of foreclosed homes that the banks need to sell off, and the underwater homes may have a lot of appreciation to do before they can resurface. Even if the sections of the market jump 10% this year, remember that an average, sustainable appreciation rate is more like 3% per year.

Realtors may call you and try to convince you that now is the time to buy or sell, using national or citywide statistics. Before you jump on board with them, make sure they’re looking at the right “horoscope” for your particular home of choice.


 

Friday I’ll be back to discuss the taboo against listing prices on “for sale” signs, and how it might be leaving the door open for scammers. See you then!

Celebrity Tenants

Between my current career as a Realtor and my prior career as a stage manager, I’ve been lucky enough to deal with several celebrities during my time in Chicago. Like anyone else, they have to live somewhere too. As a landlord, it’s very possible in Chicago that you’ll be contacted by a celebrity (or a member of their entourage) who is interested in renting your apartment. Here are some do’s and don’ts for dealing with the celebrity renter.

Don't get so starstruck by a famous tenant that you lose your business sense.

Don’t get so starstruck by a famous tenant that you lose your business sense.

Do: Remember that “famous” is very relative.

It might be a professional sports player, a celebrity chef, or a movie star. It could also be a local news anchor, car dealership owner, or even your child’s school principal. Or it could be someone you’ve never heard of, like the bass player from an 80’s hair band or a voice actress from one of your kids’ favorite cartoons. It could even be the author of your favorite real estate advice blog. 🙂 (more…)

Fannie, Freddie and Ginnie

First time buyers will probably get confused when people start talking about Fannie Mae, Freddie Mac and Ginnie Mae. Who the heck are these people, and why do they they have a say in what house you can buy? Today’s article is a quick (and vastly oversimplified) overview of who they are and why they exist.

They aren't actually people. You cannot invite them to parties or weddings.

They aren’t actually people. You cannot invite them to parties or weddings.

The story begins back in 1938, at the height of the Great Depression. FDR and his team were trying to come up with ways to encourage the money to start moving around again. They wanted to get people to buy houses, but they had several problems to solve along the way.

Problem: Government-Mandated Limits on Bank Lending

When people don’t have any cash, they need to borrow a lot of money to buy a house. Money doesn’t grow on trees, though, not even trees in the backs of banks. The amount of money a bank can lend is capped at a number that’s in ratio to the amount of money people have deposited there. The exact ratio varies depending on the economy, but there is always a limit. They cannot lend out infinite amounts of money. Back in the 1930’s, with everybody short on funds, the banks were also out of money to lend. Nothing was coming in, so nothing could go out. (more…)