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Before bank owned properties and foreclosures became the buzz words for a generation, there were the myths and mystery surrounding them.  Through spending the last 5 years involved in this aspect of real estate, I realize that not many people understand what really happens to a house in foreclosure.  After reading this article if you have any additional questions about foreclosures or bank owned properties in Plainfield, Naperville, or anywhere in Illinois, feel free to contact me with questions.

Plainfield and Naperville Foreclosure and Short Sale FAQ’s:

• Illinois is a judicial state in which the homeowner must be sued by the lender in order to be granted repossession of the asset by a court of law.  Until the auction has taken place and ownership has been transferred the owner is in possession of the home.

• Lis Pendens are the documents filed at the beginning of a foreclosure once a homeowner misses 2-3 payments with their lender.

• The foreclosure process takes about 4-9 months after the Lis Pendens has been filed for the the foreclosure to be complete.

• Foreclosure can be avoided only by selling the property either traditionally or through a short sale, bringing the loan current, or a loan modification.

• Once a payment has been missed a lender will not accept partial payments, and the debt often begins to snowball.

• A property becomes an REO or bank owned property when the minimum bid at the auction (made by the bank)  to satisfy the loan at auction is not met.

• Abandoned properties that are in need of exterior maintenance such as lawn care, vandalism and graffiti can be addressed by contacting “neighborhood services” through the local municipalities.

• Short sales are sales that sell for less than what a homeowner currently owes, that are subject to the banks approval.  While short sales are often fabulous deals, they often take weeks or months to complete.
  

Plainfield and Naperville Foreclosure Myths Revealed…

Myth: REO’s or bank owned properties are the best deal in real estate.

Truth: Pre-foreclosures or short sales will probably give you more bang for your buck.  Pre-foreclosure simply means that the homeowner still controls the property, and a short sale means that the house is being sold for less than what the seller owes with the banks consent and approval.  A short sale done right, gives the buyer the best opportunity to get a great deal… and the seller the best opportunity to avoid a foreclosure.  Short sales take longer to approve than regular residential real estate, but sometimes they are worth the wait.   Bank owned properties have often been damaged by disgruntled owners who were distraught about losing their home; pre-foreclosure properties on the other hand are often in move in condition because the owners are still living there, depending on where they are in the process. 

Myth: If I’m in foreclosure I need to move out right away because I’m going to get evicted anyway.

Truth: Stop! Don’t move out! List your house for sale and attempt to sell your house by performing a short sale!!! While your waiting for the home to sell, start saving the money you would have spent and put it in the bank.  You will need for the 1st and last months rent when you move out.  Expect that the foreclosure will affect your credit for the next 2-7 years depending on whether or not you are able to avoid the foreclosure through a short sale.  Save every penny you can during this time.  Plus your home will probably sell faster if it isn’t vacant and abandoned. Homes that appear to be abandoned will often have the auction date accelerated by the lender.

Myth:  My homeowners association is responsible for the exterior maintenance of vacant properties in my neighborhood.

Truth:  Contact your cities ‘neighborhood services’ contact for properties that are in need of exterior maintenance such as lawn care or weed abatement.  They can place a lien on the property, but you will have better luck contacting the “neighborhood services” contact for the city of Plainfield, or the city of Joliet.  Homeowners associations will not maintain vacant properties, but can put the pressure on the lender if the property actually gets returned to the bank’s possession.

Myth:  Banks will take anything to get rid of a property…

Truth: The banks will take anything that makes sense to their situation.  If an offer does not meet their criteria for a specific property they will not entertain the offer.  Most likely they will counter the offer, but take note:  their counter is a good indication of what they are wiling to negotiate to!

Myth:  If a house is vacant it means that the house has been foreclosed on and the bank owns the property. 

Truth:  A home is only bank owned if there are no bidders at the auction and it then becomes the repossessed collateral for the bank, in exchange for the debt owed by the previous owner.  The deed is recorded at the county assessors office.  Vacant homes can occur for any number of reasons, and most likely if it is not bank owned, it means that the owners abandoned the property during the process of foreclosure.  Who controls the property is a determining factor regarding who is responsible for the property and all of it’s maintenance. 

Do you have a question about foreclosure or bank owned properties that you want to see answered?  Call me at 630-673-6233, or contact me using the button at the top of the page. 

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According to Crain’s Chicago Business an index of Chicago-area single family home prices will decline 8.1% in 2008 and another 2.2% in 2009.  Prices for homes in Plainfield and Naperville area, in general, have held up well against the current rates of depreciation, but the price declines are a necessary evil for bringing some long term stabilization to the real estate market. 

Plainfield home values have returned to their 2005 values which was pretty much the peak of the area’s appreciation during the real estate gold rush that swept across the nation.  I personally think that one of the reasons that appreciation was so high and depreciation has been relatively low in areas like Plainfield and Naperville has to do with the new development that took place during the years of 1998-2004. 

The lure of lower home prices on new construction became a concession to the distance that buyers were willing to travel for a newly constructed home in under developed suburban areas.  Buyers were able to buy low for a longer period of time until the development of the area caught up with the amenities of older and more established neighborhoods north and east of Plainfield and Naperville. 

After the area became developed, the prices in the area caught up with the national rate of appreciation, in addition to the quickly captured equity of “moving so far away” from where residents were originally from.  I think that those two factors softened the blow for the immediate rate of depreciation, BUT… that may not be the end of the story.

Plainfield home owners may have a tougher storm to weather in the long run.

Why? Because there is a large demographic of first time home-buyers in Plainfield. This demographic continued to rise every time a new developer built a subdivision on vacant land.  First time home buyers who bought a home from 2003-2005 were easy prey for unscrupulous mortgage lending schemes.  It was also an opportunity for new homeowners to be tempted by the market to strip their newly acquired homes of any and all available equity. 

First time buyers that find themselves in the wrong hands can often be misguided and misled to make bad decisions.  The best piece of advice I could ever give someone looking to buy a home it this:

Don’t let someone else tell you how much house you can afford. 

Now, I’m not saying that you shouldn’t seek the advice of a mortgage professional when it comes to buying a home, because that’s the first thing I’m going to tell you to do, BUT… I hope you already have an idea of what kind of a payment you can comfortably make before you start shopping for a loan.  Commit to that payment before you start shopping for a house because it’s really easy to inch up past that mark as you take in the excitement of buying a house.

Another reason things may get worse for Plainfield and Naperville sellers is that tighter lending restrictions have made it more difficult to reduce the inventory of homes available for sale from owners who want, or need, to sell their homes, and we all know from high school economics class that when there is a surplus of anything it drives prices down. 

Foreclosures in the Will County area are still on the rise and as long as there are bank owned properties, neighborhoods with a high volume or REO homes for sale will continue bring down the area values.

Home prices are still relatively high in comparison to area income levels and in order for home prices to stabilize, prices need to decline. 

Naperville and Plainfield sellers who are serious about selling their homes in this market will need to be serious about their homes value based on market time, active comparisons, and closed comps within the last 3-6 months.  Sellers who are not willing to price their homes according to the current market conditions will find themselves holding on to a property that is never going to sell. 

To find out what your house is worth right now, or to learn about the market conditions in your Plainfield or Naperville neighborhood, call me at 630-673-6233 contact me at the tab at the top of this screen for your custom market analysis or market report.

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The market has been a little off recently with the amount of foreclosures and pre-foreclosure short sales taking over the real estate market in Plainfield and Naperville, but not all properties in both Plainfield and Naperville are being sold a deep discounts.  Buyers always ask me how much they should offer if they want to have their offer accepted by the seller.  Sellers likewise ask how much they can expect to be offered for their Plainfield and Naperville properties.

On average over the last 6 months, sellers in Plainfield got about 96% of their asking price for both town homes and single family properties, with the exception of single family homes with 5 or more bedrooms, which got about 94% of their asking price. One reason that the sellers with 5+ bedroom houses may have gotten less than asking price is because it was over priced to begin with.  Bedrooms typically add between $7-10K to the value of a house, but not often more than that.  Another reason is that there is not as great of a market for homes with more than 4 bedrooms, lessening the interest that buyers would have in a home that may be more than what they need.

In Naperville, it’s a similar story but the numbers are down just a bit. For all single family homes available in Naperville that closed in the first 6 months of 2008, the single family home sellers are are closing at about 95% of their asking price with the exception again being the 5+bedroom market.  Those homes are fetching about 94% on average.  Attached single family homes are fairing a little better with a sale to list price ratio of about 96%.  The exception is one 4 bedroom attached single family home that closed at 98% of the asking price, which strangely enough, is converse to the situation with 5+ single family homes in Naperville.

Plainfield Market Statistics for the last 6 months:

Naperville Market Statistics for the last 6 months:

A few things to remember about how much you should offer on a properties in Plainfield and Naperville are:

• Is the house you are interested in over-priced?  Any good Realtor would, and should, pull the neighborhood comps and do a market analysis on the property you are interested in BEFORE you make an offer.  Find the true market value before you start negotiating and then go from there.
  

• Owners of exceptionally well kept homes in Plainfield or Naperville that are already priced well may be less willing to negotiate.  They know they will sell their home to the next person if you make an offer that is too low.  Often these sellers are often willing to wait for a higher priced offer.
  

• Ask about their motivation.  Do they need to move? Are they just testing the market? Have they been transferred?  Experiencing a life change due to birth, death, marriage, divorce or illness? 
  

• Does the property need repairs or have deferred maintenance that needs to be addressed?  If so, how much do you think it will cost to repair?  Is the house priced accordingly?

• Does the property have some kind of functional obsolesce that will make it difficult for you to sell in the future?  Power-lines or freight train tracks cutting through the back yard?

• How much have similar properties sold for in the neighborhood?

• And finally….How much do you really want that house?!
  

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Under the new housing bill that gives first time home buyers a tax credit, first time home buyers will be eligible for a tax credit for up to 10% of the property up to a maximum of $7,500.  In order to qualify a buyer can not have owned a home in the last 3 years.

Here’s how the new first time buyers tax credit works…

• Married couples who file separately will each get a credit of $3,750, and unmarried couples who file jointly can divide the $7,500 credit between them.

• This program is actually a loan that must be paid back over the next 15 years at 0% interest, in the second year of home ownership.  A 1st time home buyer who qualified for the whole credit would pay $500 for 15 years or about $41.67 per month.

• The credit will only apply to homes bought after April 9,2008 and before July 1, 2009.

• High-income home buyers dont qualify: Eligibility begins phasing out for single filers with adjusted income of more than $75,000 and $150,000 for joint filers. It completely phases out at $95,000 for singles and $170,000 for married couples filing jointly.

While having to pay back the credit over time seems like it dilutes the benefit, many homeowners will  enjoy the benefits of a higher tax return. I’m sure the money can be put to good use for home improvements and some of the higher cost home purchases such as appliances and furniture.

Under the new FHA guidelines it just got a little tougher for 1st time buyers to purchase their first home with an FHA loan, but hopefully this new bill will help soften the blow.

Just to be clear, it’s not a credit you have to take if you meet the criteria, but just know that it is available to you. 

It’s still a great time to buy a house!  If you are in the market to buy or sell a home, or know someone who is, it would be my pleasure to help you with all of your home buying or selling needs in the Plainfield or Naperville area.  Call me at 630-673-6233.

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How much you should offer on a pre-foreclosure or bank owned property depends on a few different factors, but if you play your cards right, it could lead to a really great deal on Plainfield on Naperville real estate.

Plainfield and Naperville Short Sales:

If you are making an offer that has not yet been foreclosed on and that is subject to bank approval, you are making an offer on a property that is still in the possession of the homeowner. The owner decides which offers make it to the bank for the final approval. Offers that are too low will eat up the buyers time in which they may elect to decline the offer; but offers that are close to or near market value may entice the lender to accept less than what is owed to satisfy the debt of the homeowner in default.

Short sale approval can take anywhere from 1 day to 8 weeks, depending on the lender, and the amount of accounts in default that a case manager is handling. Most lenders are in the process of negotiating hundreds of loans in default. The response of each lender will be determined by the efficiency of the way the required information is packaged by the person in charge of handling the short sale.

If the sellers financial information is missing or incomplete, the file will sit on a desk, unaddressed for days or even weeks! The case managers are overloaded with files from sellers in default and they will not chase down the person in charge of the short sale for missing information. If you have an offer in on a short sale and you have not received a response after 4 weeks, ask the person handling the file to check with the lender to make sure that all required information is on file and accessible to the case manager. You need to make sure that the person performing the short sale has good contact with the bank and that they are proactively pressing the bank for a decision.

Plainfield Bank Owned Properties or REO’s:

Bank owned properties are corporate owned homes that have been sent to the auction but which were returned to the bank’s possession when there were no bids offered above the banks opening bid. (which is usually for the amount that is owed.) These properties are then marketed by an experienced REO agent who sets the price, taking into consideration the condition of the property and the banks desire to quickly sell their property at a fair market price. On the other hand

How much should you offer for those distressed properties in Plainfield or Naperville?

What condition is the property really in?

Are the repairs cosmetic or is there structural damage that needs more than just a little elbow grease? Homes with serious issues such as structural damage or mold issues will always be the most deeply discounted properties on the MLS, but they will also require the most amount of money and time in repairs, especially if the mold inside of the house is toxic. The next two areas of the house that will yield a decent discount it damage to the drywall, the carpet or flooring, sinks, cabinets and counter tops… and missing mechanical appliances such as a furnace, air conditioner, sump pump, & hot water heaters. The final degree of discount comes from the things that may not be perfect, that are easy and inexpensive to fix.

What kind of cash reserves will you have to make repairs?

Most of the homes that area bank owned will need some kind of work. They may need new carpeting, appliances, landscaping. Keep those repairs in mind when discounting the property by comparing the Plainfield or Naperville neighborhood values to the amount of work, and the amount of money that needs to be spent, in order to bring the property up to the neighborhood market values. Make sure you will have the money available to you to make those repairs, especially if they are required by the lender (for FHA loans) or by the village.

Are there other offers on the house?

If you are making an offer on a pre-foreclosure home in Plainfield or Naperville and you find yourself in a multiple offer situation because the listing agent discloses that there are multiple offer on the property; it is always in the best interest of the buyer to bring your best offer to the bank. Presenting offers to the seller is the first hurdle to overcome, but then you still have to get the bank to agree to the loss it is willing to accept. Most often the real negotiation begins after the offer has been handed off to the bank. A seller that truly understands the process, knows that they have the best chance of having the short sale accepted by their lender to avoid the foreclosure, by getting the best offer as quickly as possible.

A few tips from an agent in the trenches:

• Don’t submit a ridiculously low offer if you want a quick response.
• Lenders will not typically accept offers asking for seller paid closing costs, points, or fees. There are exceptions, but only when the contract is heavily negotiated. Make sure your financing is solid you want to be taken seriously.
  
• Lenders will NEVER accept an offer that is subject to a home sale contingency. Never, ever, ever. Nope, just to be clear it won’t happen.
  
• The bank will most likely counter any offer that comes across their desk. It’s their policy, and I always expect it to happen and anticipate it.
• Most short sales take anywhere from 2-8 weeks for approval. Foreclosures are at record all time highs, and there are a limited amount of loss mitigators in each department.
• A contract that is subject to bank approval is not fully executable until it is accepted by the lender, which means your offer could be bumped mid process by a better offer. This is subject to debate by several local area attorneys as to whether the contract becomes fully executable when signed by the seller, or when it is approved by the bank. I would refer to a real estate attorney to clarify if this situation were to arise.
• Liens, property taxes, and homeowners association fees need to be paid prior to closing by the seller (lender) and it’s important to take those losses suffered by the bank when assessing the loss the bank is willing to accept.
• On an FHA loan, the minimum amount that a bank can accept on a short sale is a NET offer of 82% of the APPRAISED value of the property. This is what the bank needs to see on their side of the HUD on the closing or settlement statement.
• Only work with an agent who knows about the foreclosure process if you are buying a pre-foreclosure or bank owned property.
  

If are looking for an REO or pre-foreclosure house in Plainfield or Naperville, IL, I can provide you with a current list of properties available for sale in the area. It’s really important to be pre-approved for a loan before you even begin to look at these types of properties because the lenders are looking for a quick close. I can arrange a meeting with one of the mortgage brokers that I work with if you are ready to get pre-approved for a loan.

Call me for your complimentary list of foreclosed or pre-foreclosure properties in the Will county area at 630-673-6233 for access to the hottest market in real estate right now.