Chicagoland REO Specialists

Welcome to the DK Home Team


Regional Market Trends in Housing

Regional-PricesAs you know, we all get caught up in what the media is saying about current real estate market trends. Most of what we hear in the news is based on national averages and not specific to our area. This becomes extremely frustrating to the realtor when listing or selling a property for their client. Seller's and buyer's need to focus on the local market trends and not the national overview of the market. Listening to a national trend can very well result in unrealistic expectations and perhaps overpriced listings. KCM recently did an excellent market trend by region shown below. This kind of puts things back into perspective when you look at your market compared to the rest of the county.

“The House of Walking Debt” – Better Known as The Zombie Foreclosure

Foreclosure-ZombieWhat is a Zombie Foreclosure or, more appropriately, what is a Zombie Title? This is a title to real property that happens when a lender initiates foreclosure proceedings by issuing a notice of foreclosure and then, for whatever reason, dismisses the foreclosure. If the person on the title is unaware that the foreclosure has been dismissed, they will be left holding a Zombie Title. The lender can dismiss the foreclosure for reasons such not being able to justify the costs associated with the foreclosure or the lender not wanting to take possession of the home. In some states like Illinois, the foreclosure process takes so long that the lender's cost to maintain the vacant property simply does not justify the cost of taking possession. Lenders and banks are under no obligation to foreclose and take title to a property even if the loan is in default. A lender can just walk away leaving the unsuspecting homeowner in a world of hurt. These Zombie Titles can be catastrophic for the homeowner who thought the bank took over the property after they abandoned it. The homeowner is still held responsible for the property taxes and held liable by the local government for maintenance and repairs on the property. The holder of these Zombie Titles can very well have their wages and/or tax refunds garnished and they can further destroy their credit as the unpaid penalties and fees increase over time. It is critical that the homeowners protect themselves against Zombie Titles by making sure the foreclosure process has been completed and that the title legally transfers to someone else. The lenders are not required to let a homeowner know if they decided to dismiss the foreclosure. The homeowner abandons the property thinking they no longer on the title when in fact they are still responsible for all the costs of maintaining the property. The unsuspecting homeowner may find out years later they are still responsible for these costs. According to RealtyTrac, there are over 302,000 zombies out there with the top two zombie states being Florida and Illinois. So watch out for the “walking debt” coming soon to a neighborhood near you!

THE TWELVE DAYS OF CHRISTMAS – As seen through the eyes of an REO Agent

On the first day of Christmas my AM sent to me A vacant REO property On the second day of Christmas my AM sent to me Two discolored basements And a vacant REO property On the third day of Christmas my AM sent to me Three MMR’s Two discolored basements And a vacant REO property On the fourth day of Christmas my AM sent to me Four BPO’s Three MMR’s Two Discolored basements And a vacant REO property On the fifth day of Christmas my AM sent to me Five angry Realtors Four BPO’s Three MMR’s Two discolored basements And a vacant REO property On the sixth day of Christmas my AM sent to me Six outstanding invoices Five angry Realtors Four BPO’s Three MMR’s Two discolored basements And a vacant REO property On the seventh day of Christmas my AM sent to me Seven winterizations Six outstanding invoices Five angry Realtors Four BPO’s Three MMR’s Two discolored basements And a vacant REO property On the eighth day of Christmas my AM sent to me Eight missing lockboxes Seven winterizations Six outstanding invoices Five angry Realtors Four BPO’s Three MMR’s Two discolored basements And a vacant REO property On the ninth day of Christmas my AM sent to me Nine cash for keys Eight missing lockboxes Seven winterizations Six outstanding invoices Five angry Realtors Four BPO’s Three MMR’s Two discolored basements And a vacant REO property On the tenth day of Christmas my AM sent to me Ten cancelled listings Nine cash for keys Eight missing lockboxes Seven winterizations Six outstanding invoices Five angry Realtors Four BPO’s Three MMR’s Two Discolored basements And a vacant REO property On the eleventh day of Christmas my AM sent to me Eleven pipes a bursting Ten cancelled listings Nine cash for keys Eight missing lockboxes Seven winterizations Six outstanding invoices Five angry Realtors Four BPO’s Three MMR’s Two discolored basements And a vacant REO property On the twelfth day of Christmas my AM sent to me Twelve squatters squatting Eleven pipes a bursting Ten cancelled listings Nine cash for keys Eight missing lockboxes Seven winterizations Six outstanding invoices Five angry realtors Four BPO’s Three MMR’s Two discolored basements And a vacant REO property Happy Holidays from the DK Home Team!

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The Illinois REO Expert is Ready to “Lead the Way” in the Fight to Help Stabilize the Housing Market

Just like the Army Rangers' motto of “Rangers Lead the Way”, the Illinois REO Expert is part of a highly trained and rapid deployable force with specialized skills that enable us to engage in a variety of Real Estate REO related Special Operations. We “Lead the Way” in the Default Industry. RealtyTrac released its Market Trends Newsletter confirming that Illinois had a 34% increase in Foreclosure activity in the 3rd Quarter. That is more than double the national average. With the Chicagoland area defying the national trends in foreclosures, the need to deal with these properties by seasoned REO Experts will soon become more apparent. The recent philosophy of many of the banks was to bring in more traditional Real Estate agents with little or no REO experience to handle smaller blocks of inventory. They felt this would allow the traditional agents to concentrate more on bank properties by giving them more personal attention and in turn, would move the properties quicker. The banks put pressure on the asset management companies to increase their agent database. Every Realtor wanted a piece of this specialized business to hopefully fill in financially until the market returned to a more normal cycle. You simply cannot maintain, manage and market this specialized product by conventional Real Estate agents. It does not work and has not worked in the past. The traditional agent has very little, if any, experience in evictions, property management, rehab, security, board-up, lawn maintenance, snow removal, winterizations and de-winterizations. Nor do they have the crews, inspectors, and specialized agents to handle this massive undertaking. This does not include the large amount of upfront cash needed to sustain staff and day to day costs for properties that often times may not be listed for over a year. In fact, RealtyTrac stated that the Illinois foreclosure timeline is 673 days to complete the foreclosure process. The national average is 382 days. As I have stated on several occasions, the second shoe is about to drop on all of the Judicial states that have dragged their feet in getting these properties to market. Illinois by all statistics is one of the slowest. When these properties begin flowing into the larger metro areas again, and they will, it will be the REO Experts that are best prepared and properly staffed to market and manage volume. The REO Expert will continue to “Lead the Way” in assisting in the stabilization of the housing market. Frank DeNovi

Shadow Inventory: Myth or Magic?

Just like magic a few years back the housing market collapsed. Are we now seeing the banks doing another slight of hand called the "Vanishing Shadow Inventory"? Think about it. Everyone knew about the millions of properties in the mysterious "Shadow Inventory" last year, and now you can't get a straight answer from anyone as to where they went. As an REO Real Estate broker for 27 years, I certainly haven't seen them come into REO. What happened to them? How did they disappear? Have they all gone to the short sale fairy in the sky? Has everyone suddenly brought their mortgages current? Solid statistics are showing that the housing market is improving, foreclosure activity is down, housing prices are showing signs of improvement. And most importantly the "shadow inventory" is shrinking. This must be true. I read it on the internet! Let's look at this from another prospective. What if the banks are classifying the shadow inventory differently than in the past? Let's just say for argument sake they no longer are identifying a major portion of this vanishing shadow inventory as delinquent or in default. Let's also imagine that they are not listing them in the MLS or identifying them as REO properties. Why would they do this? In theory this would help stabilize the housing market. Get prices to go up, and then gradually release them into the market at higher prices. I'm not saying this is a bad thing in the very short run, but it certainly solves nothing in the long run. We still have the issue with over 5 million homes in some stage of delinquency or foreclosure. Is the 2nd shoe about to fall? Too many questions and not enough answers these days. I still believe the glass is half full and not half empty. But then again, I still believe in Santa Claus. Frank DeNovi

The Illinois REO Expert Believes in Home Ownership

THE REO EXPERT Make no mistake about it, the REO EXPERT is critical in assisting in the stabilization of the housing market and increasing the opportunity of home ownership. The REO business is a specialty business. It is a a unique segment of the real estate industry that requires special skills, talents, training, and work ethic that is not for everyone. It requires organization, state of the art marketing and management systems and a skilled professional sales and property management team. We are the Marine Corps of the real estate business. "First In, Last Out". From pre- foreclosure until closing. The thousand dollar property to the multiple-million dollar one. The rodent, flea infested hole in the wall to the country estate. When we take an assignment from a client, we have no idea what condition this property is in. Just like our client, we have no idea if it's vacant, occupied, a crack house, meth lab, or the house of our dreams. The REO Experts carry the tools of our trade in the trunk of our cars from various types of lockboxes, kwickset locks, hasps, padlocks, and a complete set of tools. Not to mention our IPad, camera and cell phone. We have to be an expert in property values, repair estimating, code violations, marketing, advertising, and be responsible for all utilities, lawn maintenance, snow removal, and potential hazards. We inspect our properties weekly to insure they are maintained to local codes and standards as required by our client. Often we act as general contractors and oversee repairs and renovations. In many cases we front the repairs and submit invoices for reimbursements. All of this is what differentiate the REO EXPERT from the real estate broker. We wear two hats, twice the responsibility and liability, and nearly half the commission and several times the volume as the average real estate agent. Why do we do it? We love it! We are addicted to the work and the personal and financial reward that come with long hours and hard work. We take a personal pride of being a member of the select few who do make a difference. - Frank DeNovi

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2011 WILL BE REMEMBERED AS THE YEAR OF FORECLOSURES, SHADOW INVENTORY, STRATEGIC DEFAULT, UNDERWATER LOANS, AND ROBO SIGNING So what did we learn from all of this? According to Joel Cone, the staff writer for Realty Trac’s Foreclosure News Report Borrowers learned how to use strategic default and walk away from their underwater loans instead of making payment. Cone goes on to say that “armed with knowledge that the financial institutions are so far behind the eight ball playing catch-up with the delayed foreclosures, homeowners have no motivation to move on” He also stated “there are documented cases now of homeowners who are simply staying in their homes without making a mortgage payment for as long as three years, figuring they can stay until the bank gets around to foreclosing on them. In the meantime, they are living rent-free”. SO WHAT DOES 2012 LOOK LIKE? We are seeing employment figures improve slightly so we will probably see less delinquent loans. However, foreclosures will continue to rise as the banks push through the backlog of the Shadow Inventory that was previously stalled partially from the robo-signing. Trulia said an increase in “foreclosures will depress prices for several reasons-foreclosed homes are often sold at a discount and used as comps for non-distressed homes” “Agents should be gearing up with competitive pricing strategies to catch buyers and preparing to counsel their traditional seller-clients about the depressed prices to come in high-foreclosure areas,” Trulia said. With many people losing their homes and the need to rent, they will find the rental market cost to rise in 2012. Based on what we are hearing, this seems like the absolute best time for the first time home buyer to capitalize on low interest rates and low home prices. For the long term investor there are great opportunities for rehabbing and renting these distressed homes to capitalize on the strong rental market and long term appreciation and positive cash flow potential. 2012 should be the year that will be remembered with the words: HOUSING RECOVERY BEGINS.

A Broker’s Paradox – Dustin Brown

Six months ago, an established San Francisco REO broker closed down his operation, leaving the REO business for good. Around the same time, a Florida broker was forced to let go half his staff. And these aren't isolated incidents---it's happening nationwide. At the June REO Expo in Fort Worth, TX, I spoke with brokers from across the country. Many of them had already made similar cuts. Even the brokers who hadn't cut staff knew brokers who had. Which begs the question: what is happening to REO brokers? Two factors seem to be affecting them the most. First is the decision by some of the biggest lenders, in an effort to cut costs, to slash broker commissions on REO properties by as much as 1/3. Facing such drastic cuts, many brokers find themselves actually taking a loss on each property sold. Couple that with the continuing effects of the robo-signing fiasco, where kinks created in the pipeline months ago mean that in some places properties are not being foreclosed on at all. Nationwide, available inventory continues to trickle out at a fraction of its potential rate. As if conditions were not bad enough, prices in most areas of the country either remain stagnant or continue to decline. The end result is that more brokers are competing for fewer properties for less money. Somewhere, something has got to give. One California broker I spoke to on condition of anonymity told me how dire things have gotten, and what some brokers are doing to sruvive. Since the start of Q1, his REO volume is down 50%. To compensate, he has both cut staff and branched out in his business. "Where our old business was about half and half REO/short sales, now we're about 1/3 REO, 1/3 short sale, and 1/3 standard retail," he said, and it's a practice that's becoming more common with brokers who are just trying to stay in the game. Some brokers, however, recognize opportunity in this uncomfortable state of affairs. Darren Brown , an REO broker based in Fair Oaks, CAtold me how he and his staff are adapting to the current market conditions. "Some staff have had to be laid off, but the remaining staff are a lot more versatile. We're doing a lot more cross-training," he explained. "With volume down, my people are able to perform more than one task, which helps keep overhead low." As an example: while volume is still low, there are fewer BPO's to do, which means that staff who used to focus solely on BPO's now have time to do field inspections on existing inventory. In this way, Brown and his staff are able to continue their focus on REO and short sales. "We're still pushing forward [in REO], trying to absorb the inventory left behind by brokers leaving the business." Sherry Rahnama --a Fairfax, VA based broker--has a similar strategy. Although overall volume in her area has decreased, her business hasn't been nearly as affected as others, with asset managers continuing to assign her steady listings. "I think that's because of the level of service we provide them," she says. Rather than branch out, she continues to focus heavily on REO. "Where other brokers might only be capable of taking one or two listings at a time, we provide the services that asset managers need. If they need a rush BPO, we're able to do it the same day." Some day, the REO market will normalize. The pipeline will straighten out, and prices will reach equilibrium. No one knows when that day will come, but one thing is certain: The brokers who emerge on the other side of this mess will be the ones with the ability to adapt to current conditions and the foresight to realize that dedication now will yield huge dividends in the future.

S&P is now putting the “Shadow Inventory” principal balance at $450 Billion

S&P is now putting the “Shadow Inventory” principal balance at $450 Billion Shadow inventory is a term that refers to real estate properties that are either in foreclosure and have not yet been sold or homes that owners (banks) are delaying putting on the market until prices improve. These are mainly the result of the mortgage meltdown of 2007-2008. According to Realty Trac, one in every 577 housing units received a foreclosure filing in February 2011. Here is a breakdown of the number of foreclosure filings in February, by county, for Cook and the surrounding collar counties in Illinois:
  • Cook County             1 in every 470 homes
  • Lake County              1 in every 308 homes
  • McHenry County      1 in every 298 homes
  • DeKalb County          1 in every 405 homes
  • Kendall County          1 in every 174 homes
  • Will County                1 in every 279 homes
  • Kane County              1 in every 293 Homes
The total foreclosure activity in these 7 counties accounts for 7,574 Sales Trends: Cities with the highest gains in Home Sales prices,  based on the last 2 calendar quarters, are River Forest with an average sales price of $602,967,a 39.39% quarterly increase, followed by, Schiller Park, Hazel Crest, and Prospect Heights. The city with the greatest drop in home sales prices was Downers Grove with an average sale price of $255,258 (a 25% quarterly % decrease in value), followed by Hoffman Estates, Ingleside, Lincolnshire, Winnetka, Burbank Zion. How do we rank on a National level regarding the foreclosure rate?
  1. Nevada
  2. Arizona
  3. California
  4. Utah
  5. Idaho
  6. Georgia
  7. Michigan
  8. Florida
  9. Colorado
  10. Hawaii
  11. Illinois
  NOTE: Before we get that warm fuzzy feeling about NOT being in the top 10, keep in mind that in Judicial foreclosure states there was a 19% decrease in the foreclosure filings in January and a decrease of 48% from February 2010. Judicial States are taking much longer to clear up the robo signing mess than non-judicial states.  These figures do not reflect the increased delay in filings which could be substantial. From everything we are hearing in the industry, there appears to be some agreement that 3rd and 4th quarter will see an increase in REO inventory at a controlled pace.

Current foreclosure trends for December 2010

While Sales of Foreclosed properties appear to be down, the figures are misleading. Many properties have been held off the market during the foreclosure freeze the past several months. In fact, while we are still seeing the numbers down almost across the board, the properties actually hitting the market has all but stopped. Where are these properties? When will the banks start releasing them? Why haven’t they released them? What effect will it have on the market once released?  Once these questions are answered, we can get a true picture of the future of the housing market. Until then, we have to base everything on what current data is available.   One in every 376 housing units in Illinois has received a foreclosure filing in December 2010 according to RealtyTrac. This is down from  1 in every 311 in October.   The foreclosure activity in the Chicagoland area shows Cook county number one with 8117 in new foreclosure activity in December. New foreclosure activity as defined by RealtyTrac is the total number of properties that received a foreclosure filing, default notice, foreclosure auction notice or bank repossession in the most recent month.   Top 5 foreclosure activity counties in Illinois for December 1.       Cook  8117 2.       Lake  883 3.       Will  1041 4.       Du Page 1099 5.       Kane  624 Basically 65% are in pre-foreclosure, 15% public auction, 20% bank owned.   Foreclosure activity in December for the United States as reported by RealtyTrac shows Illinois still #4 from the last report in October. 1.       California  65915 2.       Florida  25641 3.       Michigan  16061 4.       Illinois  14042 5.       Arizona  13561 6.       Nevada 13472 7.       Texas 11,162 8.       Georgia 11,042 9.       Ohio 13,233 10.   Colorado 5123   Some other interesting figures are the average sales price by the top 5 counties in Illinois: 1.       Cook-  Avg Sales Price $264,197 Avg Foreclosure Sales Price $145.064   45.10% Savings 2.       Lake-   Avg Sales Price $306,108. Avg Foreclosure Sales Price $184.670. 39.68% Savings 3.       Will-    No Data Available 4.       Du Page- Avg Sales Price $285,661 Avg Foreclosure Sales Price $190.074  33.47% Savings 5.       Kane-   Avg Sales Price $230,236 Avg Foreclosure Sales Price $111,237 51.69% Savings With all of this data, the big question still looms out there.  Where are the properties in these statistics? They certainly are not coming into inventory or being listed for sale.   I welcome your feedback and would like to know of other topics you may want to discuss regarding foreclosures, short sales, and REO (bank owned) properties.

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