In spite of all that Oak Park and River Forest have to offer as great places to live, the local communities have not been immune to the recession that has gripped the real estate market across the entire country.
According to real estate website Blockshopper.com, foreclosures in Oak Park have been steadily rising, from 15 in 2006 to 86 in 2010. According to the Oak Park Area Association of Realtors, the short sale market has also blossomed significantly in the area. As of Sept. 9, Oak Park had 79 active short sale listings, while River Forest had 10.
Short sales are transactions in which a bank agrees to accept a sale price for a home that is less than the amount the homeowner currently owes the bank. For a seller, a short sale may have a negative impact on his credit rating, but it allows him to avoid the much larger hit of a foreclosure. From a buyer’s perspective, a short sale can provide a significant discount on a property. While short sales typically take at the minimum four to six months to close — a much longer period than traditional sales — a positive is that the property has usually been inhabited and better maintained than a foreclosed property.
Due to the increase in such sales, John Lawrence, a broker and owner of Weichert Realtors-Nickel Group in Oak Park, noticed a need in the community.
“During the first six months of the year, 45 percent of real estate transactions in Cook County involved either short sales or bank-owned properties. Unfortunately, I believe this is where the market will remain for a while. I noticed that only about 40 percent of short sales in Oak Park and surrounding communities were being handled by local agents, and I thought local agents could better represent the needs of the sellers and the community.”
Lawrence called on Weichert Realtor Alice McMahon to help form a team focused on distressed properties. With experience in the short sale market, McMahon had also noticed that local property owners were not always being given the best advice.
“One motivator was that we were seeing some agents who weren’t well-trained to handle distressed sales,” she explains. “Short sales get more and more complicated because the rules change almost every day, and preparing the packet for a short sale is much more complicated than for a traditional listing.”
McMahon built a team around Weichert agents Michael Dmyterko, Donna Karpavicius and Pauline Sharpe, all of whom have experience in dealing with distressed sales. Because banks frequently change requirements for such properties, McMahon says it’s imperative that buyers and/or sellers find an agent with experience in the field of short sales.
James Salazar, of Baird and Warner, notes that Oak Park has not seen as many people walking away from their mortgages as other communities, but realizes the short sale market has been picking up, which creates unique circumstances for all parties involved.
“The majority of buyers today are looking for a bargain,” he says. “With a short sale you may pay 80 cents on the dollar, while a foreclosed property could run you 60 cents on the dollar. Bargain hunters have to consider condition issues. Short sales tend to be in better condition, but they do tend to take at least six to nine months to close, which can deter buyers.”
Salazar is working with a few banks on a pilot program meant to streamline the handling of distressed properties.
“Banks are significantly overwhelmed right now with proposals, which explains the delay in responses,” he says. “They are starting to realize that it’s more profitable and better for the economy to put more manpower on this, to approve short sales and avoid foreclosures. I think we’re going to see banks being much more proactive in finding individuals who may not qualify for loan modifications and helping them qualify for short sales.”
Oak Park’s proximity to Chicago, universities and hospitals combined with a great commuting culture have insulated it from a lot of the real estate downturn, but McMahon emphasizes that the local market has been adversely affected.
“Condominiums are the big plug of bubblegum that we can’t get out of the tube right now,” she says. “We have a great community with a healthy rental market, but most homeowner associations limit the number of condos that can be rented, if they even allow rentals at all, so it’s very hard for some condo owners to move on.”
The numbers back her up. Of the current 79 short sale properties on the market in Oak Park, 58 are condos, and in River Forest five of the 10 are condos.
“A lot of people buy condos as a starter home, needing it for at most a five to eight-year span before they are ready to move up or on,” says Lawrence. “Now, a lot of condo owners just can’t get out what they paid for the condo a few years ago, so they can’t move up to a [single-family dwelling].”
Weichert’s distressed property team is taking a multi-tiered approach. They plan to hold seminars to educate potential buyers and sellers about the market. They’re also working with banks, attorneys and title companies to insure that every aspect of the sale is handled by experienced people.
Lawrence notes that not all distressed sellers will qualify for a short sale, but sellers often don’t know where they stand with their banks.
“One of the things our group really brings to the table is that we’re going to educate the sellers,” he says. “We want to be a resource whether they can sell or not. We can lead them through the process.”