Are Bank Owned Units a Deal in 1717 S. Prairie in the South Loop?
I’ve been getting inquiries about the status of 1717 S. Prairie in the South Loop.
If you recall, the building was in litigation with the developer over water issues.
Here’s a bit about what is going on (taken from a NY Times article in April 2010.)
The view from Tom and Jane Justic’s eighth-floor condominium in the South Loop — with Soldier Field in the foreground and majestic Lake Michigan behind it — is exactly what they were looking for when they moved from Beverly in 2005.
But the condominium that came with that view has an unexpected and unwelcome additional cost: $850 a month in special assessments for the next five years, to cover the expense of building repairs that were completed late last year.
“The sun still comes up every morning,” Ms. Justic said one recent afternoon, rolling her eyes in mock reverie.
Since it was constructed in 2002, the Justics’ 23-story building at 1717 South Prairie Avenue has become an extreme example of the strains and pains that many South Loop condominiums and town houses now face from the area’s boom in construction before the market collapsed in late 2008. Once one of the city’s hottest real estate markets, the South Loop is crisscrossed by scaffolding and suffused with the frustration and anxiety of litigation between condo boards and developers.
Howard Dakoff, a condominium lawyer, said his firm had represented at least 10 South Loop condominium associations in fights over what they alleged was faulty construction in the last decade. But now, as suits brought by Mr. Dakoff and other lawyers have been settled, dismissed or just died in the face of mounting legal costs, the question for those still litigating and for the South Loop residents who remain in a state of real estate limbo is, how long to keep holding on?
In its lawsuit, the condominium association claimed that faulty construction resulted in “severe water infiltration” and that the developer had failed in its duty to address repair requests made by the board within a year after the condominium turnover.
The scaffolding came down in December, after nine months and $6.5 million worth of repairs to replace all of the windows and improve the masonry after severe cases of water leakage. The suit the board filed in 2005 against the developers and subcontractors moves slowly through Cook County Circuit Court.
Meanwhile, Tina Feldstein, president of the Prairie District Neighborhood Alliance, said, “Many people are forced into default now because they simply cannot afford their monthly assessment, their special assessment, and they can’t refinance because their property wouldn’t appraise for what it would have to appraise for.”
Unexpected repairs rattle owners of new condos [New York Times, Daniel Libit, Apr 22, 2010]
What does this mean for the building in 2011?
In a listing for Unit #1005, a 3-bedroom unit that recently came on the market it says: BLDG IS IN EXCELLENT SHAPE FINANCIALLY & PHYSICALLY W/ ALL IMPROVEMENTS COMPLETELY DONE.
That unit has a monthly assessment of $826. You can see the pictures and listing here.
But there are some bank owned units also listed in the building.
This corner 2/2 on the 20th floor is bank owned and appears to have the kitchen and bathrooms intact.
The kitchen has stainless steel appliances and granite counter tops.
It also has the new construction amenities such as washer/dryer in the unit, central air and garage parking.
Originally listed in June 2011 for $211,900, it has been reduced to just $172,900.
However, a Redfin agent who saw the unit states in the agent notes on the Redfin web site that the special assessment for the building repairs is included in the assessment amount- which is why the assessment is at $1622 a month.
If this building is turning itself around, is this a deal?
Barbara Thouvenell at P.R.S. Associates has the listing. See the pictures here.
Unit #2006: 2 bedrooms, 2 baths, no square footage listed
- Sold in October 2004 for $370,000 (included parking)
- Lis pendens foreclosure filed in September 2009
- Bank owned in August 2010
- Listed in June 2011 for $211,900
- Reduced several times
- Currently listed at $172,900 (includes the parking)
- Assessments of $1622 a month (includes doorman- and also apparently the building repair special assessment)
- Taxes of $4849
- Central Air
- Washer/Dryer in the unit
- Bedroom #1: 12×12
- Bedroom #2: 10×10
When the assessment is larger than the mortgage payment, something is wrong. This place will sell when a real estate barron believes it will become profitable. How much do 2/2’s in the south loop rent for? Assessment + taxes is $2026 a month. Until the price drops to a reasonable level, this will be nothing more than shadow inventory.
This place is going to have a “hard time selling” the way in which it is being marketed (by the bank) for two main reasons:
1. people in this price range are going to RUN when they see the assessments (even though 800 of it is a special assm and will terminate in a few years).
2. the typical person in this price range cannot afford the assessments – even for a few years. Therefore you have to have someone with an income that can afford something in the 300k+ range – and those people are not going to like this place.
The bank should pay the special assessments upfront and roll that into the price (ie keep assessments at 750/month and raise the price to 225k – or better yet, pay 5 years of assessments and raise the price to 275k. Seriously, think about it: What is more psychologically appealing?
1. A 175k place with 1600/month assessments or
2. A 275k place with no assm for 5 years?
I can guarantee you that the majority of buyers will jump at #2 – the reason is that most people think they are going to be in a better situation in 5 years (better job, more money, improved market, etc.)
Very good idea Clio and you are 100% correct. Those assessments scare a lot of buyers that could otherwise “afford” the price.
Actually, I think the lower price with the higher assessment makes more sense (assuming the price reduction works out to the economic value of the higher assessments). With less up front cash to outlay it opens the place up to more buyers and puts less cash “at risk”.
I have looked into a unit here and I was told it was cash only due to the inability to finance in this building. Also, there is a 25% rental cap, and they are of course at the cap now.
wait nobody mentioned Oak brook yet, its already 8:15, what the heck people.
“How much do 2/2’s in the south loop rent for? Assessment + taxes is $2026 a month.”
I second this question. I’d guess that rents are around $2300 to $2400, which means the price on this unit would need to fall a lot farther to make any economic sense.
Of course if the following is true:
“I have looked into a unit here and I was told it was cash only due to the inability to finance in this building. Also, there is a 25% rental cap, and they are of course at the cap now.”
then the current owners truly are SoL. Almost no owner-occupier will be able to (or at least want to) pay cash only, and no investor will buy if the unit can’t be rented.
“wait nobody mentioned Oak brook yet, its already 8:15, what the heck people.”
Groove, I’m glad you asked – it seems as though there is increased interest in the suburbs. Below is a great piece of land someone could buy and build their own custom house. Also, you may also be able to subdivide the land into 2 (TWO) parcels!! That would further reduce your costs!!!
http://www.redfin.com/IL/OAK-BROOK/3601-W-ADAMS-St-60523/home/28622845
gary is correct but clio is right
In terms of sheer numbers/math this could be a deal. It would be higher payments up front re: the assessment, but it’s not impossible for the asking price to be within reach of some prudent savers & buyers.
The real question for me would be: Was the disease cured? Were all issues identified, repaired, etc. or is there more substantial repair needed?
In a somewhat-related tangent, we just put an offer in on new construction and they don’t want to let us send a home inspector in until after atty review & closing. That seems crazy to me – and I fear something along these lines would be in our future if we don’t have an inspection.
love the description for 2006 “EUROPEAN SPA IN MASTER BATHROOM. DESIGNER KITCHEN.”…
This would probably rent for 2k, maybe a couple hundred more. Without knowing the special assessment amount can’t say if it’s a deal. I’d stay away…
“don’t want to let us send a home inspector in until after atty review & closing.”
That is fucked up, just walk away.
This is a joke. The developer, Warren Barr, also defaulted on the Milwaukee twin towers, with Amalgamated Bank seeking over $100 mil. This building is NOTR repaired, typical Realtor spin to make a buck and screw the buyer.
“In a somewhat-related tangent, we just put an offer in on new construction and they don’t want to let us send a home inspector in until after atty review & closing. That seems crazy to me ”
Agreed, not wanting to allow an inspection seems like a big red flag. If I were, I’d either demand to be allowed to do an inspection or pass on the property. You don’t want to buy and then find some fundamental flaw.
your agent didnt warn you about this? this is what your paying him for!
“In a somewhat-related tangent, we just put an offer in on new construction and they don’t want to let us send a home inspector in until after atty review & closing. That seems crazy to me – and I fear something along these lines would be in our future if we don’t have an inspection.”
I had considered new construction around 18 months ago. The developer wasn’t this shady, but kind of gave me the creeps. I told them I would need a guarantee from the LLC that owned the thinly capitalized shell that was the developer and a personal guaranty from at least one of the human principals attached to the warranty they were offering. Needless to say, the deal didn’t happen. Please ask your developer for the same and post all correspondence on cribchatter for our enjoyment.
PJWestLoop, I’d be shocked if your attorney didn’t insist on allowing you to have an inspection before the closing. If they developer holds firm about not having an inspection ahead of time, you should run as far away as possible. Would a bank even allow you to close without an inspection?
As for the building above, I would be very worried that there was more wrong with this building than what has already been fixed. When developers cut corners, they cut them in many areas.
I feel bad for the original owners. This is a great location and the floor plans seem fine. It’s just sad to see a building so new and so troubled.
couldn’t you just “pay more” (say 50k) and have the extra cash from the mortgage cover the special assessment amount? If you know what I mean? That would certainly make this place look a lot more attractive, I mean a place for 225k with 800 a mo. assessments is much better than a 172k place with 1600 a mo assesssments
I don’t think bank cares about inspection. I would not personally bother with an inspection in a healthy high rise and rather review their rental percentage, reserve and such. Now town homes and SFH are a different story.
PJWestLoop you need to talk to my attorney, she would have straightened them out sharpish.
“This would probably rent for 2k, maybe a couple hundred more. Without knowing the special assessment amount can’t say if it’s a deal. I’d stay away…”
The special is around $800 per month for the next 40 months. You could pay it up front at closing, which would basically just add the $32k to the purchase price.
Also, with these specials, you may be on the hook for the last 6 months of special as well.
“your agent didnt warn you about this? this is what your paying him for!”
most agent’s usefulness is chauffeuring and flipping light switches, and using descriptive adjectives while making you imagine what you can do with X space
“In a somewhat-related tangent, we just put an offer in on new construction and they don’t want to let us send a home inspector in until after atty review & closing.”
Yikes. Giant red flag.
“That seems crazy to me – and I fear something along these lines would be in our future if we don’t have an inspection.”
Problem is, your inspector probably wouldn’t have found a problem like what 1717 had. It was a systemic problem with water.
On a side note, I wonder if somehow buildings like 1717 are “better than new” now that the problem has been “worked out”. (note the use of quotes). While having to do 6.5mil worth of work may be a sign of poor overall construction, it could also mean that many of the bugs have been worked out.
Did a race that went through the SL yesterday. At around 7:30 a.m., it felt like a set from “28 Days Later” or “I am Legend.” I’d blame it on the light rain and early Sunday morning time, but I felt that the WL was surprisingly nice and neighborhood-like at 7 a.m.
I’m confused. The 3BR in the same bldg. is $599,000 and has only $826/mo assessments, but this unit is $172,900? Even if the 3 BR unit with 2-car parking already wrapped up the special in their ask, it still seems too far above the 2 BR ask. What gives?
Bob 2 (not Bob) – how are you able to view historical MLS listings? I bought a foreclosure and would love to see the previous listing.
I go for walks with my baby and it is full of people with strollers, bikers, folks walking their dog, runners etc…
7:30 on a saturday morning on a rainy day should be deserted. This is not a military training camp.
Try 10 am on sunny day next time or sometime in the afternoon.
Bugs, in today’s real estate market, there are properties that are owned by banks which you can get at a discount. These properties are called “foreclosures”. These “foreclosures” have been dragging down the market throughout the country. This is the reason for the price discrepancies.
“This is the reason for the price discrepancies.”
In this case the asking price for the 3bed is just absurd. They paid 475 with 1 parking in 2005 and are now asking 600k with 2 parking. There are better deals in better buildings.
Also Bugs a lot of the foreclosures aren’t eligible for little money down, EZ financing which immediately takes the majority of idiots out of contention for bidding on them.
Sonies – LOL. I agree with your comment Regarding agents. Why can’t the industry be reformed/transformed? Many, many agents offer no value at all beyond what you’ve described. I can not understand how or why the fees are 5-6% all in. Especially in a bear market. The real estate agent should go the way of the elevator operator (obsolete), IMO.
“most agent’s usefulness is chauffeuring and flipping light switches, and using descriptive adjectives while making you imagine what you can do with X space
“
“This would probably rent for 2k, maybe a couple hundred more. Without knowing the special assessment amount can’t say if it’s a deal. I’d stay away…”
Wrong Bob. We are renting my wifes one bedroom with zero parking for $1500. There were zero other rentals available in the building at that time. 2bedroom with 2 spots should go for $2500 easy. They could also break out one of the two spots and get $150 without a problem.
“2bedroom with 2 spots should go for $2500 easy”
It’s only 1 parking spot. The 3bed is the one with 2. So you say 2350, I say 2k, maybe a couple hundred more. We’re on the same page here…
Even when the special assessments cease, the assessments will still be high for the South Loop.
There is another 2/2 that is under contract (last listed at $241K) that appears to have the special paid.
http://www.redfin.com/IL/Chicago/1717-S-Prairie-Ave-60616/unit-2110/home/12641810
So, if you add the 32k that is owed to the 172k price of this unit, you get a total price of around $204k. I’m guessing (but have no idea) that the 241k is under contract for more than 204k.
Also, one sold a few weeks ago for $195k and did NOT have the special paid:
http://www.redfin.com/IL/Chicago/1717-S-Prairie-Ave-60616/unit-2206/home/12567724
So, if you are willing to take the chances of owning in this building, I think this unit is priced about right.
“I’m confused. The 3BR in the same bldg. is $599,000 and has only $826/mo assessment”
That is how the owner chose to deal with the large special assessment. We chose to pay it all upfront in one check. Owners that could not handle that paid it out over 5 years. Clearly anyone who was going to foreclose would choose the later option.
It is a really nice well run clean building. Although it has been a poor investment I still like the place. When we showed it in June in the end we had multiple people that wanted to rent the unit. Once the window issues were settled it is very good place to live.
On the plus side if there is ever a settlement collection from the developer the current unit owners will get those dollars. That is an extreme long shot as the developer and the mayor were Bridgeport buddies and the city’s building dept files were mysteriously lost. Should one sell a unit there should be a clause set in place to collect those potential dollars.
“Even when the special assessments cease, the assessments will still be high for the South Loop.”
In addition to the repairs that builder didn’t cover, there were accusations of mishandling of the reserves by the builder when the association took over the building. I understand that the common fees have already been raised twice to cover shortfalls in reserves, in addition to TWO specials. One if which just finished getting paid a couple of months ago (was around $200 a month I believe). The other special is the one that is going on now, until the end of 2014.
So, while all of this is especially painful for the current residents, and will most likely lead to many more foreclosures, it appears that this building MAY have turned the corner and be in better shape going forward.
jp3chicago, how have things been since the repair? Anything else major that you are concerned about? I am interested in this building but I am afraid there are more problems around the corner. Did they do anything to address potential mold issues due to the water infiltration?
There were not really two special’s as it was a staged plan. The first part of the special was to fund the initial repairs to the garage and pay for the studies to see what the whole project entailed. The second one was for the whole balance. It sucked but showed that the unit owners would deal with this issue and solve it once and for all. It was proactive, painful, and the right thing to do!
As to the changeover issue it is extremely common for the initial board to have to drag the developer to court or threaten legal action to get the full amount of money owed. Nothing new there.
” Did they do anything to address potential mold issues due to the water infiltration?”
Chuck – that was exactly what they repaired. The developer was also the architect and G.C. Somewhere between plans and building he changed to a different window. It was not properly flashed when installed. The city lost all inspection files to show what idiot inspector signed off on this poor work.
In the end they tore out all drywall around the windows, took the windows out, flashed correctly, and then replaced the drywall. It was interesting to find out that the vast majority of units had no mold at all!
The great news is that in the end it was the expensive and exhaustive solution but really showed that the board did not want to be dealing with potential future mold issues by taking a shortcut. They took the high road by replacing every window and are now in excellent shape for the future.
Hi all, we do have a lawyer, the contract is in atty review and he IS pushing back. I just thought it was strange beyond belief that they were being so reluctant about it. I can’t imagine any seller being so reluctant. (Then again they were absolutely unbendable in price, so maybe it’s a pattern.)
Our lender did not mandate an inspection but, in their language, strongly recommended it.
We didn’t have a buyers agent in this transaction. I am not anti-agent and know several good ones, but for a long period we were in research-only mode. By the time we decided to move we’d seen the place 8x and couldn’t bring in an agent. We were OK with that & felt any issues would shake out in atty review.
On any deal with red flags, I’d want to go beyond the routine $500 residential real estate attorney review.
Also, the $1622 assessment in this listing is wrong. They were including the stage 1 assessment which has since been paid off. I believe the assessments are something like $650 regular monthly and $800 “special”. So, if you paid off the special owed (32kish), then you’d be back to a more normal assessment for a 2/2 with doorman, etc.
At 173k plus 32k for the special or 205k all in for a reasonable assessment, this seems like a decent deal. I would tend to agree with jp3 that the repairs done probably make the building in great shape, although I would want a VERY thorough inspection first. If all comes back good, a corner 2/2 with balcony with these views for $205k sounds good to me!
Amen! The upside/downside is a lack of pool. Some other newer buildings in the area have one but personally I think that is a downside. FYI a 1 bedroom closed for $175k this spring. $205k should get it done!
I love pools but they actually can cost quite a bit to maintain so if one is not really into them, might make more sense to buy in a no pool building. BTW, our pool is empty most of the time so I think few people use pools any ways.
How many years are left on the special? At $10,000 ayear in specials with say 3.5 years remaining, that’s an extra $35 grand on the purchase price.
#2206 two floors up just closed last month at $195,000.
I think someone may come in pretty close to ask on this one. I’m not sure its a good investment though. That building has some scary issues, plus it’s not a real big unit, plus the south loop just seems to have an over supply issue. I’d want prices to fall further before I got sucked in.
“Jp3chicago on August 15th, 2011 at 12:49 pm
FYI a 1 bedroom closed for $175k this spring.”
There is 1br on the market now for $109k
“EB on August 15th, 2011 at 12:57 pm
How many years are left on the special?”
40 months (end of 2014).
Here is the listing for the one bedroom at $109,000. http://www.redfin.com/IL/Chicago/1717-S-Prairie-Ave-60616/unit-1208/home/12645319
It doesn’t mention any special assessment . . . perhaps it has been paid in a lump sum? Regardless, this has a nice sized bedroom and reasonable monthly assessments and the price includes a parking spot. I don’t know how big the special assessment was for 1 bedrooms but this could be a bargain for someone who wanted to live there. If the remaining special assessment is say $21 grand and you financed the special and put 20% down your payments would be under $1,100 a month. This is something you could rent for potentially $1,500 without parking.
If there is no special you’d pay less than $1,000 a month.
I wonder if there are some issues with this unit because the price seems almost too good to be true.
Eb, I have looked into that unit. For one, it is cash only, so forget about the 20% down. Secondly, there is around 30k left on the special, and they didn’t pay the 1st phase either. So, you might be looking at another 5k or so in back assessments to the bank. That 109k is now closer to 150k.
I may get a rep for being the guy that always complains about the el/trains but….
Just remembered that this is very close to the Metra Electric Line tracks. Views may be awesome but hearing the train screech may not be for some people.
“…we just put an offer in on new construction and they don’t want to let us send a home inspector in until after atty review & closing. That seems crazy to me – and I fear something along these lines would be in our future if we don’t have an inspection.”
PJWestLoop,
And what would be your legal recourse if some major expensive or dangerous conditions were uncovered during your inspection…after all the paper work has been approved and your sale is complete? This is just a prime example of unethical business practice that contributed to the RE mess we are now in.
No matter who I am selling to, I communicate to both my broker and to the buyers broker that I will not go any further in the sales process until my rehabs get passing remarks on the inspection report. And I insist on one being done prior to any negotiations. How in the world would you be able to complete proper negotiations if you do not know the severity of the hidden from plain view problems? I have sold hundreds of homes in the nearly 30 years my team has been doing renos and never once have Isold a unit without having it inspected by the best inspectors I can find. In every city large or small, there are always a hand ful who are referred to as deal killers by lending institutions and agents as their work is so thorough and their process is so detailed.
THERE IS NO LEGAL RECOURSE for you to take after you sign for and agree on a 30 yr mortgage.
DO NOT move forward until AFTER you have had a thorough top to bottom inspection from a reputable inspector. Your agent or bank should be able to recommend a list of those they use on a regular basis. In this case with all that mess of low quality, cutting corners work I would not hesitate at all in getting a second estimate.
In the between time, ask the developer or Building manager to produce THEIR own inspection findings after the water leak problems have been fixed. DO NOT trust anyone with this very important deal killing detail of the mortgage process.
I can tell you horror story after horror story about ppl who went through a sale without any inspection and ended up paying nearly the same amount on repairs as they did on the monthly mortgage payments. New construction or not, GET IT INSPECTED!!!
“I don’t think bank cares about inspection. I would not personally bother with an inspection in a healthy high rise and rather review their rental percentage, reserve and such. Now town homes and SFH are a different story.”
FOOLISH STATEMENT if there ever was one on CC!!!!
LOL @ your your lack of common sense with regards to following the proper channels needed to finalize the sale of a home or condo.
Not only should your agent strongly suggest it, the bank should require it (and in certain mortgage program requirements they do) and your attorney should ask to see the original copy of such inspection(s) before moving any further in the process.
I am simply dumbfounded that after the crash of this industy that people are still choosing or recommending passing on such an important document. WTF is going on?
I thought…sincerely hoped that all of this would have been pounded into all new buyers heads. Esp with a building that has had a $6.1 million dollar repair and lawsuits from their low quality work.
I just do not see how this buy / sell process can work if no one has not learned the basics of covering their own asses to avoid losing their homes from fraudulent sellers / half assed brokers and agents / dumb as a bag of rocks developers.
REALLY? No inspection needed on a soon to be sold place?
I too strongly agree with this thought. There needs to be a complete overhaul of how RE is sold and it has to be a governement instituted program that all states are required to follow.
Whether you are buying a short sale dump that needs a total gut rehab to an ultra luxury high rise condo all of the same rules apply. 99.9% of all US agents are so dense and do not know even the most basic duties of their jobs. It sickens me the amount of undeserved commissions these asses make for doing something as simple as making a few phone calls, setting up viewing times and then standing next to you telling you what a great view you would have at night if you looked out this window.
In the era of MLS being advertised on the internet, what exactly does a full fledged agent do for their clients? Sure there may be a small percentage of new to an area buyers who need basic information on where to look for what they need, but in the majority of cases, these agents are so useless.
To me they are as needed as bathroom attendants in an upper level club. They are there to turn on the water for you to wash your hands and after they hand you a towel to dry your…and the really dedicated ones might offer you cheap designer imposter cologne in return for a gratuity.
Hey, maybe that oculd be a part of the newly regulated RE sales business…give a gratuity percentage based tip on the service you receive instead of a set in stone percentage of the purchase price.
Something really has to change in how Americans buy their homes and it needs to be done now.
“FOOLISH STATEMENT if there ever was one on CC!!!!”
Even better in context considering this was coming from someone who spends 4 figures on purses.
“In the era of MLS being advertised on the internet, what exactly does a full fledged agent do for their clients? Sure there may be a small percentage of new to an area buyers who need basic information on where to look for what they need, but in the majority of cases, these agents are so useless.”
Most people are idiots and don’t care to properly research themselves. Even redfin is unfortunately morphing more into a traditional broker:
http://blog.redfin.com/boston/2011/06/redfin_boston_gets_personal.html
Back in the day redfin also would charge you for additional tours and people didn’t like that either. Ultimately us informed customers end up paying all those realtor fees to subsidize those idiots who insist on viewing 100 properties and then never buying anything.
WestLoopElo – we got the developer to agree to an inspection and it’s happening ASAP.
We think there may have been a communication issue. Unit is not yet 100% “done” e.g. major stuff is done but cabinets are still being assembled, etc. and developer may have misunderstood the intent or been confused (since finishes still need, well, finished).
So we are doing the more “safety and structural” review now (of everything that IS done at this point) and a second review at closing. This works for me. Fixing the wrong knob on a cabinet is minor. Discovering a structural issue, obviously, is not.
Thanks to everyone for their feedback/suggestions.