Buy a Foreclosure, Renovate, Re-Sell: A 3-Bedroom at 3908 N. Wolcott in North Center
This 3-bedroom duplex down at 3908 N. Wolcott in North Center just came on the market.
It had been a bank owned unit which was bought in October.
The bank owned listing said the property “needs work throughout” but according to the pictures, the kitchen looked intact with newer cabinets, granite counter tops and stainless steel appliances. There were no pictures of the bathrooms in the old listing.
The new listing says it’s a “great opportunity to acquire a newly renovated property @ a significant discount.”
2 of the 3 bedrooms are in the lower level along with a 15×14 family room.
There is a washer/dryer in the unit and central air but no deeded parking.
The kitchen has granite counter tops and stainless steel appliances. There are hardwood floors throughout the main level.
Is this really a great opportunity?
Elizabeth Lothamer at Jameson has the listing. (It is also agent owned). See the pictures here.
Unit #1: 3 bedrooms, 2 baths, no square footage listed
- Sold in November 2005 for $345,000
- Lis pendens foreclosure filed in January 2009
- Bank owned in April 2010
- Sold on October 22, 2010 for $147,000
- Originally listed in early December 2010 for $269,900
- Assessments of $250 a month
- Taxes of $4763
- Central Air
- Washer/Dryer in the unit
- No Parking
- Bedroom #1: 13×12 (main floor)
- Bedroom #2: 12×10 (lower level)
- Bedroom #3: 10×8 (lower level)
- Family room: 15×14 (lower level)
- Den: 11×10 (main floor)
why didn’t they do crown molding? compared to the 1/1 the next bldg over seems like a good deal
http://www.redfin.com/IL/Chicago/3906-N-Wolcott-Ave-60613/unit-3/home/12604450
so much wrong, head exploding
Looking at the one small box room with the two chairs gave me an idea: for staging why not set up miniature furniture? This way it gives rooms like that the illusion that its spacious and livable.
a good deal for the seller if they can sell soon; but the carry cost will add up. 120K for a 1 month rehab seems a bit much but I don’t see cheaper 3/2 or 2/2
LOL bob that would be hilarious
I am a Realtor and recently showed this property to a client. The layout is very choppy and the rooms are all way too small. It is unbelievable that this unit ever sold for $345K. The location is fine but even the current price is too high; sadly, I can’t even imagine someone wanting to rent this property.
kitchen looks really odd. maybe the perspective, but it doesn’t look like there’s any way to stand by the awkward (and small!)corner sink due to the stove sticking out. Looks like a wet bar sink.
And, I agree that this looks totally staged, but not much you can do with some of the room sizes here (10 ft. x 17 LR/DR combo??)
All hail the housing boon that made basements into bedrooms!
Basement bedrooms in multifamily buildings some times get the short end of the stick in a sewer back up. Fine for a SFH, but like many things that don’t necessarily cross over, not so good for a condo building.
“Looking at the one small box room with the two chairs gave me an idea: for staging why not set up miniature furniture?”
http://www.eamesgallery.com/cart/detail_prod.php?id=252
I went to see this place twice. Thought I’d purchase it, live in it for a few mths and then sell/rent it out when I was done “sidelining”. It was a good deal for the area but it is literally a cracker jack box. I couldn’t risk being stuck in a dollhouse.
The only thing wrong with it originally was it needed new drywall and carpet in the basement. This seller made absolutely no changes to the place. If it sells anywhere near asking price, he/she will make out quite well.
crapbox
“compared to the 1/1 the next bldg over seems like a good deal”
Paying $50k to add the basement space–which, according to shopalot, appears to have flooded previously–doesn’t seem like much of a deal.
Not a *bad* deal, but not a particularly good one, either, especially with the 3 relative downsides–1st flr v 3d, smaller kitchen, above-grade space taken by stairs to lower.
Perhaps they can put a bedroom and small kitchenette into the garage and sell that apartment for another 100K. That would be almost as nice as living in the basement. Under the Groove theory someone might buy it as their winter home. That way the buyer could roll out of bed into his car and be off to work!
Cribchatter is great, but you know what we need? A comments section directly accessible in Redfin. Get on it, techies.
Also, on the 1 br, you couldn’t really justify more than $1k/mo rent (it’s quite a bit nicer than the rentals at that price in the hood, but the rentals include heat–charitably, call it a wash). After assessments and taxes, you’re left with a rentsavings/cashflow that justifies a price of under $125k.
This of course explains both why they were converted and why they shouldn’t have been converted.
“A comments section directly accessible in Redfin.”
Um, Redfin has the capacity, but there’s this:
“The seller has requested that all public comments be removed from this listing. Per MLS rules, we are not allowed to link to blog posts about this home. “
Basement = bad deal
All of you guys are waiting for the foreclosures – but this is exactly what is likely going to happen to all of them: they are going to be snatched up by investors and flipped for a profit. This is why I always say that if you find something now you like and can afford, buy it!!! Don’t wait for that great deal to come along… chances are that you won’t get it and you take the risk of higher prices/rates.
“… chances are that you won’t get it and you take the risk of higher prices/rates.”
I got into a protracted debate/argument with certain people on this site (*cough* JZ *cough*) and basically up until now there hasn’t been much of a correlation between rising rates and falling prices. However generally those rising rates have been in times of economic growth.
Rates are up 75bps in the past six weeks. I’m betting that has a negative impact on pricing in the near term. On a $417,000 conforming mortgage that’s an extra $3,100/year or $260/month.
Maybe that’s pocket change in clio’s world. But I can assure you $260/month is a lot of money to most people that live in most areas of Chicago. Heck it’s a used-car note amount (not a lambo used note, though).
Historically, its been shown that there is little correlation between rising interest rates and real estate prices. In periods where interest rates rise, buyers qualified and purchased homes in a lower pricing tier than they qualified for when rates were lower. Historically it is shown that most sellers did not lower their prices when interest rates rose, they sold their homes to buyers who once qualified for higher-priced homes.
That’s what most people forget when they bring up this argument. But maybe *this* time its different. 🙂
*cough* your JZ argument is tired or are you just plain dumb and just don’t get it? *cough*
sparky = JZ. proven again.
Proven by what standards? LOL have another drink, Bob. You’re drunk!
“All of you guys are waiting for the foreclosures – but this is exactly what is likely going to happen to all of them: they are going to be snatched up by investors and flipped for a profit. This is why I always say that if you find something now you like and can afford, buy it!!! Don’t wait for that great deal to come along… chances are that you won’t get it and you take the risk of higher prices/rates.”
Yep. Sharks in the water.
That theory is ridiculous. Low interest rates mean higher prices aka ARMS allow for a higher priced house for the same monthly as payment as a 30 fixed, but, the inverse doesn’t apply? Higher interest rates mean you buy less house? So its a race to the bottom then; which means the competition for the lowest price homes causing prices to rise while the high end lanughishes? That’s exactly what we have now and we have low interest rates. Foreclosures are hott but the high end is paralyzed. Interesting.
The theory isn’t that ridiculous homedelete. We saw it in operation in the late 1970s/early 1980s when interest rates soared. Did home prices go down then? Not really. And the reason is that people DID do as Sparky says. They simply traded down on their houses.
So instead of buying the 4-bedroom in Clarendon Hills, they bought the 3-bedroom in Downers Grove instead.
Now, I don’t know what affect our overbuilding will have on it this time around. As you mentioned, we are already at record low rates and sales are at 20 year lows. Seems to me it will get even more difficult for those in the price ranges with too much inventory (the higher price points) to sell and that they will be forced to lower their prices in order to find a buyer. But we’ll just have to wait and see.
“Now, I don’t know what affect our overbuilding will have on it this time around.”
Given the antiquated housing stock of Chicago proper I’m guessing not much. The rapid depreciation of Chicago RE values going forward I am guessing is more due to a tightening of credit standards and not letting idiots speculate who have no business doing so. Which means idiots that were able to bid up Chicago RE during the boom are mostly removed now. Not entirely, though
“Proven by what standards?”
By Bob’s. And when sparky shows up and walks like, talks like, and sounds like JZ mere minutes after his initials are mentioned, that’s good enough proof for Bob. Remember, Joey, this is no court of law. You’re like Beetlejuice on command sometimes, JZ.
Ok ridiculous is a strong word but who buys the clarendon hills home? The former hinsdale buyer? Who then buys in hinsdale? See what im trying to say? I’ve always thought that lower interest rates let buyers borrow more which indirectly drives up home prices. but that theroy is failing now in A low interst rate environment where prices are still dropping. Futhermore, in a high interest rate environment the low end market should be hot as it s now in a low interest rate environment. The high end in a low interest rate environ,ent should be hot because be can trade up rather than down but yet today the high end is dead. Im sure saying I think economists ans researchers need to rethink their assumptions between interest rates and prices.
“Historically, its been shown that there is little correlation between rising interest rates and real estate prices.”
As we have discussed many times, there is serious debate about this among serious economists.
“The theory isn’t that ridiculous homedelete. We saw it in operation in the late 1970s/early 1980s when interest rates soared. Did home prices go down then? Not really. And the reason is that people DID do as Sparky says. They simply traded down on their houses.”
If everyone shifts down, then if housing prices reflect demand conditions (as opposed to purely cost conditions), it’s hard to see how that doesn’t affect prices. So that’s a far from complete answer to this. It’s a complicated question. Depends on expectations of rates, there are also real versus nominal issues, etc. I agree there may be asymmetry in reactions from rates going up v. down, but not clear and not clear how big they are.
“Given the antiquated housing stock of Chicago proper I’m guessing not much.”
Why stop at Chicago proper? The average age of a home on the north shore has to be at least 70 years, perhaps more. Many of these homes have outlived their useful lives in terms of construction and more importantly design. No one lives in their living room daily, no one eats in a formal dining room daily, and middle class families do not need servant quarters and stairwells. The denizens of the north shore that tolerate these homes do so because they have been in them for at least 20 years and are receiving social security. This housing stock, like much of Chicago, is past its useful service life. Sure it looks good from the street but is practically unliveable on the inside.
New construction is desparately needed and wanted. This is yet another factor that puts upward pressure on prices given the replacement costs out there.
“I agree there may be asymmetry in reactions from rates going up v. down, but not clear and not clear how big they are.”
Wage inflation.
“The rapid depreciation of Chicago RE values going forward I am guessing is more due to a tightening of credit standards and not letting idiots speculate who have no business doing so. Which means idiots that were able to bid up Chicago RE during the boom are mostly removed now.”
Bob, what you fail to realize is that it is the idiots that are running and working in the banks/mortgage companies and making policies in washington. They and the people that work for them are so frickin’ stupid that you shouldn’t be surprised if more idiotic decisions/policies are made.
They can’t even get the simplest of transactions right – please don’t try and give them credit for having any solution/insight into the real estate problems. One of many recent examples is that I tried to pay off one of my investment property mortgages last week (submitting a clear statement of which mortgage I was paying off, the loan number, address, etc. – so clear that a frickin 1st grader could understand). Of course, today, I check to make sure that it was paid off and find out they just applied that money to my home mortgage. What kind of fucking idiots do they have working there? – and you expect something brilliant to come out of an industry that is FULL of these morons (and yes, I understand that the moron idiot that dealt with my transaction isn’t making any decisions, but you can’t expect an industry/business that can’t even train its employees in the simplest of transactions to make any intelligent decsions whatsoever!!
probably why you see a place b4 making an offer
“I am a Realtor and recently showed this property to a client. The layout is very choppy and the rooms are all way too small.”
Thanks DZ for the link to the mini-Eames furniture. I found this great photo:
http://www.flickr.com/photos/ironpugdesign/2586045689/
sparky, what do we need QE for if allowing rates to rise due to natural market forces will stop prices from further declines?
“If everyone shifts down, then if housing prices reflect demand conditions (as opposed to purely cost conditions), it’s hard to see how that doesn’t affect prices.”
Looks like we’re going to find out with our current conditions. But if you look at the Case Shiller data from the 1970s and 1980s, house prices didn’t fall with nearly 20% interest rates. I do recall, however, that it took forever to sell something back then (literally years) because there weren’t any buyers. But people were not dropping prices like they are now. But the psychology about housing was also very different then. You had to have serious cash saved in order to buy.
By the way- Gary put together a very good synoposis of our last discussion on Crib Chatter on his own blog- complete with links to arguments on both sides (saying that prices WILL decline when rates go up and some saying they will not.)
http://blog.lucidrealty.com/2010/02/22/will-rising-interest-rates-kill-the-real-estate-market-2/
“This housing stock, like much of Chicago, is past its useful service life. Sure it looks good from the street but is practically unliveable on the inside.
New construction is desparately needed and wanted. This is yet another factor that puts upward pressure on prices given the replacement costs out there.”
This is, to me, a goofy notion. The home I live in is over a hundred years old, but has been rehabbed over time. It is perfectly liveable. In Europe, they live in homes that are MANY hundred years old. If a place is structurally sound, it can be reworked inside, for a lot less than new construction can be built. I, for one, will be happy to see a move back to gut-rehabs, and less teardowns. Too many hoods have been violated with hideous and out-of=place towering infernos of condomania and McMansionism.
A spike in interest rates like we’ve seen in the past two days can actually bring buyers into the market in the short term. People who have been on the fence have had no reason to move as interest rates have done nothing but go lower for years. People don’t mind missing the exact bottom and paying an extra half a point but if buyers start to believe we are heading back to five or six percent you will see a wave of buying.
This quick shift in interest rates without a corresponding increase in wages will not push people to buy this week over last week. Completely erroneous on all accounts. This is exactly what will hurt the housing market even more and push sales volumes even lower.
I think it is so hard to make sense of the interest rate/housing price/housing sale correlation is because there might not be an absolute direct relationship. I truly think that the majority of the people out there are not smart or industrious enough to research all of this – most are complete morons who buy when they time is right for THEM to buy. They will look for places in an area they want to liveand, when they find one that they can afford the monthly payment, they will buy. Oh, also, they are usually too lazy to research anything – most go by “what they heard at the office” and what “uncle joe” told me. People on CC are, of course, different – but we are real estate junkies. I think we have to realize that most people out there aren’t.
Interest rate increases in the short-term will hurt the housing market. I know first hand of 2 friends who had been seriously looking at buying 2 bedroom condos in the city, but now the increases rates would force them to look outside of their desired neighborhoods. They have both put off their search until rates come down, or prices come down more. I expect prices to come down more, so by March or April they could be priced back in to their desired neighborhoods. Without significant increases in income, significant short-term rate increases are not good for the market.
“They have both put off their search until rates come down, or prices come down more I expect prices to come down more, so by March or April they could be priced back in to their desired neighborhoods.”
Thanks Dave for the good laugh – so basically, your friends will be looking in Iowa by spring. Rates ARE going to go up (albeit slowly) and prices ARE going to go up (also slowly). There is not going to be any generalized further decrease in prices (especially in good neighborhoods). Sure maybe a good foreclosure is going to pop up here and there, but your friends are going to be in a very long line to get them.
“Looks like we’re going to find out with our current conditions. But if you look at the Case Shiller data from the 1970s and 1980s, house prices didn’t fall with nearly 20% interest rates. I do recall, however, that it took forever to sell something back then (literally years) because there weren’t any buyers. But people were not dropping prices like they are now. But the psychology about housing was also very different then. You had to have serious cash saved in order to buy.”
1. If there’s asymmetry, our current conditions may not tell you much about what happens when rates go up.
2. If you want to talk about rates/prices in late 1970s and early 1980s, you really have to think about real versus nominal (e.g. was the rate of change in real housing prices lower than in the past).
3. Notwithstanding (2), I think people have looked at this much more carefully than we are likely to do on CC, and there may be an effect but not a dramatic effect.
4. I’m far from convinced that the lack of a dramatic effect is primarily from the “trading down” effect. It certainly hasn’t been “shown”. If you are an owner when rate go up and you have an existing mortgage with low rates, you’re not going to be in a big hurry to move, especially if you think high rates are temporary. If you’re a buyer you may be willing to wait too, or maybe you’re willing to buy (at a price that doesn’t reflect a discount for high rates) with the expectation that you can refinance.
5. My guess and this is just a guess is that if rates were to go up permanently and everyone expected it to be permanent, that that would have a very signficant effect on prices.
6. Does case shiller go back to the 1970s? I know shiller had that series but that’s different, isn’t it?
There are a lot of people on the sidelines conserving their cash, saving up for the future. As they aren’t buying property, it’s hurting the people who depend on sales volumes for their livelihoods – realtors and mortgage brokers. It created a flight to quality in those professions as well, and culled the ranks of the not so good ones. Also, there’s only so much trading down that people can do, especially when you now qualify for a mortgage that is 10% less than 4 weeks ago. It is affecting behavior and will affect the entire market. Good times.
“Thanks DZ for the link to the mini-Eames furniture. I found this great photo:”
Here’s some cheaper stuff (I’m a little afraid my wife is going to buy a Arne Jacobsen doll house). Probably would fit better for Bob’s plan too.
http://www.the-doll-house-cafe.com/dollhouse-design-furniture.html
If you are debating whether to buy now or a year from now, but you feel interest rates will be two points higher a year from now, you will buy now.
I think most buyers are looking at how much a month they can pay, and how much they can afford, not what the actual price of the home. Incomes are not growing for the largest segments of would-be buyers. Inflation may help with the higher rates, but inflation levels are not tied to interest rates with any degree of certainty. Let’s say inflation went to 4% in 2011 and 2012, but for many of would-be home buyers, their wages may only go up 2-3% (compared to the rich who have 6-8% increases, and already own their homes). I don’t see how this will get any better for home prices adjusted for inflation, assuming rates rise and incomes don’t (which is a very big possibility as the rich continue to take an outsized share of the recovery).
Meh, I’ll just put more down. I’d rather wait for a place I actuall want at a price I’m willing to pay. Not to say I’m solely waiting for prices to fall just what I have looked at on the market has not inspired me to buy.
“If you are debating whether to buy now or a year from now, but you feel interest rates will be two points higher a year from now, you will buy now.”
Please correct me if I’m wrong:
Rates have increased nearly 75bps over the past two weeks, in general, because the feds QE2 plan further increases the risk of inflation.
Isn’t the purpose of QE2 also to continue providing easy money/keeping rates low/and increasing the money supply?
“In Europe, they live in homes that are MANY hundred years old.”
Climate is different in Europe (or at least it was), density is different and the construction you refer to is far different. In addition, you have a very different consumer, different expectations with respect to convenience and significantly more renters. Land is far more expensive in city centers.
Not many wood frame houses make it 100 years. People don’t like floors on slopes. Energy issues also abound. And, your somewhat mistaken on the gut vs. new building costs. Rehab costs about as much as new construction, or so the village I live in says. Most guts are done because solid masonry exteriors are prohibitively expensive, so it is done to keep that element. Masonry has good thermal mass but is actually a very poor insulator — people are often thrown by that when they buy such a house. Flat roofs don’t allow for much insulation either.
Actually I think rates spiked higher the past two days because the tax cut deal will hopefully stimulate the economy, making QE2 less likely
“Isn’t the purpose of QE2 also to continue providing easy money/keeping rates low/and increasing the money supply?”
That is the publicly stated purpose (which is laughable).
The real intent and effect is it provided an opportunity for Wall St to front-run the Fed’s trades. Its another backdoor bailout to Wall St and the financial sector.
“Actually I think rates spiked higher the past two days because the tax cut deal will hopefully stimulate the economy, making QE2 less likely”
QE2 is already announced and will run through May-11.
“2. If you want to talk about rates/prices in late 1970s and early 1980s, you really have to think about real versus nominal (e.g. was the rate of change in real housing prices lower than in the past).”
Yep. See here:
http://cowles.econ.yale.edu/P/cd/d08b/d0851.pdf
for a paper by Case and Shiller which happened to include Chicago as one of the 4 metros tracked from 1970-1986. It found real $ annual price increase of 0.3% in Chicago, with a trend to higher real $ appreciation halting in 78 and disappearing pretty much completely by the end of 81. So, in Chicago at least, based on C&S’s research, it sure looks like, in real dollar terms, higher interest rates *did* affect home appreciation.
Also, it gives the lie to any long term real dollar appreciation of over 50 bips. At least in Chicago metro, at least for SFH.
And, the article illuminates a bit more of the methodological basis for the CS Index, which was undoubtedly tweaked some, but still interesting.
“It found real $ annual price increase of 0.3% in Chicago, with a trend to higher real $ appreciation halting in 78 and disappearing pretty much completely by the end of 81. So, in Chicago at least, based on C&S’s research, it sure looks like, in real dollar terms, higher interest rates *did* affect home appreciation.”
I know you have caveated with “in Chicago at least” but if the effect exists you would expect to exist more broadly across regions. Of course, there are other factors that aren’t controlled for by looking at the graph (changes in income, changes in population, changes in construction costs, etc.) that are relevant and may in particular explain differences across regions. So they may explain why we observe effect in Chicago but not elsewhere, or they may not.
“And, the article illuminates a bit more of the methodological basis for the CS Index, which was undoubtedly tweaked some, but still interesting.”
Interesting indeed. Is it clear whether they are using the appraiser dataset for the current case shiller series? I didn’t see anything indicating they were.
“Of course, there are other factors that aren’t controlled for by looking at the graph (changes in income, changes in population, changes in construction costs, etc.) that are relevant and may in particular explain differences across regions. So they may explain why we observe effect in Chicago but not elsewhere, or they may not.”
Also observed to some extent in Atlanta, but not true in SF or Dallas in the 1970-86 period. Which of course why we have evidence both of a decent correlation and of none. And, as you note, the external factors are (1) legion and (2) difficult to control for.
Bob, you’re spot-on regarding QE. Its just a backdoor bailout so Wall St can front run the mainstream population and bend’em like Beckham once again. I think the main reason for QE2 is to lure the public back into the game of speculating on stocks, real estate and every other risky asset. They are intentionally keeping rates at 0% so our parents look at their retirment portfolios interest earnings in disgust and pile back into equities to save the stock market once again. I see this firsthand. I’m a pretty sophisticated investor and I can’t tell you how many people have asked me what to put their money into b/c they’re not getting anything on their interest. Mission accomplished. They will continue to pump this scheme until its too late again and mom and pop get back into the market at exactly the top of the market. Gotta love this govt! Makes me want to move to the south of France LOL.
Sold on 02/11/2011 for $235k.