It’s Small But It’s Still a Single Family Home in Lakeview: 3623 N. Hermitage
We last chattered about this 3-bedroom single family home at 3623 N. Hermitage in the North Center neighborhood of Lakeview in November 2009.
See our prior chatter here.
It is still available and has now been reduced by $54,000.
The property is only listed for $3,000 more than the 2004 purchase price.
Yes, the listing admits the bedrooms are “tiny.” All three are on the second level, however.
It does have hardwood floors, a separate dining room and arched doorways.
And while it’s small, you’ll have your own 2-car garage and no shared walls with neighbors.
The listing still has the unique night time pictures. See them here.
Evan Kane at Weichert Realtors – Endeavor still has the listing.
3623 N. Hermitage: 3 bedrooms, 2.5 baths, 1134 square feet, 2 car garage
- Sold in June 1996 for $124,000
- Sold in July 2004 for $522,000
- Was listed in November 2009 for $579,000
- Reduced several times
- Currently listed at $525,000
- Taxes of $6115
- Central Air
- Bedroom #1: 12×14
- Bedroom #2: 8×13
- Bedroom #3: 7×11
- Living room: 14×18
- Dining room: 12×14
- Kitchen: 9×15
- Finished basement: 12×14
- 140 sqft front porch
- 240 sqft back porch
Well, I’ve been thinking about this one a lot lately. There are virtually no SFHs within reasonable proximity of the city and east of Western that are below $600K. Having said that, this lot is short and for just a little more money there is one available that is bigger, on a bigger lot, and closer to the city 🙂 Or you can buy a townhome with no back yard.
1. MBR is not “tiny”, but not *large* either.
2. It’s either in North Center *or* Lakeview; it cannot be both.
3. 108′ is a bit short–and really kills any realistic expansion options–but it’s not that bad.
4. “SFHs … east of Western … below $600K.” But there are starting to be 2-flats. And when 2-flats are cheaper than the little SFHs (like this) people start considering them as substitutes, even if it seems nutso to many here.
And the competition for SFHs below $600k are so great because many people are willing to devote a larger percentage of their income to the mortgage to live in the ‘green zone’. And further complicating the matter is that during the boom, many of the SFH’s were either torn down and replace with 3 flats or ginormous mcmansions all of which make the SFH more scarce.
“many of the SFH’s were either torn down and replace with 3 flats or ginormous mcmansions all of which make the SFH more scarce”
so really this is now an “endangered” home and wouldnt that aspect make it worth even more than its list?
Absolutely Groove, buy now or be priced out forever. Land – they’re not making any more if it.
“Groove77 on March 9th, 2010 at 9:05 am
“many of the SFH’s were either torn down and replace with 3 flats or ginormous mcmansions all of which make the SFH more scarce”
so really this is now an “endangered” home and wouldnt that aspect make it worth even more than its list?
“
It seems bigger than 1134 square feet to me … or the rooms must be really chopped up. I live in a true 1100 sq ft 2/2. This little place has a bigger living room, an extra half bath and an extra bedroom. I can’t imagine fitting two more rooms in my place.
“Land – they’re not making any more if it.”
You know, the thing is that (to me*) is more of a SoCal trope than a Chicago-relevant thing, b/c there are *huge* swaths of the city that are convenient to transit/highways/loop/lake/whatever and “only” require nearly-complete redevelopment to become viable upper-middle class neighborhoods. So, in a way, gentrification *can* make more land, at least as a prospective homebuyer looking to spend $500k is concerned.
*and yeah, hd, I know it’s part of your point in hitting us over teh head with it. But it is a stupidity that has somewhat more relevance in coastal Cali–where only so many SFHs can be x blocks or less to the beach–than here.
“they’re not making any more if it”
unless you live in Detroit 🙂
Hey CC’ers need some help.
I have a friend who is a single mom looking to find a place to rent and asked me for some help. I having not looked for an apartment in ages am lost at whats the newest (best) way to find a good place. ages ago it was the reader, local papers, and driving around a hood you like looking for rent signs. I am thinking now its craigslist and driving around a hood you like looking for signs.
her info;
needs a 2br
kid is 4 years old (good school district)
works in Lincolnwood or by the border of city/lincolnwood
would like to be closer to work (rodgers/uptown out of question)
wants a safe hood for her kid (she is by armitage/pulaski now)
she only pays $600 for her huge 2br+den+enclosed porch
she can only do $900 a month tops
needs one parking spot (drives to work)
all help is much appreciated 🙂
sorry to hijack the thread
“It seems bigger than 1134 square feet to me ”
As noted in the prior thread, that’s the assessor’s number. The building footprint is ~1000 sf, so it’s prob about 1500 sf above ground + however big the basement is (and however you wnat to count it).
“unless you live in Detroit :)”
Do I sense a bitter Blackhawks fan? Aw. . . 😉
(And, Groove, re: your friend: for renting in the city I still think the Reader, and then driving or biking around is best. But there are tons of places in hood better than Arm/Pul under 900– just looked and saw quite a few.)
SFH or not that $/sf is absolutely ridiculous at ask price if the square footage is correct. At 1,500sf the PPSF is still high but not nearly as obscene.
“all help is much appreciated”
How ’bout this:
http://chicago.craigslist.org/chc/apa/1627586464.html
(bell)
or
http://chicago.craigslist.org/chc/apa/1633956379.html
(coonley)
No parking, but I *guarantee* no problems parking on the block unless there’s street construction.
Groove:
I put in two links so its stuck in moderation, but there are a couple places on C-list in bell/coonley that are $900 or less–no parking, but easy street parking almost always. Maybe not really closer, but def. safe for the kid.
“Do I sense a bitter Blackhawks fan? Aw.”
thats all detroit has is hockey. i just read on yahoo the city is going to bulldoze neighborhoods and bring back farms to cetralize the city.
“But there are tons of places in hood better than Arm/Pul under 900– just looked and saw quite a few.”
thats the thing she saved up her money by living in the hood she wants out, now her kid is older and want a GOOD hood to live in.
The angled ceilings make those BRs quite a bit smaller than their already-small footprints would suggest. It would be hard to live in these rooms – particularly at this price. That said, props to the agent for calling out the small BRs – I’ve seen too many agents describe “good sized” 10×8 BRs. This is refreshing by comparison (but the CAPS weren’t really necessary – jeez.).
“I put in two links so its stuck in moderation”
good looking out anon, i will wait for them to show 🙂
Gary – There are no SFH east of western around or below $600K… yet
And as far as 2 flats go, there are currently around 8 below $500K in this area, with more to come
“There are virtually no SFHs within reasonable proximity of the city and east of Western that are below $600K.”
“Gary – There are no SFH east of western around or below $600K… yet”
Maybe not the part of the city you guys are thinking of, but there are a number under $600K and under $500K in the Bucktown area.
REB: What about 2325 W Dickens? Or 2035 W McLean if you’re up for some work.
” There are no SFH east of western around or below $600K… yet”
No SFH *YOU* would consider living in, as is, maybe, but that’s simply not true.
1917 Larchmont is $499
4232 Claremont is $599
4116 Bell is $499
4139 Bell is $519
1824 Cuyler is $419
1828 Cuyler is $325
3256 Hoyne is $369
3445 Leavitt is $555
2233 Fletcher is $479
…and now I’m bored. And I haven’t even touched Westtown.
Those pictures of the upstairs bedrooms give me claustrophobia and i’m not even claustrophobic. I don’t live in a big place but jeez thats tiny
Yes thank goodness for the red wings! And that farm idea… Have you been to Detroit lately? Such a shame. It’s a hell hole.
Groove,
If you search craigslist for 2 bdr under $900 in Norwood Park, there’s a few candidates.
Also this one (close to work):
http://chicago.craigslist.org/chc/apa/1628540868.html
DZ,
looks like craigslist is the spot, thanks!!! i forward it to her 🙂
This listing agent must love HDR photography.
God, I can’t stand phony HDR.
Groove,
I would just go to chicagoapartmentfinders.com They don’t just rely on the MLS.
I advise walking/driving around neighborhoods you like – everything isn’t on CL and the one’s that aren’t are often good deals by long-time LL’s who aren’t web-savvy.
“are often good deals by long-time LL’s who aren’t web-savvy”
thats how i would find the apartments i loved, i drove around looking for signs.
I thought with interweb being so woven into our daily uses (pun intended) that there would be a go to site in chicago for listings.
“I would just go to chicagoapartmentfinders.com They don’t just rely on the MLS.”
I will have her try that site. do they charge a fee? who cares i will just pay it for her.
When i moved here from another city, i tried some of the services – they showed me so terrible, terrible places with holes in the floor or a basement with no windows at all – and my budget was much higher than hers. They were also showing places in larger buildings at almost $300 more per month than by going directly thru the rental agent. If you use a service, be careful.
agree with condoshopper. pretty sure i actually used chicago apartment finders service, and it was shady. they seemed like they had some properties they couldn’t move, and just kept showing me those crap holes figuring i didn’t know any better. total waste of time.
craigslist and driving the neighborhood are the way to go.
“driving the neighborhood are the way to go”
i told her last night the wife and i would go with her and walk the area by peterson park if it wasnt raining.
B and Condomshopper,
thanks for the heads up on the services. I used a service in college and got the same vibe-crappy unloadable units at high prices.
Groove-
no problem. it was more than worth it for the amazingly great, freudian typo in your above reply…
jesus do NOT use apartment finders or any similar service, you will pay much more and get much less!
“freudian typo in your above reply”
ha didnt see what you were talking about had to re-read it 5 times. i guess you can tell what i need to pick up on the way home besides milk and lunch meat 🙂
“jesus do NOT use apartment finders or any similar service, you will pay much more and get much less”
i gather from the peanut gallery it looks like its craiglist and driving around. (i really rather not drag the wife, kid and her around looking for signs more than one day.)
i found a cheap garden apt in roscoe village but from the pictures it looks like a DAMP garden apt
http://chicago.craigslist.org/chc/apa/1636261717.html
“i found a cheap garden apt in roscoe village”
That’s a nice block. Parking will be a sometimes issue, but still pretty okay.
Groove:
Still in mod, so the titles of the two listings I found are:
$825 / 2br – St Bens / Roscoe Village – 2 bd 1 ba w patio!
(claremont/grace)
+
$840 / 2br – HIDDEN GEM in North Center with 2 Bedrooms, Pets Welcome!
(Western/Belle Plaine)
having used apt-finder type ventures, one extremely disappointing experience was all we needed to learn that craigslist works best. driving around was OK, but getting calls returned was a hit-or-miss proposition.
Not sure if anyone is still checking this, but when do you guys expect SFH and multi-unit prices to bottom? I keep waiting for more bargain basement prices and it seems like they’re still very few and far between and are getting snapped up fast. That 424K two-flat in Andersonville on a double lot that we chattered about recently was my dream place but someone said just wait because more deals like this are on the way. I’m trying to hold out for a very tiny SFH that needs a ton of work for around 300K somewhere on the brown line or in LP, LV, or Andersonville. Will it ever happen?
I guess I should specify and say somewhere on the brown line east of the river. Not sure if Andersonville is considered a part of the “green zone”, but you guys know what I mean. Something in a nice area near the train that’s not on a major street and has parking and doesn’t have some other crazy dealbreaker like the el running through the back yard.
“I’m trying to hold out for a very tiny SFH that needs a ton of work for around 300K somewhere on the brown line or in LP, LV, or Andersonville. Will it ever happen?”
Depends how much work. If you mean almost complete rehab to the studs and rebuild possible.
But otherwise no because half the other regulars here seem to be holding out for the exact same thing. Myself not included.
300k for a tiny home near almost any other line definitely doable. But in my view the Brown line is the northside yuppie line and we know yuppies have an irrational fear or disdain of the buses so..
Maybe up near Kimball that might be possible but not any area you mentioned.
Danny with your expectations you remind me of a 35yr old former sorority girl complaining to all her GFs that she’s still single. Afterall she only wants to meet an investment banker, who is 6’0+, with pretty blue eyes and with an athletic build and still single to whisk her away. hehehe sorry had to.
perhaps that sorority girl should check the internet for what she seeks? Seems like every man on the web fits that description
It’s going to take a while. You didn’t make the bubble, you’re just living through bust. Probably a few more years. As those these ‘bargain basement’ sales set the comps, prices on similar properties will have to adjust. It’s happening, one property at a time, but as prices continue to fall, volume will increase, and there will be more deals available. I don’t think that the north side will ever be like south side pricing, but you know, prices will eventually reach the point where if you want to buy a house, and you have an income to support it, you’re no longer going to be confined to the crappiest house on the block. The shadow inventory will be released, we still have a second round of jumbos ARMS which are due for reset/recast which will effect the market in a tangible way.
“Not sure if anyone is still checking this, but when do you guys expect SFH and multi-unit prices to bottom? I keep waiting for more bargain basement prices and it seems like they’re still very few and far between and are getting snapped up fast.”
Or,
Danny could find a house that he likes and wants to live there for a long time thats affordable while interest rates are low and housing prices have reduced (since the peak in 2006 or 4 years ago).
Or you could listen to people on the internets for the most major financial decision in your life and never ever buy a house because renting and investing the difference is so much smarter… lol
“having used apt-finder type ventures, one extremely disappointing experience was all we needed to learn that craigslist works best. driving around was OK, but getting calls returned was a hit-or-miss proposition.”
thanks shorts, i forgot all about the phone tag played with landlords (i so dont miss those days)
“$840 / 2br – HIDDEN GEM in North Center with 2 Bedrooms, Pets Welcome! (Western/Belle Plaine)”
wow missed that one!!
its funny Anon i know i should be searching closer to where she works but my brain keeps typing in northcenter/rosoce village/lincoln square.
“Not sure if anyone is still checking this, but when do you guys expect SFH and multi-unit prices to bottom?”
ARM recast chart indicates there were a bunch of funny money loans that will recast between now and the end of 2012. Give a couple more years for them to turn into foreclosures and work their way through the pipeline & I am guessing 2014. The longer the government is heavily involved the longer this will get pushed back, though.
Here we go again, Bob, with you making fun of me because I don’t like the bus. As multiple people pointed out before, there are several very legit disadvantages to the bus:
1) Few stations have shelters, the ones that do can’t always hold everyone waiting, and even the best bus shelter will never have a heat lamp.
2) The bus is notoriously late and unpredictable. I’ve heard many people say the bus tracker is helpful, but not reliable. When I go wait for the blue line twice a day, I almost never wait more than six or seven minutes.
3) Bus routes are the first to get cut when the CTA is strapped for cash.
I don’t think what I’m holding out for is completely insane. There’s currently a house in Roger’s park not far from the Loyola stop for 245K. There’s a dumpy two flat in Lakeview that was just reduced to 399K. I’m willing to do a gut rehab. I’m not saying I’m going to get everything on my list, but I think many people on crib chatter believe prices are heading further down. What I really want to know is are we talking this year or next for the bottom?
The idea that there are a bunch of fence sitters is sort of a myth. Most people who wanted to buy bought during the boom which is why used-home sales are still at or slightly above record lows from last year. Yes there are a lot of people waiting for deals but they’re not really in the market because :
~ they’re already stuck in a home that they will have to sell for a loss
~ they don’t have enough money saved for a down payment
~ they have bad credit/foreclosure/bankruptcy so they don’t qualify to buy
~ they’re professional investors/rehabbers looking to rehab and flip
~ the first time homebuyer credit pulled a lot of demand forward
So, what I’m saying is that the market can’t really improve substantially on it’s own until these issues are worked through. There are always people looking for ‘deals’ and that’s why they get snapped up, as they say “bottom feeders get sticky fingers”.
“But otherwise no because half the other regulars here seem to be holding out for the exact same thing. Myself not included.”
“300k for a tiny home near almost any other line definitely doable. But in my view the Brown line is the northside yuppie line and we know yuppies have an irrational fear or disdain of the buses so..”
This is NOT Danny’s preferred location (and I’ve heard that location is important in real estate) but you could probably get this for close to $300K. It’s a decent Bucktown location.
http://www.redfin.com/IL/Chicago/2035-W-McLean-Ave-60647/home/13357249
“I’m trying to hold out for a very tiny SFH that needs a ton of work for around 300K”
There are 3 currently pending/contingent brick 2-flats in A’ville that were listed for $240, $259 and $274. Two of them were on Ashland, so that might not work, but the reality is they are out there, you just need to be ready to make an offer and accept as-is.
There’s the place on Damen that was featured here that isn’t very tiny but does need a ton of work and is listed for $295 (also contingent). 2414 Berteau is $299k and tiny and needing a ton of work.
If you were willing to cross the river to A Park, you’d have lots of options–there are 15+ sfh/multis listed under $300k east of Central Park.
And that’s 10 minutes on Redfin.
Basically, you are either pickier than you claim or not trying very hard.
Snarky comments aside, I do appreciate your two cents, Bob. I’m not sure I agree that we’re looking at 2014 before prices have fallen all they’re going to fall. It seems every year someone on here is pushing their doomsday estimate back one more year. I fear crib chatter die-hards will still be calling everyone knife catchers in 2020. But I’m no optimist. Maybe I could be talked into 2013, assuming the Mayans were wrong and we’re all still here.
As more ‘deals’ come to market, the listing times will increase, and at some point people will say “wow, this is more like a normal market” but we’re years from that.
Anon,
Maybe I’m pickier than I claim, but I already claimed no busy streets, and that puts Ashland and Damen out. (Although believe me, for the right price, I might consider living on a house built in the median of an expressway.) I could maybe be talked into the near west side, but I really hate switching trains to go visit friends on the north side. 45 mins+ to meet someone at an Ann Sather’s is not the urban life I’ve always dreamed of.
“There’s currently a house in Roger’s park not far from the Loyola stop for 245K.”
You can’t compare Roger’s Park to any of the areas you mentioned. They are entirely different neighborhoods with entire different RE valuations. You can get RE just north in Evanston these days that makes Chicago’s valuations look laughable. Like 50% cheaper.
The problem with what you want, at 300k, is what everyone else seems to want as well (and they’ll be willing to pay more). So your competition is going to be flippers and rehabbers “snapping” them up before you do.
I only used the bus commentary to show that there are many other people who want exactly what you do. Heck I want exactly what you do as well (I lack the rehabber wherewithal so maybe less feasible in my situation). If you’re willing to sacrifice on one of your key points it greatly increases your options.
Oh and Andersonville is definitely “green zone”. Lesbos flock to Andersonville and just like their dude counterparts they don’t tend to have kids (money sink), so a lot of that extra disposable income goes towards housing.
“its funny Anon i know i should be searching closer to where she works but my brain keeps typing in northcenter/rosoce village/lincoln square.”
Yeah, b/c that’s where you’d rent to balance kid/fun/commute to L’wood if you were looking to rent.
Hey I want to live next to Blago too in an SFH and send my offspring to elite expensive private schools. But Dave Letterman isn’t calling me up to appear tonight to read his Top 10 List for a steep fee so everyone can laugh at me because they believe I am going to prison and I don’t seem to realize it.
That’s how the market is today, yet, there is an estimated 33 months of properties out there in shadow inventory. The 60 day DQ rate in IL, as of today, is something like 1 in every 8 mortgages, and assuming 50% of all homes are free and clear, that’s one in every 16 homes, like one house on every block in the city, suburbs and beyond in Chicago is DQ. That doesn’t include the properties which are already taken out of the pipeline, or REOs, or much of the southside/westside which has already been decimated and ravaged. This is going to affect the market in the years to come. It’s unavoidable. The banks can’t and will not let home owners live there forever. It will eventually catch up to them. I sound like a shill, I know, but you have to look behind the scenes and really analyze what’s going on here to get a feel for the market. 1/8 mortgages delinquent doesn’t vibe really well with the bottom being in. 33 months of shadow inventory doesn’t vibe wit the bottom being in.
“…but the reality is they are out there, you just need to be ready to make an offer and accept as-is.”
“its funny Anon i know i should be searching closer to where she works but my brain keeps typing in northcenter/rosoce village/lincoln square”
How’s she going to get a decent school in Lincoln Square? I was suprised the ones Anon dug up don’t put the school in the listing.
I would think the commute has got to be a big factor for her. The Edgebrook listing I posted should be the winner. Not sure which school district it’s in.
DZ, that’s a pretty good find. I haven’t checked Bucktown in a while because just about everyone I know is on the red line and so is work. (I have no car, so being able to get to friends and work quickly is a big deal.) Plus when I do check stuff near the blue line, I rarely find something dirt cheap. (I’m on the fence about whether the crime in Logan Square is too much for me and obviously Bucktown and Wicker Park are more expensive.) There are a few other places on the north side that are around 400K that I’d probably just suck it up and pay more for because I think they’d resell much better, but that little place in Bucktown is a good size for me.
“Yeah, b/c that’s where you’d rent to balance kid/fun/commute to L’wood if you were looking to rent.”
So i guess i am pushing my LOGICAL preferences on her 🙂
Danny:
a’ville is solidly greenzone. However, you are probably going to be waiting a long time. No one can call the bottom. Find a place that meets your needs from location, amenities, and price. If the stars are aligned, make your move. Nothing will ever be perfect and you just have to make decision based on your personal circumstances.
I highly doubt we are going to see much larger drops in the below jumbo market in desirable hoods.
I know some folks here think a 2/2 on the Gold Coast with lake views ought to be $150k, but it ain’t gonna happen.
“The Edgebrook listing I posted should be the winner. Not sure which school district it’s in”
it is the clear winner so far and it is in the edgebrook school!!! (border i think is the train tracks)
“I already claimed no busy streets, and that puts Ashland and Damen out.”
You wrote “major” before; I don’t think of Damen as “major”, but it is “busy”. Does that eliminate streets near schools, too, since they are “busy”?
And I avoided blue line locations b/c no one that lists A’ville first actually *wants* to live in a blue line location.
You really just need someone who is all over this for you, because the sfh/multi places under $300k go contingent/pending v., v. quickly, esp. if the location is actually decent.
Logan Square appears to be the latest hip ‘hood I’ve noticed lately with rehabbers buying cheap run down foreclosures, rehabbing them and re-selling for 2-3x cost basis.
What you want to do is definitely possible on the Blue line. Even moreso than Red line I suspect. That neighborhood doesn’t appear as walkable as the ones you mentioned though.
oh, and, if you’re serious about the “no switching trains”, you weren’t serious about “on the brown line”, which is why you aren’t looking in A Park. Which is fine, but may be causing you to lose focus.
Homedelete, I think you make some good points. I need to keep reminding myself there’s no rush. I just really want to take on a project for my own enjoyment and to feel like I’m doing something smart with my spare time and money. I’m frustrated because I really don’t know what I’m supposed to do with my money for the next five years or so. Pour it all into dividends paid for by tobacco companies? Buy gold and hope the world ends? If I just want to buy a house every three or four years, fix it up, and make 20 or 30K when I sell, am I just going to have to wait until 2017?
“I have no car, so being able to get to friends and work quickly is a big deal.”
Car makes a big difference. We’re in Logan/Bucktown and make some trips up to A’ville and other areas up there. Not bad with a car, taking the right streets, and getting good traffic on at least one leg. I wouldn’t want to do it all the time though.
“Pour it all into dividends paid for by tobacco companies?”
I’d say those and big oil like XOM and CVX are your safest bets. Its a little late to get on the gold bandwagon without taking a lot of downside risk, IMO.
“it is the clear winner so far and it is in the edgebrook school!!! (border i think is the train tracks)”
Not sure about the school. Don’t have an address and Edgebrook cuts off around there. As anon always points out, check school boundaries carefully.
Anon, I’d consider the brown line because I can get to belmont and fullerton and a few other places without switching. I’d suck it up and accept a longer trip to edgewater (or borrow my partner’s car) and a train switch to get to the mag mile if the right deal on the brown line came along. I haven’t looked much at Albany park because it still seems to have some gang problems and the occasional midday open-air murder according to what I’ve read, but maybe it’s not so bad. I’m really more into North Center though because Albany Park just seems like a very long brown line ride to Belmont and the loop.
“Buy gold and hope the world ends?”
If you’re doing that, you’ll need to have a place witha big safe and a lot of guns, b/c if things get that bad, no one will convert those pixels and ledger entries to genuine Au for you.
“I just really want to take on a project for my own enjoyment and to feel like I’m doing something smart with my spare time and money.”
For that, you should pretty narrowly the area, type of property and amount you want to spend and just make an offer (low ball) on every place that comes on the market that is reasonably satisfactory. You’ll face some risk, but you just have to accept that, I think, if that’s an itch you need to scratch.
DZ, I think you’re right about the drive to A’ville being doable. I’m in Oak Park right now so it’s killing me any weekend when someone in Edgewater or Uptown wants me to come up there (by train or car…both take forever). Really, getting anywhere near the lake and north of the loop takes entirely too long from Oak Park. I have to remind myself sometimes that I could borrow a car and be in A’ville much faster than I can now if I moved to Bucktown, so maybe it wouldn’t be so bad.
$300-$400k is the sweet spot for homes a house and should be the average to middle higher end of the market. A $400k house with a 20% down is a feasible and sustainable PITI for two professionals making $70k or $80k a year, and still have money left over for the car payments, parochial school, and a little for savings. Nicer, newer larger houses and sweet condos will be more, and crapshacks, conversions or homes on bad blocks will be less. Of course everyone wants to pay that because that’s what is ‘affordable’ and sustainable.
But the problem is that many many people who are supposedly on the fence already own a unit and have little or no equity and/or don’t have a large down payment, or just plain can’t sell their current unit so they’re not really anyone’s competition for the $400k turnkey home.
As I’ve been saying all along (and anon(Tfo) even agrees) the ‘deals’ in the future will be the homes that are still listed for $600k+ today will be selling in the $400’s because that’s the price point that a majority of buyers in the market can afford. Hell I’ve got a decent household income and I can afford a $400k house today. I just don’t want to fight with 5 other offers for the one decent turnkey house listed on the block in the $300’s because they get snapped up quick. I’ll buy when there are half a dozen decent homes listed in the upper $300’s in my hood and none of them go under contract/contingent within 4 day.
I’ve never said and I don’t believe that there are going to be a plethora or deluge of $100k turnkey SFH’s on the northside and anyone who imputes that to me is being factitious.
“I’m really more into North Center though because Albany Park just seems like a very long brown line ride to Belmont and the loop.”
North Center is much, much closer than AP and is really just a stone’s throw from Lakeview and has a ton more going on. Nice and solidly “green zone”.
AP is way da eff up there and there really isn’t much going on. Its where my friends live who can’t afford the minimum $600/rent in Lakeview and can’t afford to keep their cell phones on continuously.
Thats the one thing about the Brown line I’ve noticed is that the Kimball stop isn’t like the others (not sure about Kedzie stop area though never been around there).
Anon, I’m definitely heading in that direction (getting preapproved and just lowballing every dump in my preferred locations). At the moment I’m waiting to see what the expiration of the housing credit and continued pileup of foreclosure inventory does to prices.
>>”Its where my friends live who can’t afford the minimum $600/rent in Lakeview and can’t afford to keep their cell phones on continuously.”
Ah, yes! As much as I love a bargain, I’m starting to see the value of living in a pricier neighborhood where the friends I make will actually be able to afford to go out to eat with me once in a while. I think I’m just going to have to accept that a bargain isn’t a bargain if I hate my neighbors.
Russ,
Nobody believes a 2/2 in the gold coast should be $150k. Nobody believes they should be selling at what a majority of them are listed for either.
Assuming both of these places need an equal amount of work (unlikey, I know), which do you guys prefer?
1) Andersonville-ish Greystone for 400K
http://www.redfin.com/IL/Chicago/1310-W-Winnemac-Ave-60640/home/22678970
2) Lakeview two-flat
http://www.redfin.com/IL/Chicago/3125-N-Seminary-Ave-60657/home/13364825
“If you’re doing that, you’ll need to have a place witha big safe and a lot of guns, b/c if things get that bad, no one will convert those pixels and ledger entries to genuine Au for you.”
And the national anthem pep rally folks seem to forget little things in our history to suggest otherwise. Like when Roosevelt issued a presidential decree confiscating all gold during the GD when it wasn’t even wartime. Only to revalue it at 70% more the following year.
So yea ditto on the guns with that safe. And better not tell anyone about that hidden gold stash, as our government currently rewards tax snitches they will undoubtedly do the same for gold snitches.
Assuming both of these places need an equal amount of work (unlikey, I know), which do you guys prefer?
1) Andersonville-ish Greystone for 400K
MLS 07342196
2) Lakeview two-flat for 399K
MLS 07368133
“should be the average to middle higher end of the market”
This is where I keep getting hung up in your logic. What does “should be” have to do with anything? I mean, given an unlimited supply of houses, I guess that makes some sense. And makes a lot of sense in the ‘burbs, where it really doesn’t make a ton of difference which subdivision you pick as long as it’s in your desired school district.
But in a place like Bucktown or Roscoe Village, where there is a finite number of SFH’s and a lot of demand for those houses, “should be” doesn’t really mean anything does it?
“I’ve never said and I don’t believe that there are going to be a plethora or deluge of $100k turnkey SFH’s on the northside and anyone who imputes that to me is being factitious.”
there are those days you go off about how the price declines of crappy f/c in the burbs are coming to prime parts of the city. And then you cite to 75% price declines on those crappy properties.
And I don’t even disagree that there will be *a few* properties that trade that low–it’s just that a few people will get really great deals and make a lot of money, while most will doing what you’re saying today–paying in the $400s for houses that did/would have traded in the $600s at peak pricing. And my view is that both of those prices value the structure *exactly* the same and the $150k-$250k is entirely a difference in the spec land value–each time the house is trading for +/-$100/sf (adjust for quality–there certainly are SFHs trading at $200+/sf, if they’re d-lux enough), and the lot drops from ~$400k to ~$200k (or $600k to $400k on my block, or $1mm to $700k in LP, e of Halsted)
Hello,
I’m one of the owners of Chicago Apartment Finders and I’m sorry to read all of the misconceptions about our business and industry. While we are by no means perfect we do provide a free service for renters and try very hard to match our clients with a great place to live, but let me answer the statements above.
1) “You can find much better deals on your own”. Sometimes. We all hear about the friend who found a 3-bedroom apartment in Lincoln Park with a view of the lake for $800. While this can be true examples like this are also few and very far apart. Heck, I would be living in a unit like that if I could find it. In general the market is what the market is and you get what you pay for regardless of who finds the place.
2) “They only show crappy apartments”. We do not own any apartments but have more than 45,000 apartments in our ever-changing database. This is good in the sense that we have a lot to choose from but unfortunately we don’t always have time to see all units before we show them the first time. So yes, once in a while a bad apartment slips through and that is disappointing to our clients as well as to us.
3) “You will pay more and get less when using an apartment finding service”. Not true. In fact we can often find better deals than you can on your own because whenever management companies lower their prices they come to us first. In addition private landlords come to us since we can rent their units much faster than they can on their own, thereby saving landlords the cost of having their units sit vacant and with no income.
In conclusion, using Craigslist works for some and obviously using an apartment finding service works for others. That’s why we since our start 7 years ago have rented 25,000 apartments and now employ more than 140 people, all of them working very hard to provide good service because that’s the right thing to do and because our livelihood depends on it.
Justin Elliott
Founder and CEO
Chicago Apartment Finders
“What does “should be” have to do with anything?”
“Should be” to preserve a sustainable market.
“a finite number of SFH’s and a lot of demand for those houses”
There are also a (very) finite number of HHs that can actually afford $1mm+ for a house.
b,
1. The upper limit on prices ‘should be’ is what people can afford to pay. This was circumvented during the bubble with 0 down, IO, ARM, Option ARMs with Neg Am, 55% DTI ratios, etc…
2. In neighborhoods like Bucktown (which is like narrowly focusing in on a small ‘hood with a couple hundred homes occupied by biglaw attorneys, consultants and doctors) homes will be more expensive because the residents can afford to pay more. Move a few blocks over to Logan filled with hipsters and you’re not going to have Bucktown pricing.
It’s not that hard of a concept to understand and you and I are more in agreement than you think. For example, the homes you’ve given as examples showing a newly rehabbed/flipped home for $499k, that doesn’t bode well for the older home on the same block selling for $600k. The older home will sell at $300k because that’s what people can afford, and the wealthier residents can afford to pay more and they get the new house. Move that house to bucktown where biglaw associates/partners live and they can afford to pay $600 or $700 for that same house because they have a higher income. But the average with regular joes at private accounting firms, goverment jobs, mid sized law firms, etc. we can afford $300k to $400k but the bubble drove that up to $500 and $600k which is out of our price range, hence, very few homes are selling in those price ranges.
“The upper limit on prices ’should be’ is what people can afford to pay.”
Don’t forget about 20% down. It just so happens these days people gasp at the notion of this as property values skyrocketed so much to the degree that 20% down on even starter places took several years worth of savings.
However if 20% down had been required at all times these valuations would’ve been anchored to wages to begin with. Of course current homeowners were supportive of removing traditional lending standards–it means an idiot can show up and pay them an outsized price for their place with increasingly less amounts of their own money in the game.
I really hope those banks biggest in the 2nd lien mortgage holder market get hosed and seized by the FDIC. I wonder if the Fed bought a bunch of that worthless crap at par value? In any case I can’t believe I agree with Barney Frank on this one.
http://www.housingwire.com/2010/03/08/investor-uncertainty-surrounds-frank-remarks-on-agency-mortgage-debt-4/
Danny,
Definitely the uptown two-flat. The thing on Seminary doesn’t look as solid (without seeing the interiors of course). I saw a SF up on Granville for a bit less, which had a lot of potential character, but it seems to have sold, for about that (400k) or less.
My friends who used apartment services always ended up with drab places I thought, this isn’t New York (even though the landlords pays here) that you really need to get that unless you are really in a huge hurry.
Good Luck!
“The 60 day DQ rate in IL, as of today, is something like 1 in every 8 mortgages, and assuming 50% of all homes are free and clear, that’s one in every 16 homes, like one house on every block in the city, suburbs and beyond in Chicago is DQ.”
and considering that the “unemployment rate” (notice the sarcastic quotes) is 9.7% having a 6.2% delinquency rate isn’t that bad considering the normal historical average DQ rate is 1.5 to 2 percent. Yeah its nearly 3 times as bad, but remember how our economy was doomed?
Know how many people you know that are screwed on their 100% LTV financed extra investment homes? I think the fact that its only 6% is incredible.
I wonder how much of that number is skewed from rental tenants not paying their landlords due to being laid off too?
There are a million reasons of why the US economy will crash and burn, but the fact is, is that we’re fricking America and even with 90% employment our economy is 4x larger than the next biggest country… Our economy is the size of the next 9 countries (in the top ten) combined!
Being bearish on America has been a big loser long term, and I expect that to continue. So you can either suck it up and throw your boat in the ocean, or you can do the safe thing and piss and moan on the dock while the wind blows in your face.
flame away
Sonies, I’m all for a little optimism around here. I keep reading all this stuff about the inevitable sovereign debt collapse in Europe and huge bond market meltdown. I really hate to think all is lost and that we’re on the verge of some depression that is going to force all of us to keep working until the day we die.
Since when is being bearish on housing like being bearish on America ?
HD:
The problem is your definition of what is affordable is differnet from a lot of other people who are in fact willing to pay more than you to live in certain neighborhoods. Just because you or the average Joe aren’t willing or can’t pay the price of entry doesn’t mean home prices are still overly inflated in some areas.
Big city real estate isn’t cheap. Very few big cities have cheap homes in highly desirable areas with easy access to public transportation, restaurants, decent schools, and other amenities.
If you want cheap real estate, move out to bumblefuck Ohio or something. Every city I have ever been in pretty expense for the average Joe. I have this discussion with the wife as we discuss if we would move to another city. Every city we would ever considering living in has relatively high real estate in the “intown” areas we would prefer to live. Heck, even Kansas City is expensive downtown. Seattle. Portland. Boston. NYC. Atlanta. Houston.
Yeah, funny money inflated prices to some degree along with the specuvestors, but all that is largely gone from the market now and people are still buying. I think we are getting close to finding some stability in prices. The non jumbo stuff isn’t really going to fall much harder imho. But I do think the jumbo market might still have quite bit of continued pressure due to lack of financing.
homedelete, don’t you know that if you let home prices fall any further, the terrorists win? Maybe you and the Dixie Chicks and Ralph Nader should all get together and bash America and it’s inflated real estate prices, you America hater.
Shoot. It’s = its. I was so close to a flawless sarcastic quip.
Russ, you’re basically saying “buy now or be priced out forever, because city real estate isn’t cheap”
I do bankruptcy all day long, day in and day out (among many other non-bankruptcy things too) and I see what people make from all walks of life, just like you do, and I don’t see how many of these prices are sustainable. Because they’re not. 1 out of every 8 people in IL is 60 days late on their mortgage.
The bubble has shown us that just because people are willing to pay more doesn’t mean they can afford to or that they won’t default.
The argument that city living is inherently more expensive isn’t true. City living is more expensive because the wages are higher and there’s more competition.
Russ, you say “and people are still buying. I think we are getting close to finding some stability in prices” but they’re buying at levels just barely above the 2008/2009 lows. Yes it’s up a bit, but still far far less than during the bubble or even ‘normal’.
People are still buying the ‘deals’ and the fact of the matter is that ‘deals’ are all relative. When every house is priced as a ‘deal’ then you know the market has returned.
“The problem is your definition of what is affordable is differnet from a lot of other people who are in fact willing to pay more than you to live in certain neighborhoods. Just because you or the average Joe aren’t willing or can’t pay the price of entry doesn’t mean home prices are still overly inflated in some areas.”
Danny,
Some of the places that seem ‘cheap’ in nice neighborhoods are in such rough shape that they are cash only deals. Plus you have to factor in the amount of time/money it takes to rehab. Then you realize it ain’t so cheap after all.
That said, affordable properties do pop up now and again. There was a house in Edgewater Glen, on a short lot that went for 240k or so last year.
Also there are/were a few places on Paulina just north of Ridge that dipped down under 200k. Pretty close to A’ville, although near a busy street.
So get pre-approved and be ready to pounce, but try to be realistic about how expensive ‘bargains’ really are.
“Russ, you’re basically saying “buy now or be priced out forever, because city real estate isn’t cheap””
No, he’s not. You two are talking past each other and comparing different submarkets–Russ is saying the “ultra-premium” will remain premium priced (but which might be less premium priced in the future) and you’re saying the 2-income lower-upper-middle class ‘hoods need to take the edge off to have any stability (but might remain relatively expensive compared to similar-quality suburban locations). They aren’t contradictions.
I’ve enjoyed the points many have made on this thread.
“The argument that city living is inherently more expensive isn’t true. City living is more expensive because the wages are higher and there’s more competition.”
The second sentence disproves the first.
And you didn’t even touch on the smaller supply of homes versus greater demand.
I think your earlier point answering my question is a fair one. But I don’t know that it has a whole lot to do with the price of a house in any of the neighborhoods I’d buy in.
“When every house is priced as a ‘deal’ then you know the market has returned.”
That actually kinda sounds like peak bubble times doesn’t it?
b,
supply and demand effect prices because higher prices means less demand. which is what many areas in the city are experiencing now. fewer sfh in some areas all listed at high prices, and hence, little demand. Further proof is that LP is barely off generational low sales of SFH. Cribchatter features these properties nearly every week.
SO the demand move elsewhere, like the exceptionally nice house in Logan for $499k just a few blocks away from the ridiculously priced homes in Bucktown for $800k. Take a look at Redfin, there’s a tremendous amount of product (Attached and detached) in Bucktown and comparatively only a small percentage are even under contract. That $300, $400k, $500k is the sweet spot for upper middle professional incomes (and easier to finance !). Whether you, developers or anyone else likes it or not, nice homes at those price points move and quickly. It’s too bad for underwater FBs and developers sitting on unsold homes, but higher priced homes will need to come down to meet that price point, and condos will have to follow the downward trend too.
Justin,
Good write up on clearing out the “myths”, thank you.
I have a few questions about your site i was trying to use it last night and i have a hard time tying to find apartments in non-trendy areas. i.e Peterson park, edgebrook, sauganash, budlong woods, north park college NORTH of foster (not albany park).
and when i search in roscoe village albany park place show up?
I have to say that I have heard good things about Chicago Apartment Finders. I find Craigs List to be really difficult to use. It’s just not structured.
“I find Craigs List to be really difficult to use. It’s just not structured”
looking yesterday I found many reposts there, a lot of junk to filter through not as simple as i thought.
wife and i had to go to sears yesterday and decided that we would go to the six corners one so we could drive through portage park area and look for signs (got harder as the sun went down). found a house renting the 2 bedroom apartment upstairs (read attic apt).
had my friend call she said the guy sounded nice and she gets to share the yard and garage its $825 utilities included free laundry in the basement. she is going to go see it tonight.
I a feeling it might be small and know for sure some rooms will have sloped ceilings (only dormer on left side of house). its only her and her kids so size shouldnt be an issue. i think for the price and all she gets plus its three blocks from the park its a great deal.
“I find Craigs List to be really difficult to use. It’s just not structured”
Depends on what you are searching for. If you have good search terms that don’t appear in all the ads, it works great. One issue I noticed in the apt listings is that some posters (I’m guessing “professional” services) put every conceivable neighborhood in there so they come up on most searches. There’s a lot of good stuff on craigslist. It can be a pain.
Justin – thank you for the clarification on your firm. Good to see the investment and drive your team has.
Groove: check out this mashup for Craigslist, it might help you:
http://www.housingmaps.com
“supply and demand effect prices because higher prices means less demand. which is what many areas in the city are experiencing now. fewer sfh in some areas all listed at high prices, and hence, little demand.”
You need to go back and take high school economics again what you are saying is nonsense.
supply and demand aren’t mutualy exclusive… you can have higher prices and higher demand… the supply just needs to shift, which in the city is exactly what has happened. Nobody is building now, demand is continually (albeit slowly) shifting left while all this excess supply is getting bought up.
“supply and demand aren’t mutualy exclusive”
If I remembered more of my high school econ, I’d say something about demand being relatively inelastic for SFH’s in prime locations.
I think the “prime location” is the key part. I agree with a lot of your assessment, HD. But I’m just not sure it applies to all areas. People who can’t afford high priced locations (Bucktown) have always moved to the next best thing (Logan Square). That’s not new. And I’m not sure how much it will affect prices for people who don’t see Logan as a replacement good.
But we shall see.
I also wonder what sort of effect the foreclosures and short sales will have on prices. If a SFH is a short sale at $450k, is that really a comp for a non-short sale at $550? The $450k sale involves a ton of headaches and extra nonsense. So it’s not quite apples to apples.
“Nobody is building now, demand is continually (albeit slowly) shifting left while all this excess supply is [building] up.”
Sonies, I fixed that for you.
http://www.dsnews.com/articles/sp-estimates-three-year-overhang-of-shadow-inventory-2010-02-16 (S&P Estimates a Three-Year Overhang of Shadow Inventory)
“Heck, even Kansas City is expensive downtown. Seattle. Portland. Boston. NYC. Atlanta. Houston.”
I think it depends on how you define downtown and what particular city. I know Cincinnati has really cheap real estate downtown (near the highrises) but that it is a very seedy area which all but shuts down after 6pm. The (few) yuppish neighborhoods within the city limits do tend to command premiums though.
Speaking of overpriced SFH in Bucktown, any thoughts on 1911 N Hoyne? It’s currently listing at $725K (down from $750K last year), sold for $660K in 2005 and $425K in 2000. Not sure if there were any significant upgrades since 2000. Current owners seem to have $417K and $70K mortgages.
I know HD is going to yell at me, but I’m thinking it’s not bad at the 2005 price. Yes, it’s a short lot, which is very common in the area. I like the back patio rather than yard. Three beds up. Wish there were photos of the basement (which probably tells me something). Finishes are kind of innocuous.
Spring has sprung and my wife is interested in buying…
Yeah this “shadow inventory” give me a break. How much of that is in actual desireable hoods? Around chicagoland most of the shadow inventory crap is unsellable shit on the south side or in the exurbs of will kane, and kendall county. All the “good” properties are put on the market and almost immediately “scooped up” by investors or friends of bankers.
I guess these people who bought a huge lot with teardown for 650k in Andersonville didn’t get the memo. I j drove by the other day and saw the massive house being put up.
http://www.redfin.com/IL/Chicago/5354-N-Paulina-St-60640/home/13404616
“Nobody is building now, demand is continually (albeit slowly) shifting left while all this excess supply is [building] up.
“any thoughts on 1911 N Hoyne?”
Where’s the 2d bath? Any possibility of easily adding a half (at least) to the basement or 1st floor? bc that would bug me, on a daily living basis.
Danny i saw 1310 winnemac – looks good on paper. in person, it feels like its going to fall down.
take a walk by, look closely and you can see the building separating in the front – like someone took an axe and chopped in half. Sadly, despite the fact that it’s an old greystone, it’s prolly a tear-down.
“Where’s the 2d bath? Any possibility of easily adding a half (at least) to the basement or 1st floor? bc that would bug me, on a daily living basis.”
I was assuming 2nd bath was on top floor. There’s a half bath listed and assume that is on main floor, but I guess I don’t know that.
“I was assuming 2nd bath was on top floor. There’s a half bath listed and assume that is on main floor, but I guess I don’t know that.”
Poor reading by me–I looked at the assessor info and formulated the question w/o looking at the right part of the page.
A practical question. If I buy without a realtor, are there any pitfalls with just hiring a real estate attorney to handle contracts and closing and an inspector to inspect? I’m not looking for advice in pricing etc.
“If I buy without a realtor, are there any pitfalls with just hiring a real estate attorney to handle contracts and closing and an inspector to inspect?”
You may be just giving 3% to the seller. You might want to consider one of the realtors who will rebate some of the comission to you, unless the seller agrees to give you 1.5-2.5% off the final negotiated price. But pitfalls, as such, from not having a realtor’s advice? Not really.
“You may be just giving 3% to the seller. You might want to consider one of the realtors who will rebate some of the comission to you, unless the seller agrees to give you 1.5-2.5% off the final negotiated price.”
To the seller or the seller’s agent? I’ve assumed if the seller gets the 3% he would internalize the difference (indifferent between getting $97 offer w/o having to pay the 3% to his agent versus $100 and having to pay). My concern has been that the sellers’ agent would pocket it. With 1911 N Hoyne, I think the agent and seller are related.
I may end up with one of the rebating agents, at least I know I’m getting a portion of the commission. Haven’t been serious enough up to now to take up someone’s time, but may be getting there.
“To the seller or the seller’s agent? I’ve assumed if the seller gets the 3% he would internalize the difference (indifferent between getting $97 offer w/o having to pay the 3% to his agent versus $100 and having to pay). My concern has been that the sellers’ agent would pocket it. With 1911 N Hoyne, I think the agent and seller are related.”
I think of them as unitary, to me, and I don’t think there are really that many people who are genuinely indifferent, and I don’t know if the listing agreement works that way (ie, allowing the seller to pay the listing agent only 3%, if no buyer’s agetn (Gary? Anyone?)).
Generally, they keep the full amount if no buyer’s agent. So if the listing agreeement is 6%, they keep 6% if you don’t bring a buyers agent versus getting just 3% if you do.
IMHO, buying without an agent is just asking for trouble. God knows there are a lot of “realturds” but having financed countless deals without buyers agents involved, they usually wind up being fusterclucks.
The buyers simply do not know the process and what needs to be done and when. They much better served finding a quality agent. The easiest way to do it is simply interview them like they would any other professional:
Get referrals, evaluate years in business, education level, etc. Most people just use their out of work cousin who just happen to get their RE license, so it is no surprise the general level of satisaction is low.
“IMHO, buying without an agent is just asking for trouble. ”
DZ: You could also find a lawyer who has an active broker’s license (many, many do–Big Stevo said he wears both hats) and work it into the fee arrangment.
If/when I buy I am planning on using ZipRealty. At least with sites like that you get a rebate on the 3% they’re getting.
“I may end up with one of the rebating agents”
Me too. I suspect for a vanilla purchase (no strange things going on) those places should work. Unless anyone has any horror stories about those rebating agents?
“So if the listing agreeement is 6%, they keep 6% if you don’t bring a buyers agent versus getting just 3% if you do.”
I’ve often wondered about what seems to me like an inefficient commission structure. All of this is ignoring the question of whether realtors will get largely disintermediated. Even assuming realtors perform a function, the pricing doesn’t seem to provide strong incentives. Why get 3% if you are not providing the buyer (you are not the buyer’s agent)?
Why have 6% of TOTAL price? Anyone can sell a house for half or three quarters of list price. If there’s value provided, it’s in getting the increment above 90 or 100 percent of list. Why not give a bigger cut of that increment? I remember reading a study of how realtors got better pricing for their own properties, arguably because they don’t have strong incentives to get better prices for their clients.
“You could also find a lawyer who has an active broker’s license (many, many do–Big Stevo said he wears both hats) and work it into the fee arrangment.”
Thanks for the suggestion. I’m also intrigued by the idea of using Gary, just to say I did.
Bob, there are very few plain vanilla deals. Even deals that seem like they are easy wind up being very difficult. Buying a house is a very complicated transaction and no where near as easy as it seems on HGTV.
Real estate commissions are attacked because from those looking on the outside in, it seems like agents make a lot of money. The reality is that they don’t. For every Mario Greco, there are several thousand barely making $30k a year. Commissions are split FOUR ways in most cases. So a 6% on the typical transaction probably only yields 1.5% or so for both agents. While, it varies by agent, an agent may give up 50% of the commission to their brokerage. They also have to deduct any expenses as well as agents are considered independent contractors.
The other issue is that you eat what you kill. Therefore, commissions on the deals that do close have to be higher to compensate for the time wasted on deals that don’t close. Remember, the agents are taking a risk working essentially on a contingent basis and aren’t paid unless the deal closes. Very similar to personal injury attorneys, etc. So the commissions have to be commensurate with the risk.
I am not saying ALL agents are deserving of outsized commissions, but it isn’t an easy business and by in large, most work very hard for their checks.
“If there’s value provided, it’s in getting the increment above 90 or 100 percent of list.”
Of course it is. It would be more respresentative of actual commissionable work if the agreement were for a fixed amount plus %age (possibly large) over X (most likely based on either prior purchase price or pricing of recent comps) for the seller agent. Handling the buyer agent is a little trickier, as it’s a finders fee, which probably is best set as a %age of total sale price, to preserve incentives.
But then, commissioned sales reps often get to feed off of accounts that are in reality “house accounts” at the same rate as new accounts in all sorts of businesses.
gary is a discount broker…:)
bubbleboi, thanks so much for the insight on 1310 Winnemac. I think it’s really true what someone said about so much of the foreclosure inventory (particularly with SFHs and multi-units) being in really awful ‘hoods. Prices on everything in Englewood and Garfield park could fall to a penny and I don’t know that it’ll make a bit of difference in the price of property in Lakeview. I just don’t see the SFH and multi-unit market falling much further in my desired areas, but I hope I’m wrong. At least now I can sleep tonight without that damn greystone dancing around in my head. Now if I could just forget about that great two-flat at 1431 w. Argyle going under contract so fast, I’d be in good shape.
Dude… forget about living in Uptown… period. Seriously, I considered it once…. and then slapped myself back into reality.
Just
don’t
do
it
What about Redfin? (I know we like to use their site to link properies)
They spilt the commision with you and their agents work on a flat salary (no commision goes to the agent). I have been working with Redfin and find them to be better than agents I have used in the past. The Redfin agents get bonuses on satifisation surveys you fill out after you make an offer (even if the offer doesn’t go through). It makes sense if you like to search for you own property and basically need them to get you in the door and help make sure the deal closes.
It is a whole new business model towards real estate and it is interesting.
“It is a whole new business model towards real estate and it is interesting.”
kind of like carmax but for houses 🙂
It surprises me people find the “split the commission with the agent” pitches so compelling.
Seems to me it’s just a way to get the buyer “on the same side” as the agents– i.e., change buyer’s interest to “get the deal done” as opposed to “get the best deal.”
I’ve seen friends get totally fixated on that percentage they’re “getting back”. . . to the extent that they literally forget to drive a hard bargain. Hey, higher price, more “money in your pocket”!
I’ve done it solo and looked at these “new business models” and the best r.e. purchase of my life was via a traditional buyer’s agent– a really good one.
Costs you nothing as a buyer, and can make all the difference in the world in getting the right deal (and getting the deal done).
Getting a “deal” is simply part of the culture. Pennywise and pound foolish.
Save 2% on the commission, but over pay by 10%. Nearly lose your earnest money by not meeting the contract dates because you backed out of your nearly clear to close $500k mortgage trying to save .125% on the rate, only to have the “Lending Tree” offer deny your loan at the last minute.
Sometimes saving a few dollars is inconsequential in the scope of the transaction.
You can try and do your own plumbing too but don’t get pissed when something gets messed up.
Sonies, I think you have the whole Wilson red line stop/Uptown east of Broadway area confused with stuff on the west side of broadway further north. The two flat I’m talking about was way closer to the heart of Andersonville than the bad parts of Uptown and had the cemetery as a buffer to the South. I’ve spent plenty of time around there and I don’t know why you’re treating all of Uptown like it’s the same.
“I’ve spent plenty of time around there and I don’t know why you’re treating all of Uptown like it’s the same”
cause the same mentally unstable person east of Broadway has feet and will make his way east
“cause the same mentally unstable person east of Broadway has feet and will make his way east”
Partially true. I’ve seen a handful of mentally unstable people east of Broadway who don’t have feet.
meant west
“Partially true. I’ve seen a handful of mentally unstable people east of Broadway who don’t have feet.”
got a good laugh with that one. to put Uptown into perspective i would feel more comfortable walking the streets of the wild hundreds or austin than i do in uptown.
A’ville is a little island of sanity. Rarely ever saw any questionable types west of broadway, north of argyle, or south Bryn Mawr, when I lived there.
Some of you need to get out more.
Now down by Lawerence can get a little shady with all the loose screws running around down there.
I’ve been to andersonville, the good part not near Uptown… I eat at M Henry for brunch sometimes, great place everyone should go there sometime
“Sometimes saving a few dollars is inconsequential in the scope of the transaction.”
Sometimes you can have your cake and eat it too, not very often, but every now and then. I would at least recommend checking Redfin out if you were familiar with the neighborhood you were shopping.
“unless the seller agrees to give you 1.5-2.5% off the final negotiated price”
This is exactly the sort of fraud that the FBI is now cracking down on. More specifically with regards to cash payments to firm’s that are second lien holders so far but cash payments contingent on on a closing still constitute fraud nonetheless.
“This is exactly the sort of fraud that the FBI is now cracking down on. More specifically with regards to cash payments to firm’s that are second lien holders so far but cash payments contingent on on a closing still constitute fraud nonetheless.”
No, it’s not.
Because I was suggesting negotiating an agreed price and then saying “i don’t have a realtor, so I expect 2% off b/c you’re saving 3%”, but that doesn’t generally work b/c the listing agreement gives 6% (or whatever, in case Stevo/stevo is around) to the lister, with the practice being that the buyer’s agent gets 3%.
No suggestion of cash payments to anyone “contingent on closing” or otherwise. Just a flat out lower purchase price b/c the seller is (theoretically) netting more $$ with a lower broker’s commission.
Oh well then yea. But that wouldn’t work because once its listed by an agent they’re getting their 3% OR 6% cut. Only way to get some money back on the deal is a discount broker OR getting your own RE license (a time commitment likely not worthwhile for most).
Can you write an offer contingent on the seller’s agent rebating 2-3% (to you or to the seller)? I’d guess there’s some principle of contracts that prohibits that.
Can’t believe I wasn’t around until now to pontificate on the buyer without an agent question. And thanks, Rachel, for mentioning that I discount/ give rebates to buyers.
The listing agreement often does not specify the split between the listing agent and the buyer’s agent. Therefore, the listing agent is within their rights to keep the total commission. They might promise a buyer to give that piece back to the seller but you won’t really know if that happens until you see the HUD1.
If you know exactly what you want and need no help you could try to get that 2.5% (usually) for yourself and you may or may not get it. Or you could get a portion of it for sure and still get some help – running comps, pulling histories, navigating the process, help with inspections, mortgage issues, association issues, attorney issues, etc… As much as I didn’t believe that agents added any value when I got into this business we sure do manage to do a lot of work.
DZ,
Actually, I’ve often wondered the same thing – in an effort to prevent the listing agent from pocketing the whole amount. I’m not entirely sure. There are too many ways to skin that cat to get into here. Personally, when I’ve had unrepresented buyers offer on my listings I’ve let my seller keep the 2.5%. However, many agents don’t like dealing with unrepresented buyers – right or wrong. They often assume that they are not serious or they are going to be a pain in the ass because they don’t know what they are doing or maybe they don’t like the idea of agents getting cut out of deals. I’ve heard horror stories of buyers trying to deal with listing agents on their own – get no respect.
“I’ve heard horror stories of buyers trying to deal with listing agents on their own – get no respect.”
I actually tried this when the market was better. More often than not, the listing agent would not even show me the property without a buyer agent representing me unless I was willing to enter into a dual agency agreement. I was so pissed off about it that I got a broker’s license (cost and time commitment are actually not that bad if you take an online course) . . . then I promptly got transfered to Cincinnati for a couple years and I let me license lapse.
Personally, I felt these listing agents were operating in conflict with their clients’ best interests – if I had a selling agent that was turning away potential buyers (pre-qualified, nonetheless), I would be looking for a new agent. However, I would be surprised if agents are pulling this crap in today’s market.
Chi_dad, I think it has to do with procuring cause. There are probably a lot buyers who will call the listing agents and have them do all the work associated with selling the house and then try to show up at the last minute with a “buyers agent” and expect the listing agent to then split the commission with the new buyer’s agent.
This was a big complaint I heard regarding RedFin and other discount brokers. They would tell the buyer to just call the listing agent to have them show the house. In short, the listing agent was doing all the work, but not being compensated for it.
We see this on the mortgage side a lot where borrowers will call and pick a loan officers brain regarding setting up their loan and even go so far to have the LO fix their credit and then all of a sudden nickel & dime the LO to death rate shopping.
When you work on commission, it only takes a few times of being taken advantage of to make you cautious about spending time with people. Time really is money in residential real estate.
chi_dad,
Another problem is when you get a buyer who may or may not be qualified to buy a place. If they are working with an agent chances are that they are qualified but if not then the listing agent has a delicate situation to deal with. But a listing agent is obligated to try to present the property to any viable buyer. There are appropriate ways of dealing with all the problems.
Totally understand your point, Russ, having worked in severeal commission-oriented jobs myself. However, there are several other reasons for my frustration. In general, the REALTOR system pays a lot of lip service to advocating for the consumer but, in realty, the explicit and implicit rules are designed solely to benefit those in the profession. Case in point – the previous discussion about commissions. The system is set up so that it is in a buyer’s agent’s best interest to find a home as expensive as possible, so the incentive to find the best house at the lowest price – and to negotiate accordingly – is gone. There are clearly (a minority of) agents with high ethical standards (and an interest in repeat business) who will work harder and smarter to get the best price for the buyer they represent, but the rewards are out of whack. The ones who rise above the incentive system – the Gary Lucidos and Mario Grecos of the world – are the ones who win. Just once, though, I’d like to see a development to the system that is clearly aimed to benefit the consumer. The rise of discount brokerage – money back for a reduced level of service (something that appeals to someone like me b/c I can handle a lot of the functions myself) – is a great start. I’m thrilled that the market has been able to do its work in this regard.
Chi_Dad: Commission increases are pretty negligible as the purchase price increases. For instance, a home for $400k might gross a buyers agent $10k in commissions. A home for $410k only generates an additional $250 in GROSS commissions. Hardly an incentive to put you in a more expensive house or not negotiate hard to get the price down.
On the flip side, this is a complaint about listing agents though as the effect of a lower price for the seller doesn’t really impact the agents compensation dramatically, thus the incentive is to sell as quick as possible, not at the highest price.
As a some what impartial observer and having to deal with agents on a daily basis, I think the biggest issue is that there are simply too many agents due to the low barriers to entry which make it harder for the really good agents to demonstrate their worth. Part of the challenge is showing you aren’t like all the other lower performing agents.
Unfortunately, the industry is setup with a churn and burn model and culture, so I don’t think that will change anytime soon. Same on the mortgage side. The NAR benefits from having millions of agents even if less than 2% of them do any meaningful volume of business. There stance has definitely been pretty protectionist.
Ironically, if you look at the backgrounds of the most successful people in the business, they usually tend to have higher education and real professional experience while the vast majority in the profession tend to be below average.
A seamless MLS with completely open access to all will be the catalyst that disintermediates a lot of agents.
Actually, I just posted on this topic a couple of days ago. I think the problem lies in the independent contractor model: http://blog.lucidrealty.com/2010/03/08/real-estates-independent-contractor-model-broken-2/
Gary – poignant, insightful article from the inside. Completely agree with the thesis. Thank you!!
I purchased one place with Zip and one place with Redfin. They were both decent, but Redfin is a sharper outfit. And they don’t bug you, at all, ever. No Christmas cards, no unsolicited emails, none of that pretending like we’re buddies. And the lead Redfin agent in Chicago is an aggressive negotiator – out of the 5 property purchases I’ve made in my time, he was by far the best. I was using the zip site to look up some property on the east coast (sibling moving out there) and already I’ve gotten about 3 emails from a desperate agent. So annoying.
“Commission increases are pretty negligible as the purchase price increases. For instance, a home for $400k might gross a buyers agent $10k in commissions. A home for $410k only generates an additional $250 in GROSS commissions. Hardly an incentive to put you in a more expensive house or not negotiate hard to get the price down.”
The agent has NO incentive (other than long-run reputation) to negotiate hard to get the price down. His main incentive is to get the buyer to submit a bid that will be accepted. Yes, the buyer wants a bid that will be accepted, but (ideally) as low a bid as possible that will be accepted. The buyer’s agent in some sense wants the buyer to submit as high a bid as the buyer is willing to make, as that has the highest chance of being accepted. This is all before considering the agent will make marginally more on a higher price.
I’m not saying it’s quite that stark, and I don’t discount the long-run reputation issue, but that’s the way the short-run incentives seem to me. They generally go in the wrong direction and certainly not in the right direction for the buyer.
Bob: “I really hope those banks biggest in the 2nd lien mortgage holder market get hosed and seized by the FDIC.”
You might really enjoy reading this Denninger column (he’s from Chicago): http://www.321gold.com/editorials/denninger/denninger031010.html
Well he’s a gold bug so I am suspicious from the outset. I do agree with his overall premise but the problem is capitalism is not at work in these strange days its a government command economy.
We can’t evaluate the depth of the problem from a list of bond CUSIPs when he provides no aggregate value or data on and we don’t know how the CUSIPs were selected. Also Barney Frank is talking out of both sides of his mouth again and has anointed those seconds as blessed by his DC cartel so they’re fine.
http://seekingalpha.com/article/192856-barney-frank-on-second-lien-mortgages-time-to-shoot-the-messenger
Remember so long as taxpayers are on the line those seconds are as good as gold, f_ck they’re trading at premiums to par. Nevermind they were the most idiotic loans ever made–lobbying power makes right not any other principle our country was supposedly founded on.
America as a meritocracy was a carefully constructed mirage and each successive stage of this financial crisis further reinforces that. The middle class were the biggest suckers as they were most susceptible to the buy into the system and advance your status and upward social mobility paradigm.
It comes down to this – why is the commission 6%?
I find it absurd this hasn’t come down across the board and across the country. In some places it’s 5% or there are discounts here and there, but why the 6% standard?
Ahhh. There is no 6% standard. In fact, realtors are strongly discouraged from referring to it as a standard commission because it implies price collusion. It is negotiable. On a national basis, on average, it is a bit over 5% – like 5.2 or thereabouts. It has come down over time but has risen in the last couple of years.
However, if you are a well entrenched realtor with lots of referral business you have little incentive to discount because consumers have this irrational belief that you get what you pay for and you came highly recommended, blah blah blah. You wouldn’t believe some of the weird reactions I get from buyers/sellers when I tell them I discount. “Why would you do that?”
Kathy Griffin did this video where she stood on a street and handed out $100 bills. A lot of people wouldn’t take them.
A buyer’s agent isn’t to get the buyer the lowest price and a seller’s agent isn’t to get the seller the highest price. The agents purposes is to bring two parties together to consummate a deal and all the other necessary tasks required to do that. The highest/lowest price argument is so short sided because selling a home is about so much more than price, it’s about marketing, bringing together the right parties, finding ‘qualified buyers’ (which are in short supply these days), taking care of inspection issues, dealing with the seller’s agent. People think they’re saving a couple bucks here and there but in reality they’re doing themselves a big disservice. Nobody ever says “I’ll do my own electrical” or “I don’t need no dentist I’ll pull my own tooth” but when it comes to selling or buying a home they assume they can do it themselves, like selling a quarter of a million dollar piece of property is no different than selling a used car on craigslist or something.
The 6% has been around for a while; there’s case law from the 1960’s challenging the 6% in anti-trust and it held up. 6% is what you need to encourage other brokers to visit/show your home (and sometimes your own broker too!); you get what you pay for.
I disagree with you a little, but you know, with every rule, there are plenty of exceptions (like you), and often, there are so many exceptions to the rule it’s like there is no rule at all. But it’s been a common complaint that when sellers try to low ball the commission, other brokers won’t even bother showing the house because the commission is too small.
“6% is what you need to encourage other brokers to visit/show your home (and sometimes your own broker too!); you get what you pay for.”
Can’t believe HD actually wrote that…
One of the reasons FSBOs usually don’t sell is because many are too cheap to pay the co-op fee of 2.5% to attract buyers agents. I sold my condo without a Realtor, but I did pay 2.5% to the buyers agent and paid $500 to have the property listed in the MLS. Got 2 offers in the first week and sold near ask.
That part was easy, it was all the other BS that I had to deal with that made me rethink my decision. Even though I know what I am doing more so than the average Joe, I did find the whole process to be a colossal pain in the ass. In addition, I bought the house that I am in now without a Realtor at the same time.
If you are a hard working professional with any real responsibilities at work and earning a decent living, you are probably not going to have time to sell your own place or even do a good job buying it. Since I work on commission, I probably lost what I saved on the listing agent by focusing on getting my places sold and bought instead of actually focusing on my real job.
The one thing I have learned is that time is money. At some point, your time is more valuable than any money you are saving, so you really have to weigh that part of the process.
In the Twin Cities, commission is often 6.5% or 7%.
Homedelete and Russ make a good point about the coop commission. It ranges from 2 – 3% plus bonuses sometimes. Most often it is 2.5%. When someone deals with a discounted listing broker they need to make sure that the co-op is not going to get cut. On a listing we only discount our piece of the pie – never the co-op.
I’m new to this blog and forgive me for being a little off-topic but it looks like there are knowledgeable folk posting here. What is to come of the “shadow inventory”? At what point do Bank Owned Properties come to market? Will we see a deluge of these properties come to market or will they trickle out?
This house finally closed for $495,000.
Any mortgages recorded yet for this property? So it sold for $27,000 less than 2004.