Collar County Tax Sales Coming Up!

If you live in one of the collar counties, it's that time of the year again.  Your property taxes are now past due.  The collar counties move quick.  Pay your taxes now or face the consequences.


Here's what could happen to you if you don't pay up by October 15 in DuPage County:  Your delinquent payment will be published in the newspaper at the end of October, and after October 31, you won't even be able to pay using a personal check.  You can still pay with a credit or debit card until November 12.  If you can't make the payment by then, then you still have until 4:30 on November 19 to pay using certified funds.  After that, it's too late.  The DuPage County tax sale begin on November 20.


What about if you live in Lake County and haven't paid your real estate taxes yet?  Well, you have until October 8 to pay online, or until October 15 to pay by mail or in the office.  Any payments must include the penalty, which is 7.5% on the first installment and 3% on the second installment.  If you don't pay by October 15, the failure to pay will be published on October 30 or 31.  You can still make a payment through October 31 via personal check, or through November 3 with certified funds or credit card.  If you miss those deadline too, you can still walk into the treasurer's office and pay with a credit card until November 14, but that's your last chance.  The tax sale begins on November 17.


Kane, Kendall, McHenry and Will will also have their tax sales in the next few months.  For more details, you can check any of the county websites!

Buyers Beware of Meth Homes

If you're in the market to buy a home, you probably already know there are many things you need to keep an eye out for; the list goes on and on and on.  Well, here's another one you may not have thought about just yet:  Was the house ever used to make meth?  And if it was, should you care?        


Well, yes, you should absolutely care.  Meth can get into various surfaces in a home, and cause all sorts of health problems for the home's occupants.  Many homes used to manufacture meth were re-wired, which means there might also be a serious electrical hazard.  And of course, meth remediation (yes, that's a thing) is expensive.


What should you look out for?  Well, the home may have a strong chemical smell.  There might be chemical stains on plumbing fixtures in the bathroom.  You might feel a burning sensation in your throat or in your eyes when you are walking through the home.  And if you find large amounts of empty cold medicine packaging, lighter fluids, batteries or paint thinner, that's another sign.  These things are used to manufacture meth. 


If you are concerned, but are still interested in a home, look online or call the local police department.  Your area may have a registry of homes used in the manufacture of drugs, or the police might know if the home you're interested in was involved in the drug trade.  Also, you can buy an inexpensive meth-testing kit to find out if meth was present.  You can also hire a professional inspector who tests for drugs. 


What if the house of your dreams was, in fact, a meth lab?  Well, if it's a deal, and you're willing to spend the money to properly remediate the house before you move in, maybe you can still make it work.  If not, look elsewhere.  You'll find the right home for you soon enough!

Double Digit Increase in Residential Constrution Spending in 2013

The National Association of Homebuilders recently reported that residential construction increased in 2013.  Overall, there was an 18.3% increase in residential construction spending over 2012.  Specifically, construction of single-family homes was up 20%, and remodeling was up 14%.  Multi-family saw the greatest increase, at nearly 35%.

Increased construction shows the economy is looking up!  Let's hope it stays that way.

New Phase 1 Environmental Standards in Effect

In November of 2013, the American Society for Testing and Materials (ASTM) approved a new standard for Phase 1 environmental studies.  Here are some of the new requirements

1.   The environmental consultant must look into the possibility of hazardous vapors migrating onto the property.

2.  If neighboring properties are in public regulatory databases, the environmental consultant must conduct a review of those regulatory files.

3.  The environmental consultant must identify recognized environmental conditions even if they have been resolved.

When negotiating a contract where environmental studies will be required, keep in mind that the additional requirements may take additional time, so plan your due diligence accordingly.

Environmental Due Diligence: The Phase 1 and Phase 2

When buying commercial property, especially if it's vacant land and oftentimes even when it's not, you have to know the condition of the real estate, and that involves an environmental study.

The first step is to get the Phase 1.  The Phase 1 is an environmental study designed to identify harmful environmental conditions that are affecting or may affect the property.  It is essentially the first step in your environmental due diligence, and it can often determine whether or not you even proceed.  The person conducting the Phase 1 will typically make a site visit, look into public records, check out the area where the Property is located, and review maps and images of the Property.  Based on that, he will determine if the subject Property might have any environmental issues.  For example, it might be a problem if there is a gas station next door.  Or, from public records, he might figure out that while there is no gas station in the area now, there used to be a gas station next door, and there were gas tanks actually on the subject Property.  Or there might be a dry cleaner on or near the Property, either now or in the past, using harsh chemicals.  Or there might be some sort of automotive repair shop next door, which could be an issue.  All of the above examples have actually happened to my clients, but there are other plenty of other possibilities as well.  

Of course, you might luck out, and the Property will get a clean bill of health.  But, in the event your Phase 1 reveals some potential issues, it's time to move on to the next step: the Phase 2.

What's the Phase 2?  Well, it's another environmental study, this time more invasive.  The purpose of the Phase 2 is to either corroborate or deny the possibilities set forth in the Phase 1.  The Phase 2 often involves soil tests, groundwater sampling, and surface water sampling.  These items are then chemically analyzed to determine if there is, in fact, any environmental threat.  If there is, then the buyer and seller need to determine how to proceed.  Does the buyer still want the property?  Can the property be cleaned up to make it compliant?  How much will it cost?  How long will it take?  Who's going to pay for it?    

If all goes well, you will be able to inexpensively rule out environmental hazards.  But if it turns out that there are issues that would limit your use of the property, it's better to know now than after you close!

Fannie Mae and Freddie Mac Buying Sketchy Loans?

According to a report released by the Federal Housing Finance Agency (FHFA) last month, mortgage giants Fannie Mae and Freddie Mac have continued to buy questionable mortgages despite notice that there are issues with property appraisals.

Apparently at some point during the process of buying the loans, the FHFA evaluates them.  Between the summer of 2012 and early fall of 2013, the FHFA alerted Fannie Mae and Freddie Mac to appraisal issues on $107 billion in mortgage loans.  Despite that, Fannie Mae and Freddie Mac went ahead and bought those loans anyway.

What is a Senior Freeze?

If you qualify for a Senior Exemption on your real estate taxes, you might also qualify for a senior freeze.  A senior freeze is a great way to keep your taxes down, because it will essentially freeze the assessed value of your property to whatever the assessed value is the year you qualified.  You won't be subject to annual increases in the assessed valuation of the property, as long as you continue to qualify.

 

To qualify for the 2013 senior freeze:

 

1)  You must be born in 1948 or earlier.

2)  You must own the property you are applying for, and it must be your principal place of residence.  If you do not own it, but you have a lease that states that you are responsible for the payment of real estate taxes, that is sufficient.  But you must have owned the property or had a leasehold interest in the property on both the first day of 2012 and the first day of 2013. 

3)  You also must have been the responsible party for payment of both 2011 and 2012 property taxes.

4) In 2012, your total household annual income must be $55,000 or less.

 

If you qualify, act quickly!  Contact your local assessor's office for the senior freeze application!

 

Senior Exemption for Real Estate Taxes in Illinois

If you are a senior and you own a home in Illinois, you could qualify for a senior exemption on last year's real estate taxes.  While the first installment of 2013 taxes has already been paid, the second installment won't be due for month, and you can still get the benefit of the senior exemption if you qualify.  To get a senior exemption for 2013:

1)   You must have been at least 65 years old during 2013.
2)   You must own your residence.  If you do not own, you may still qualify for the senior exemption if your lease states that you are responsible for real estate taxes.
3)   If you moved during the tax year, you can apply for and receive a prorated senior exemption.  Make sure you submit your HUD or settlement statement, proof of age, proof of residency, and a copy of a recent real estate tax bill.

Contact your county assessor to get the application, and get it done quickly.  Applications will be due soon!

Foreclosure Filings Increased Nationwide in January 2014

Are things really getting better?  RealtyTrac recently released it's Foreclosure Market Report for January of 2014.  Unfortunately, foreclosure filings increased 8 percent since December 2013 nationwide.  Perhaps the large increase is just because less foreclosures might have been filed over the holidays?  Who knows.  What we do know is that according to RealtyTrac, there were nearly 125,000 new foreclosure filings nationwide in January.

What's more, Illinois had one of the highest rates of foreclosure filings in January.  Only Florida, Nevada and Maryland has more.  The top five were rounded out by New Jersey. 

On the bright side, to the extent you're looking for a home, there might be some more inventory out there in the near future as a result of all of these foreclosures. 

 

Senate Finance Committee Proposes Tax Reforms Affecting Real Estate Investments

The Senate Finance Committee recently proposed some startling tax reform changes directly affecting real estate and real estate transactions nationwide.  If their proposal is enacted, here are some of the changes investment properties would face:

1)   Section 1031, which allows deferral of taxes owed on like-kind exchanges, would be repealed.  For general information on what a 1031 Exchange is, click here.

2)   The tax incentives for energy-efficient improvements to large apartment buildings will be repealed.

3)   All real property would be depreciated over 43 years on a straight-line basis.  The current depreciation periods (39 years for commercial non-residential property, 27.5 years for residential property, and 15 years for leasehold improvements) would no longer exist.

4)  Recaptured depreciation would be taxed as ordinary income, instead of at 25% as it is currently taxed.

All of this would make real estate investments more expensive for the owner.  Let's see what happens. . .

New Requirements for Real Estate Appraisers

The Illinois Department of Financial and Professional Regulation (IDFPR) has amended the licensing requirements for real estate appraisers.  The following changes went into effect on December 31, 2013:

If you are an associate or trainee appraiser, you must:

1) Give the name and address of your supervising appraiser to the IDFPR; and
2) Keep a log for each supervising appraiser you work with, detailing the type of property, the type of work you performed, and other details.

If you are a supervising appraiser, you must:

1)  Directly supervise associate or trainee appraisers for their first 500 hours of experience;
2)  Have a valid license as either a certified general real estate appraiser or a certified residential real estate appraiser;
3) Give the IDFPR the name of each new associate or trainee appraiser within 10 days after you hire them;
4) Give the IDFPR the name of each associate or trainee appraiser immediately after they leave your employ.

Home Flipping Increasing Nationwide

In the mid-2000s, flipping homes was common.  Buyer A would buy a home from Seller, and shortly thereafter sell it to Buyer B, making a tidy profit .  But when the economy crashed and lenders tightened up their guidelines, flipping became increasingly rare. 

But in the last year, as the price of real estate has risen, flipping is slowly making a comeback.  According to RealtyTrac, nearly 5% of single-family homes sold nationwide last year were flipped within 6 months.  In fact, the number of homes flipped in 2013 increased over 15% from 2012, and nearly 115% from 2011.  The average gross profit on such flips in 2013 was over $60,000 per sale.

While flipping may be slowly increasing nationwide, according to RealtyTrac the Chicago area has not seen a big increase in flipping.  The greatest flipping increases have been out east, in Virginia Beach, VA, Jacksonville, FL, and Baltimore, MD.

HUD Revises Notice Requirements for FHA Mortgages in Default

Last month, the Department of Housing and Urban Development (HUD) issued new guidelines for lender notice to homeowners who are delinquent in the payment of their FHA loans.  If you are delinquent, here's what you can expect within sixty days after you are delinquent:

1)   In the second month of your delinquency, you should receive a letter from your lender including specific information about your past due payments, the lender's contact information (including a toll free number for their loss mitigation department), a toll-free number you can call to get information on housing counseling agencies approved by HUD, and a request for your current financial information.

2)   In the second month of your delinquency, you will also receive a brochure, sent to you by your lender but prepared by HUD.  The brochure is called: Save Your Home: Tips to Avoid Foreclosure.

These requirements kick in on February 10, 2014, and are intended to help you communicate with the parties who can assist you with mortgage-related issues.  Seeking help early is key!

Shadow Inventory at Its Lowest in Five and a Half Years

According to CoreLogic, a data and analytical firm, the shadow inventory in today's market is at its lowest level in five and a half years.  There are only 1.7 million homes in the shadow inventory nationwide, a drop of nearly 25% from this time last year.  Unfortunately, this is still a lot more homes than what CoreLogic says is a "healthy" shadow inventory -- only about 650,000 homes.  CoreLogic states that shadow inventory was decreasing at the rate of 46,000 homes per month last year. 

While that's good news for a depressed economy, the foreclosure rate is still high.  At the end of 2013, there were about 810,000 homes in foreclosure.  That's 400,000 fewer homes in foreclosure than at the end of 2012, but it's still a lot of foreclosure. 

Don't Reneg on your Purchase Contracts

The appellate court recently came down hard on a buyer who reneged on his purchase contract.  In 1472 Milwaukee, Ltd. v. Feinerman, 2013 IL App (1st) 121191, the court affirmed the trial court's judgment that the buyer should be responsible for losses the seller incurred when the buyer defaulted on his contract to purchase real estate.

Back in 2006, the defendant contracted to purchase a commercial building located on Milwaukee Avenue in Chicago from plaintiff for $1.2 million.  However, defendant never showed up for closing in mid-November as scheduled.  The closing was rescheduled, and again, the defendant was a no-show.  The plaintiff re-listed the property, and eventually sold it for $911,500 in July of 2007.

Subsequently, plaintiff filed suit for the difference between the original and eventual purchase price, as well as plaintiff's carrying costs for the eight months in the interim between when the property was supposed to close, and when it eventually closed.  The judge awarded the plaintiff this amount (which included the difference in price, real estate taxes, and interest paid by the plaintiff), and on appeal, the court agreed.

Alternative Energy Tax Credits Calculated Net of Energy Sold

If you read my blog, you may already know that alternative energy tax credits are available through 2016.  However, here's what you may not know:  If you are selling, or will be selling, the excess electricity generated through your new solar equipment back to the utility company, you won't qualify for the whole tax credit.

To refresh your memory, you can claim a tax credit of up to 30% of the cost of certain alternative-energy improvements, so long as those improvements are completed prior to the end of 2016.  But, if you are making more energy than you need to power your own home and selling it back to the utility company (called "net metering"), then you can only claim a tax credit of up to 30% of the cost of the equipment actually used to power your OWN home.

So if you spend $15,000 on solar panels, technically you should be able to deduct $5,000.  But if a portion of your energy is being sold back to the utility company, then you will need to figure out how much of your equipment is being used to power your own home, and take the deduction based on that, which means you won't get the whole $5,000.

Just something to keep in mind!

New Servicing Guidelines for Delinquent Borrowers

This Friday, new rules go into effect for mortgage servicers.  Here's what you should know:

1)  If a borrower defaults, the servicer must contact them within 36 days.  The servicer must contact the borrower after every missed payment thereafter. At least once every six months, the servicer must contact the borrower in writing. 

2)  By the 45th day after borrower defaults, the servicer must give the borrower a written list of possible loss mitigation options.  By the time the servicer sends this notice, a specific person must be assigned to the borrower's file.

3) In the event a borrower submits a loss mitigation application 45 days or more before the foreclosure date, the bank has only five days in which to respond and notify the borrower if there are any missing documents, or if the application is complete.  If there are missing documents, the bank must allow at least 7 days for the borrower to submit them.  If a completed application is in place at least 37 days before the foreclosure sale date, the servicer must evaluate the file within 30 days and provide a decision.  If the borrower is denied, an explanation must be provided.

4)  As long as the completed loss mitigation application was submitted at least 90 days before the foreclosure sale date, the borrower may appeal the servicer's decision.

Generally, small servicers are exempt from these new rules.  Additionally, if the borrower is in bankruptcy, the servicer is exempted from these new requirements as well.