The Green Zone Litmus Test

Since this blog started out about house-hunting and it lives in the Real Estate section of ChicagoNow, I figured I should still occasionally write about Realty, property and related topics.

What is the Green Zone?

In certain local Real Estate Circles, the term Green Zone refers a subset of neighborhoods that are set apart from the rest of the Chicago neighborhoods. These GreenZone Hoods tend to be the more popular neighborhoods that college graduates, new transplants and DINKS tend to gravitate toward.  The areas have established amenities, high property values, and low crime. The Green Zone term was a reference to Baghdad. Just like how folks refer to the south and west sides as Chiraq now.

But what exactly makes a neighborhood part of the Green Zone and where does this GZ fall on the map of Chicago?  It is like porn, you know it when you see it, but it is hard to define.

High concentration of Trixies and Chads? Check.
Starbucks? Check.
Lululemon? Check.
Trendy restaurants? Check.
Close to El? Check.*

* Not TOO close as in to hear it in your bedroom and not too far as in not too far to walk in in-climate weather.

By informal Consensus, the following neighborhoods are considered GZ by the majority of the current real estate pundits:

Lincoln Park
Bucktown/Wicker Park
Lakeview
Southport
Roscoe Village
Andersonville
Ravenswood
Lincoln Square
South Loop
West Loop
Streeterville
Gold Coast
River North
Millennium Park/Loop

So looking at the neighborhoods from the above list, I asked myself what do these very diverse neighborhoods have in common?  I came up with 5 categories that each one scores relatively high in.  So I give you the GZ Litmus Test.  If you can score high in four of the following five, the neighborhood is Green Zone.  [I’ll leave defining a neighborhood and sub-hoods, e.g. Lincoln Square and North Center are more or less covered by Ravenswood, to another forum].

The GZ Litmus Test

Relatively Low Crime:  This should be obvious but I’ll emphasize that there’s probably no such place a crime free zone.  For GZ def purposes, No noticeable gang presence and very little graffiti.  The level of Violent Crime should approach zero.  See Gary Lucido’s post on this.

Schools:  public schools are decent enough to send kids if private/parochial is not an option.

Walk-ability:  Proximity to amenities is again subjective but I’ll say if you have a decent sized park nearby and a mix of restaurant types to frequent without repeating one during the week.  Independent coffee shops, boutiques and local alternatives to big box stores goes a long way.  Dog Parks.

Access to public transportation:  whether you use it or not, the ability to get around town. Availability of cabs should factor in here.

Desired Housing Stock:  This is a little tricky so I’ll go by way of example.  Downtown has luxury high rises, Lincoln Park has Vintage buildings, River North and Wicker Park have converted lofts.  Others on’ list have new construction with great amenities.  Conversely, hoods within the Bungalow Belt are probably never going to be.

So if you step through this, Old Irving Park fits, but Albany Park doesn’t.  For now. Some hoods are on the cusp like Ukrainian Village and Logan Square. West Town isn’t GZ just yet, but it is definitely getting there. Some neighborhoods will never get there.

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Why Isn’t this house Selling

Back in October, I wrote about Stupid Seller Tricks. What I forgot to add to that post was that it isn’t always clear who is doing the driving: the seller or their agent.

Ready to Move In

The house is listed as MLS 08420018 (note: you may need to create a Redfin account to see all the history). Notice that it says (as of this posting) this property has been on the market for 45+ days.

You never really know the story behind a house, unless you have inside information, but you can make some educated guesses.  For one thing, the pictures have no furniture, so presumably the owners have moved.

This house sold for $237K in 1999. Now, 14 years later it’s listed for almost twice that amount. The listing says, and the photos confirm, that the house has been updated.

Newly refurbished & updated thruout w/ refinished hdwd flrs, repainted interior. New 2nd flr bathroom & 1st flr powder room. Lg kitchen w/ island & new granite counters. New ceramic tile flrs in mudroom & bsmt.

To be sure, based on what I know about the neighborhood and this type of house, the asking price isn’t unreasonable. In fact, this is a wonderful house if you like stainglass and woodwork combined with modern amenities like an updated kitchen and Central A/C.  So why hasn’t it sold in this hot, hot market?

Couple of things to consider. One, the house is about 200 yards away from Family Fruit Market, a neighborhood Grocery store that is known for its fresh fruit and vegetables at affordable prices. Kinda like a Stanley’s West. While this shouldn’t be a reason for concern, the fact of the matter is, there is a lot of traffic in and out of the small parking lot. And let’s be honest: where there’s traffic there is inevitably some Dbag who feels that his way of driving trumps common courtesy and/or standard rules of the road.

We actually passed on a house across the street from this one for that very reason. While we were looking at the home, we noticed several cars park on the permit only street, or fight to get into some of the few legal spots in front of Family Fruit Market.

The other thing is that while this house is on a nice tree-lined street, it is also a street that a lot of people seem to use to cut across from Cicero to Milwaukee Avenue. In the less than 5 minutes I spent there taking these pictures, almost a dozen cars came drive through, and not at residential speeds either.

Another thing that is hard to analyze but I would say the number of buyers looking in Portage Park is less than the number of homes available for sale.

Icarus Theorem of Realty: In many cases the person who can afford your Asking Price, doesn’t want to live in your neighborhood and most of the people who want to live in your neighborhood cannot afford or flat out won’t pay your Insane Asking Price.

Portage Park is a great middle class neighborhood in the northwest side of the city. It has reasonable proximity to downtown, O’Hare Airport and is accessible from the highway and the Blue Line.  But unless you grew up here, you probably don’t know it exists.  And most people who cannot afford to buy in the really hot trendy neighborhoods (aka The Green Zone — I’ll do a post on that soon) figure if they are going to go West, why not just move to the Suburbs and be done with it.

My prediction: this house will have to drop under $400K to sell.  Remember, all predictions correct or double your money back!

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The Mythical and Elusive Creature known as The Comp

Today I want to talk a little bit about comparable sales, or “comps” as the realtors call them. If you want to sell your home, you have to figure out how much can get for it. Sure you could just add the amount of money you want to how much you still owe on your home but this strategy seldom works. How much your home is worth to you and how much your home is worth to someone else can often be numbers that are light years apart.

The elusive Comp searches out recent activity

Alas, A home’s fair market value is determined by what a qualified buyer will pay for it at any given moment in time. Sort of like the old commodities explanation: if you can find someone to pay $500 for a watch, that watch is worth $500, otherwise, it’s only worth whatever you can get for it.

During the Boom, a lot of people were willing to pay a lot for “watches” that may or may not have been worth the asking price. After the Boom ended, it took a long time for sellers to realize that they were not going to find someone to give them their asking price. Unfortunately, it’s hard to take a loss on a property because we are usually talking about tens if not hundreds of thousands of dollars. So before you waste anyone’s time, especially your own, trying to sell your home, you want to get an idea if what someone will pay is even in the ballpark of what you owe.

The only way to estimate what that Qualified Buyer will pay for a home before it is actually sold is to look at what qualified buyers have actually paid for very similar nearby homes, as recently as possible. This is what agents call looking at the “comps”. – Most listing agents will do a formal version of this process called a Comparative Market Analysis.

Before the days of the internet, comps were a little tricky to come by. Agents might not have known about a listing or recent sale in time to add it to their CMA. Or they would cherry picked listings to justify their case for setting a price.

In all fairness, unless the homes are part of a subdivision built by the same developer where the only difference is one house has red shutters and grey siding and the house next door has grey shutters with red siding, it can be hard to make an apples-to-apples comparison of one home to another.

“To determine which homes you should compare against your own, you’ll want to target a search area of about a quarter- to half-mile radius around your house. It helps if the homes you research are in the same school district as yours and the neighborhood is generally the same as your own. You’ll want to focus on homes with approximately the same square footage and number of bedrooms that are a similar age, condition and style home with comparable features and upgrades. All of these factors will help determine how a home is priced. ”
Source: sharimack

Today comps are more real time. There’s still a chance for error. Certain Realty Websites will simply grab everything on the market in a 1 mile radius, divide by the number of properties listed and spit out the average. Some agents, even when doing the formal CMA, don’t always weed out dissimilar properties. Over the years I’ve had agents offer to run CMAs and I always take them up on it because I need a good laugh and don’t have cable.

They’d show me listings that were miles away or me condos with more bedrooms and/or bathrooms than I have. An extra bathroom might not throw a comp off a lot but an extra bedroom is a different animal.

How much your home is worth to you and how much it is considered to be worth in the real estate world are often two different things. Believe me, I’ve been watching sellers with very unrealistic expectations list their properties over the last few years only to have that home languish on the market. The reality of realty is putting your home on the market is like a putting together a Broadway show. You only have one opening night when everyone is watching.

If a home is more upgraded, spacious or better located than the comps, or if the market has shifted since the time the comps were sold, it might warrant listing the property at a price higher than the comps indicate. Otherwise, you have to price it right if you want it to sell or even get any showings in the first place.

If a home hasn’t been selling, especially in a so-called sellers’ market, the first thing people assume is there is something wrong with it. Once the home has been rejected, they won’t come back, even if the price is lowered. They have already mentally discarded it.

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Have Home Prices come back enough to sell your home?

Everyone seems to be buzzing that the Real Estate Market is returning. No one seems to have a clue what it is returning to. Anyone who has been paying attention knows that home sales have finally started moving in the up direction after so many years in the slumps. Pundits who write about Realty finally have something exciting to publish besides the tired old What Renovations Return the most bang for your buck articles they’ve been hawking.

ChicagoNow resident real estate expert Gary Lucido actually called it a few years ago: “The most recent Macro Markets home price forecast survey of 111 economists predicts that over the next 5 years home prices will average an increase of about 2% per year. In other words…the market is not going to come roaring back.”

Basically, If you were deep underwater a year or two ago, today you may be only treading water. Which brings us back to the question on the tips of many homeowners: Is it finally a good time to sell my home?

According to a lot of realtors I’ve met, it’s always a good time to sell your home. They often leave out the part about needing to owe less on it than its worth, or when you factor in realtor commissions and other transaction costs that still means bringing a check to the closing table.

How much your home is worth to you and how much it is considered to be worth in the real estate world are often two different things. Believe me, I’ve been watching sellers with very unrealistic expectations list their properties over the last few years only to have that home languish on the market. The reality of realty is putting your home on the market is like a putting together a Broadway show. You only have one opening night when everyone is watching.

If a home hasn’t been selling, especially in a so-called sellers’ market, the first thing people assume is there is something wrong with it. Once the home has been rejected, they won’t come back, even if the price is lowered. They have already mentally discarded it.

Or maybe you really need to update your bathrooms

Once your listing goes “stale” your agent will tell you that it isn’t priced right and you have to reduce the price. Yep the same agent who reviewed the comps and came up with the price in the first place. Not “sorry I boo-booed” but “Sorry you have to lower your price.” as in I cannot believe you actually thought you could get that price for this place that I priced at that amount.

When I tried to sell my place in 2010, my agent and I sat down and we looked at the comps. He thought we could price it from $200K to $210K. I knew that was high so I said lets go with the low end of that range. We got a few showings but even with the cash for clunkers tax incentive, we didn’t get an offers. I never expected to make money or recoup my costs. I merely wanted to sell the condo for enough to cover my mortgage. Bonus if I actually got some money for a future down payment to buy dinner that night.

I had enough room to make one price adjustment. We dropped it $5K hoping that would insight someone to make an offer of $190. Didn’t happen. When I wouldn’t lover my asking price anymore, the agent dropped me except he wouldn’t let me take the place off the market. I had foolishly signed a contract that had a clause about de-listing before the contract expired, six months.

That’s on me. I knew it was there and should have asked to have it removed. In a normal market there’s a very valid reason for having this clause. You don’t want to do a lot of work, showing a home, only to have the seller find a buyer independently and then cut you out of your hard earned commission. However this wasn’t a normal market, it was the middle of the Bust and leaving my listing Active was only punishing me for not being rich enough to sell at any price.

But what is on my former realtor is that he pulled the comps and set the price and made no acknowledgement or took any responsibility when reality didn’t measure up to his advice.

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DoNotRent.com: A Yelp for apartment hunters

Ever rent an apartment and wish you had known what to expect before you signed a lease? Wouldn’t it be great if you could read reviews ala Amazaon or Yelp from former tenants? Maybe a handy rating system? What about a handy phone app? Unfortunately renting an apartment is one of those things that is still a little behind the technology curve. Generally speaking most renters either stay put because they like their landlord and/or apartment and moving is a hassle, or they move on because of other life events like relocation or buying a home of their own. But what about avoiding those landlords-from-hell?

actual listing, review not shown

Mike Cerny knows the challenges renters face, from finding an apartment that actually matches the online posting to getting the real story on a management company.

“We’re trying to give renters as much access to information as possible so they can make an informed and confident decision about whether they should rent or tour an apartment,” said Cerny, who has a background in commercial real estate. The idea came to the Chicago native when he was finally fed up with his college neighbors below him.

“They were smoking weed that came into our unit and throwing parties every weekend until 3 a.m. while my wife was pregnant,” Cerny said. “We also had a really bad management company that didn’t exterminate the cockroaches in our apartment. We had things break (faucet, dishwasher, dryer, cabinet doors), which they chose to repair versus replace and they would continue to break. It was at that moment I realized there needed to be a way to avoid all this.”

In the fall of 2012, Cerny decided to do something about it–he launched DoNotRent.com. DoNotRent.com is a national apartment review and ratings website where renters can provide honest feedback, good and bad, on apartments they’ve rented or toured. DoNotrent.com encourages renters to write reviews of apartments they toured. They are also customizing their mobile site to make it easier for users to search and write reviews of apartments they rented or toured from their smartphones.

They can upload photos and rate buildings on a scale of 1-5 on parking, noise, grounds, safety, laundry, and management. These reviews help others reviewers make an informed decision about where they should rent.

Hopefully murderer will not be a common searched term

The new social networking website is built on a user-friendly platform. People are able to login through Facebook and post and share reviews on several social media networks, ask a previous reviewer questions, search for apartment buildings in their area and check their availability. All reviews are posted anonymously to protect renters.

“I started DoNotRent.com with a focus on having the best user-friendly experience with social sharing,” Cerny said. “Although I had a bad experience renting, DoNotRent.com is a neutral site where users can write good and bad reviews. In order for renters to have the most current information about a rental, we want landlords to respond to reviews. If an issue was fixed, repaired or if they made an improvement to the property, renters need to know.”

The site is targeted towards 18 to 35-year-old renters or prospective renters, and the site has been tailored for them. The site is developing a plan to provide an incentive platform, which will allow users to earn points for writing reviews, adding photos, referring friends and sharing reviews on their social sites. The points will be redeemable for gift cards
to national retail stores.

Property managers and landlords can add their listings for a small fee in order to add a link to their website, update the property description section, receive inquiries from renters and respond to reviews. They will pay $40 per year for each listing (with discounts for multiple listings) for perks like the ability to respond to reviews, write custom descriptions, and add a link on the listing to their website. Each listing shows how many unique visitors have viewed it. During the next year, the company plans on compiling and publishing rental data along with user review trends.

“We are excited about our future and we are open to talks with investors and potential partnership opportunities,” Cerny said.

By the way, this Chicago start-up is looking for investors in order to compete in the niche apartment review market and take the business to the next level. For more
information, visit http://www.donotrent.com.

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Garage Saleing: An unorthodox approach to evaluating a neighborhood when buying a house

When you’re shopping for a home and trying to decide if a place is in a good neighborhood, many realtors will tell you to drive around the area at different times of the day (and night) to see what it looks like. They might also suggest you call the local police station and talk to the desk sergeant. But there’s another less known approach that might reveal lots of interesting inside: the local garage sales!

In some neighborhoods, garage sales have taken on a life of their own with special significance: a community will hold a communal garage sale involving dozens or hundreds of families at the same time. What a great way to meet the future potential neighbors!

The sales is typically held inside a garage, driveway, carport, front yard, porch, or occasionally, the interior of a house, giving you a sneak peak of what people have done to their personal space.

You can tell a lot about a person by the stuff they are trying to get rid of. Are the items new, like-new, or just usable? Is it last year’s Pottery Barn collection or a collection that simply is going to pot?

While this can give you a peak into the economic mix of the neighborhood, you can also learn about your potential future neighbors personalities.
Often there are people who have decided they want everything gone — She doesn’t want it back in the house, he doesn’t want to schlep it back into the house — therefore it’s priced to sell. This is a person who makes a decision and sticks to it. Get to know her!

Then there’s the guy who wants to make back every dime he ever spent on the junk. Sure that anvil vise is priced fair at $20, but for five bucks more you can buy it new at Harbor Freights. Garage Fail! This is the guy who probably won’t lend you his snow blower without a deposit and will keep score of how many times you shoveled his walk versus how many times he shovels yours.

Speaking of power tools, I’m still looking for the wife who is so pissed at her husband, she sells his band saw and drill press for a song.

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The Little House that Could

One of the houses that would often come up on my searches is 5056 W Winnemac Ave in Jefferson Park.

From the outside, this looked to be a decent looking 5 bedroom 3 bath house that seems to have been converted into separate apartments. Legal 3 unit building is what the description said, though I question how you can legally have 3 units in a place this size.

Three apartments in here? But where do they put the pool?

The configuration would make it good for what’s known as an in-law suite which is French for *you have to take care of one set of parents anyway so you might as well get free child care out of the deal*.

It’s been on and off the market a dozen times since 2010. Over the years I’ve made appointments to see it however the day of the appointment we’d get a call from the seller’s agent explaining that the comps didn’t come through for the place so unless we were making a cash offer, there wasn’t any point of seeing it.

As I said, it would show up in my search criteria but there wasn’t anything about it that made me yearn to see it. In fact, the lack of pictures along with the no Central A/C made it really easy to scratch off the Go See It List.

The owner — most likely a stubborn Pole* — wanted a certain price, $270K IIRC. Well it just sold on May 29 for $240K so it only took 3+ years to get within 10% of Asking Price, so yay Stubborn seller!

* Being Polish I can make those comments!

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Humboldt Park split by realtors like Post WWII Germany

The other day I got one of the millions of emails from realtors telling me about their latest listing that “just came on the market”. This one intrigued me:

West Bucktown single family home on corner lot w/ loads on sunlight! Open floor plan-large chef kitchen w/ top of the line finishes-large master bed w/organized walk in closet & spacious bath w/double sinks and separate shower. Plenty of closet space. Beautiful deck off the family room is great for entertaining or enjoying a quiet night time breeze. Fireplace in large open family room. 4th bed is in finished basement

Sounds good right? then I looked at the address. http://www.1656NArtesian.info

This is where I grew up and I can tell you the 1600 block of Artesian is not in Bucktown, west or otherwise.

Humboldt Park divided like post-WWII Germany

I get that you’re trying to sell a home and Bucktown has more cache than Humboldt Park or even trendy Logan Square. And I realize that we are talking about less than a quarter mile of distance, essentially a city block. But No way is this Bucktown, it’s Humboldt Park. You’d have a better chance convincing me that it’s Logan Square.

It seems that HP is getting divided up like Post-World War II Germany. You have West Bucktown and West Wicker Park. What’s next? North Logan Square and South Ukranian Village?

Germany post WWII

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Hold your horses Condo Owners, it’s not 2005 pricing just yet

For the last several years, real estate insiders have been claiming that this year is the year the market returns to normal. It appears that they are finally correct since inventory is low and sale prices have increased for SFH. It seems every day a new listing appears only to get snapped up under contract before the weekend’s schedule Open House. So this would be a perfect time to put your condo on the market, right?

Not so fast. While the numbers for SFH are improving (I don’t have them in front of me, go read Gary Lucido if you want charts, graphs and math), it’s not the case for condos.

There were just too many condos built and/or converted during the boom which means that inventory is still high and many are also going through the Short Sale/Foreclosure process. This means that as soon as you put your place on the market you are competing with all your neighbors who overspent during the boom and are stuck with underwater property.

That isn’t stopping some from trying though.

This 2/1 condo came on the market a couple weeks ago for $225K. It does have parking but why would you buy it when you can get this 3/2 condo for $25K more?

Keep in mind these are also asking prices so if you use the 10% off Ask Price that the Realty Cartel is comfortable with, you could end up with an extra bed and bathroom for the same price!

Or if you don’t want to blow your budget, why not get this 2 bed, 2 bath for $149K?

The bottom line is if you want to sell your condo this year, you need to set the price as low as possible. Instead of putting money into the place to improve it, use that money at the closing table to reconcile what you owe the bank and what you get offer-wise.

If instead you want to recoup as much money as you spent on your place, well then as the Friend’s Theme song goes…this isn’t your day| your week | your month and certainly not your year!

Like Cubs fans you will have to wait until next year for sales data to justify any type of price increase in the ball park of what you are looking for.

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First Dream House wasn’t meant to be

I’ve been watching the Real Estate market since the fall of 2008 when I first thought about purchasing a home because I noticed prices were dropping. At first I considered buying a two flat using my HELOC as a down payment and then eventually moving into the building and converting it into a SFH when and if the then elusive wife and kids arrived.

Unfortunately while I might have just noticed prices dropping in 2008, the bank that gave me a line of credit noticed a lot sooner. Chase was kind enough to suspend my HELOC before I could use it. Had I been smart, I should have withdrawn the entire line and put it in a different bank. I wouldn’t have made any money but I’d have a low interest $70K loan for many years.

I still watched the market and started looking at homes, skipping the two flat idea and going straight to the SFH. There was one particular house that has just about everything I could want and thus I refer to it as my dream house.

It is only a few blocks from the Jefferson Park Blue Line and Metra stations, so I’d have my transportation requirements taken care of. It has a big backyard with a great deck and a two car garage. A finished basement and a modern kitchen. New windows, roof and water heater means that all we’d have to do is move in and paint the place.

In March of 2009, I called a realtor from Zip Realty who made an appointment so I could see it even though we both knew their asking price of $539,000 was way out of my price range. It looked even better in person, especially after finding out it also has an attic that could be expanded into a kick-ass master suite later in life. On the downside, the basement was a little limited, it would be more of a children’s play area than a ManCave, but I’d have to take a longer look if I ever had a realistic chance of getting this place. Which I didn’t. In fact, no one really did.

The owner, who was expecting another child in July, had told me that if she didn’t get an offer in a month or so, she was going to take it off the market because she didn’t want to deal with a closing and a birth around the same time. I asked my standard “why are you selling such a great house” question and they responded that the husband had just got a job out of state. She also added that he could do the traveling thing if they couldn’t sell the home.

Even as a then single guy without children I knew that when the second child arrived that would get old real fast.

My dream house was quietly taken off the market in Sept 2009. Thanks to the Internet you can learn so much about a house. I learned that the owners had a mortgage and a HELOC which combined put them at about $475K owed on the house, so they didn’t have a lot of wiggle room.

In the summer of 2010, on a whim, I emailed the owner. Feigning ignorance, I politely asked ‘Just curious if this home was still for sale and what is your current asking price.”

It was over a week when I got this response:

“Hi. Thanks for asking. It’s not officially on the market, but we would still consider selling for the right price… Nothing below our original asking price. [Emphasis mine.]

Thanks!”

The problem with this house is its asking price. Anyone who can afford the asking price doesn’t want to live there and anyone who wants to live there cannot afford the asking price. They wanted almost $540K for it. And while it might have been worth that price at the height of the market, those days are gone for good.

Update:  apparently the owners updated the website they put together for selling this house.  It is not “listed” at $499,000.   

And I cannot blame them for wanting to come away with something for all their hard work. But there was just something about the sentence. Nothing below our original asking price that irked me. As if anything less was a personal insult. It is no doubt this inflexibility on their part that caused them to take their place off the market. It makes me wonder what they would say if someone offered them, say $525K, would they accept, counter offer or just say no thank you.

I think it’s fair to say that they are dreaming if they think they can get their price even in this now improved market.

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