KeNo's Housing and Economic Portal: Sunday November 1 Housing and Economic stories

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$25M mansion now up for a paltry $6M - (www.chicagobreakingnews.com) An upcoming auction of a Burr Ridge home isn't your typical property sale event. But then, Villa Taj isn't your typical suburban home.The 30,000-square-foot abode has not one but six master suites, each with its own full bath, dual 30 feet by 30 feet living rooms, a ballroom, nine fireplaces, 15,000 square feet of wrap-around terraces and a 20-car garage, to name a few of the features. Materials used in the construction include Jerusalem limestone, mahogany, Italian marble and sterling silver doors. One more detail: It's never been lived in. In fact, it doesn't have a certificate of occupancy yet. Owners Husam Aldairi and his wife, Rawaa Attar-Aldairi, built the house for themselves and their three children. Aldairi took almost 1 1/2 years off from his dental practice to monitor the construction but halfway through the project, Attar-Aldairi said she decided the house was too big. Bidding at the Nov. 4 auction will start at $6.265 million for the house, which was on the market earlier this year for $25 million. The house hasn't been appraised but the property, on the Cook County side of County Line Road, was partially assessed last year at $613,587. "It hasn't been appraised because there's nothing to compare it to," said Michael Berland, a real estate broker whose firm, Chartwell Group LLC, is handling the auction. "It's impossible to figure out a number, it's like picking a number out of the air. It looks like a mosque and it's built like a fortress, with 14-inch walls." More than $87,000 of liens have been filed against the property, according to public records. Berland said those will be paid out of auction proceeds and the buyer will receive title free and clear. In the hopes of attracting a buyer, the auction company is spending $100,000 to market the property nationally and in Europe, the Middle East and Asia. Attar-Aldairi said the home just needs that special someone who'll appreciate the home's Spanish and Moroccan accents and the attention to detail. "We decided we wanted to do something unique," she said. "[The buyer] has to be someone interested in the arts. "It's not your common regular person who walks in saying 'this is your common house, I like it.'" Berland said the property isn't being sold absolute, meaning it won't automatically go to the highest bidder, regardless of price. But, he added, "I've got a very motivated seller. He needs to sell it now."

Foreclosure Prices Don't Lower Property Tax In FL - (www.miamiherald.com) This is supposed to be the perfect time to buy a home. Interest rates are low, prices have fallen and there's a glut of available houses for sale. So when Glenn Suarez decided five months ago to buy a new home for his growing family, he figured he'd have an easy time of it. It hasn't quite worked out that way. ``I was very naive when I started this process of looking for properties,'' says the married father of two, whose family is being crowded out by a fast-growing 3-year-old. Instead of an ideal situation, he and many other buyers are finding unrealistic sellers, mysterious middlemen, uncooperative lenders and property tax rates that don't reflect reality. The result is a huge disconnect in home values that is stalling an already complicated market. And the longer it takes to clear the high levels of inventory, the longer it will take us to get out of the current real estate mess. SEARCH FOR ANSWERS: Just consider Suarez, who found a home he and his wife liked in South Miami-Dade and called the person who was marketing the property. From the get-go, he couldn't get that person to give him straight answers to his many questions. Tired of the runaround, he hired a real-estate lawyer to look into the property, which is in foreclosure. That's when he learned the person whom he thought was a listing agent was really some kind of loss-mitigation specialist. He still doesn't know who that person represents. Determined to purchase the house, he continued to use the lawyer to pursue a possible sale. The house had sold for about $600,000 a couple of years ago and was now on the market for about half that price. Suarez mistakenly thought his property taxes would be based on the new, lower value. But the Miami-Dade County property appraiser isn't recognizing the sales of foreclosed properties. As a result, values for tax purposes don't reflect the lower prices of many homes now on the market. That pretty much killed Suarez's interest in the home. He wasn't prepared to pay more property taxes than the house merits. ``This is happening to a lot of people,'' he says, referring to a friend who also backed out of a recent purchase after learning the property taxes would be based on a higher value. ``It just took him right out of the market.''

Detroit's Mortgage Mod Plan: We'll Just Burn Down Our Houses - (www.businessinsider.com) Half of all the home fires in Detroit are caused by arson. And many of those who set fire to houses are set by desperate homeowners seeking to avoid foreclosure by collecting on fire insurance payments. Call it Detroit's version of mortgage modification. “As the city has been plagued with foreclosures and an unemployment rate above 28 percent, fire officials have said that some despairing owners are risking prison to get out of debt, and vacant, foreclosed homes are being torched,” the Detroit news reports. Arson is up 27.8 percent since 2004, with 6,486 arsons investigated by the Detroit Fire Department's Arson Squad last year. Arson-related insurance fraud in Detroit is up roughly 40 percent from 2005 to 2008. Detroit has the nation’s worst delinquency rate, at 10 percent of all mortgages.

Developers Enforce Contracts With Remoseful Buyers - (www.dailybusinessreview.com) Bucking the Florida Supreme Court, a federal appellate panel waded into the battle between condo developers and buyers over the use of a consumer protection law to void contracts. The 11th U.S. Circuit Court of Appeals sided with developers in a Sept. 30 decision, giving them wide latitude in claiming an exemption from the Interstate Land Sales Full Disclosure Act, better known as ILSA. Passed in 1968 to protect consumers from unscrupulous swampland salesmen, the plaintiff bar seized on the law when the real estate bubble burst as a way to get their clients out of their purchase contracts with developers and get back deposits. Much of the litigation centers on promises by developers to deliver their product within two years to be exempt from ILSA’s onerous requirements, such as providing a building report to the buyer and registering with the U.S. Department of Housing and Urban Development Judge Ed Carnes, who wrote the 18-page opinion for the unanimous panel, said buyers have used ILSA disingenuously, changing their minds on what morphed into a bad real estate investment once the market turned. Circuit Judge Gerald Bard Tjoflat and U.S. District Judge Joseph M. Hood, sitting by designation from Lexington, Ky., concurred. “The bigger the bubble, the bigger the pop. The bigger the pop, the bigger the losses. And the bigger the losses, the more likely litigation will ensue,” Carnes wrote. The case is centered on a Lee County condominium contract signed in 2005 by Alan and Karen Stein for a unit at the Paradigm Mirasol development for $895,000. The Steins paid $205,370, including a $179,180 deposit, and sued under ILSA for the return of the money, the appellate opinion said. The six-story condo building was completed within the two-year timeframe, but the Steins argued they should be able to get out of their contract because they did not receive the building report required by ILSA. Their argument centered on the vast number of contract provisions that would allow Paradigm to go beyond the two-year limit. The so-called “force majeure” clause starts with acts of God and goes from there. “After the housing bubble burst, the Steins had second thoughts about their decision to purchase the condominium unit,” Carnes wrote. “Wanting out of their contract, they seized onto the Interstate Land Sales Full Disclosure Act, a federal statute that has become an increasingly popular means of channeling buyer’s remorse into a legal defense to a breach of contract claim.” Three weeks before the scheduled closing date, the Steins asked for their down payment back, claiming the developer violated ILSA. Paradigm refused, saying the property was exempt from the law because it was promised to be complete within two years.

Experts: Plummeting prices have rendered condos nearly worthless - (www.azcentral.com) New federal loan-guarantee rules imposed to fend off future government losses from plummeting condominium prices have rendered condos utterly worthless, Valley real-estate experts said. The Federal Housing Administration rules, which took effect Oct. 1, prohibit any new FHA-backed loans on condo units in projects that include more than 25 percent commercial space. In addition, no single investor - including the developer - may own more than 10 percent of the units in a particular project. That particular restriction alone creates a catch-22 from which condo builders most likely cannot escape, said mortgage originator Jill Hoogendyk of Wallick & Volk in Glendale. Another rule that has sellers and brokers scratching their heads prohibits FHA loans in condo developments that aren't "primarily residential," which could be taken to mean the FHA won't guarantee loans in future mixed-use projects. "I'm predicting that what we'll see is whole condominium complexes sitting empty," Hoogendyk said. The new rules are a reaction to substantial losses on federally insured condominium mortgages in the past year, government officials have said. In Maricopa County, condominium foreclosures have outpaced condo-unit sales by nearly two to one since Jan. 1, according to real-estate analyst Zach Bowers of Ion Data in Mesa. According to Bowers, lenders foreclosed on about 8,200 condo units between Jan. 1 and Sept. 30, compared with about 4,900 units sold during the same period. "It's been pretty much consistent throughout the year that no one's buying condos," Bowers said. "The whole market seems to have stagnated." The new restrictions won't directly affect high-end, luxury condos that sell for more than the Federal Housing Administration's roughly $350,000 lending limit, but Hoogendyk said FHA loans are by far the most commonly used loan among condo buyers. Without that option, buyers would have to obtain conventional loans, which are more expensive and difficult to qualify for, or they would have to pay cash. Hoogendyk said the FHA rules amount to a death sentence for the Phoenix-area condo market, which had only been kept on life support by the continued availability of FHA loans.