The Real Estate Lounge Chicago

The auction team came last week.

Mostly men, mainly white. Their hands showed the markings of occasional manicures. And they had a propensity to stand with feet splayed, arms crossed, hooking their thumbs in the crook of the opposing arm. Chewing mints as they nodded, always looking away from the person with whom they spoke.

Where they came from, I cannot say. The reason for their arrival was to try to sell off 41 Chicago condo homes at 1400 South Michigan Avenue.

At the end of the day last Sunday, they had succeeded, tickling 40+ condo homes into the sold column in the Chicago real estate market.

When you hear certain words, it's reasonable to have specific responses. The word "fire" evokes a sense of warmth. Carnivores hear "steak" and salivate. My sons hear "Nick toon" and they celebrate an anticipated cartoon.

"Auction"? The mere suggestion drums up a cavalcade of mental images of getting a good deal. And with this in mind the preview session of the 41 Chicago condo homes for sale last Saturday was wall-to-wall with consumers jotting notes, going from condo to condo from floor to floor and imagining themselves in their new construction high rise home at the best possible price.

At the end of the day Sunday, after the dust had settled and about 45 actual condo homes sold in roughly 90 minutes I knew with certainty that only one consumer had gotten a reasonable deal. My clients.

Sure, there may have been others. But amid the syncopated beat of the steady-voiced auctioneer steering the conversation in upward spirals of dollars being spent, when start bids burst up $100,000 on one bedroom condo homes with the quickness of a sneeze, it seemed that the bulk of participants, would be and actual, were moving quickly toward the point of paying market price.

And market price at an auction is not a good deal in the estimation of The Real Estate Lounge Chicago.

Viewed through the prism of comparison, my clients purchased a 1500+ square foot three bed/two bath condo home with parking at 15% less than similar units (on a square footage basis) had sold for in the past six months in the South Loop. One foreclosed unit with comparable specs sold for approximately the same amount.

The one beds? In the South Loop they are trending toward $225,000. (Bank owned and short sales are more than 10% less in transacted amounts.) And that is where a number of the one beds at the auction crossed the finish line. Slightly smaller one beds offered a slight mitigation, landing near $190,000. Of the seven two beds that sold, four sold at market price, roughly $330,000 (before parking) and three ranged roughly 10% less. The cost of parking was another $35,000 and storage an additional $1,000.

Yikes!

Bottom line is this - folks walked into the gathering last week expecting a good deal. They walked away with half of that. They got a deal.

Who got a good deal was the building and the auctioneers who managed to clear the shelves of inventory in one afternoon. Meanwhile the area features hundreds of one bedroom and two bedroom condo homes that will continue to chase the market amid a gross oversupply of inventory. Prognosis? The passing of time and reduction of pricing.

One last note - what disheartened me last week that most consumers were flying solo. And they didn't have somebody with them to temper them if the bidding rapidly escalated beyond what was reasonable. At the end of the day a consumer will do what a consumer will do. But in this instance where the setting is essentially fever pitched (it felt like a casino) and a contractual mechanism that veritably establishes an inescapable agreement I would veer more toward having unbiased and professional counsel to help me make my decision.

What appears to be the case overall though, the auction was an unbelievable success for 1400 South Michigan and its auctioneers. In 90 minutes they were able to propel more than 40 Chicago condo homes into the sold column while hundreds and hundreds of units remain languishing on the market in the South Loop.

Back in the day the best reads in the Chicago papers came on Thursdays or Fridays when Roger Ebert was presented with a really bad movie. One of the finest of film reviewers in America, Ebert was at his best (and funniest) when he had a chance to sharpen his pencil and scribble notes about the whys and wherefores of some particularly smelly film he had witnessed that week.

I thought of Roger earlier today as I read a review in the New York Times about Sandra Bullock's latest cinematic expression.

Since The Times doesn't give its readers a head start by using stars in reviews you have to muck through the prose to gain a sense of what the reviewer thinks. And even then sometimes you are left with a blank look, unaware of the plus or minus of a particular movie. Trust me, today's review of "The Blind Side" leaves no doubt.

While reviewer A.O. Scott doesn't seem to have an ink pot at his disposal that lends itself to the scalding words that Ebert might use, there is no doubt what his sentiments are after being subjected to the "two hour holiday greeting card" that he finds "The Blind Side" to be.

But what really struck me in his review was a single line that may have broader application when he said the movie was guilty of

shedding nuance and complication in favor of maximum uplift.

So it's a case of the energizer bunny being bright-eyed and bushy tailed over and over and over and over, pushing us and cajoling us to look on the bright side. No matter what.

Heck, it's something most of us are guilty of doing occasionally. Jeez, some might say the real estate industry as a whole suffered from the collective amnesia of pursuing "maximum uplift" all the way up to the start of our current economic downswing.

The question, though, is in the face of revised information, what is the next choice.

In the "The Blind Side" the movie's title was perfect because Bullock's character never moved out of the darkness of  her blindness. She continuing to saunter forth, blithely and daftly. The good news is that such daftness is not permeating the Chicago real estate market as I see more and more of a shift away from the darkness.

In other words more and more realtors and their selling clients are taking constructive steps to, as Dr. Phil would admonish us, "get real."

An important question that has yet to be fully and completely answered relates to whether lenders are going to step up to the plate to constructively assist prospective buyers get funding to take advantage of the shift toward more realistic and pragmatic pricing.

Stay tuned.

Synchronicity?

When apparently unrelated things occur. But when all is said and done it turns out that the things weren't all that unrelated after all.

I thought of synchronicity today. It turns out The Elysian in Chicago has decided to rescind contracts for 130 or so hotel condos at the property at 11 E Walton. And like its mythic namesake, one of Chicago's most expensive condo buildings is vanquishing 130 hotel condos like so many perished heroes to wander the Elysian Fields.

I wouldn't think the progenitors of this upper end Gold Coast project had synchronicity in mind when they dubbed the idea of 54 residential condos and 180 hotel condos as The Elysian. And yet as we slog through the 23rd month of this recession, it turns out that the the concept of privately owned hotel condos at The Elysian is dead on arrival like mythic heroes who arrived at the open doors of the Elysian Fields.

Turns out what a handful of boosters were heartily advocating for the downtown Chicago real estate market just a short time ago looks like nothing more than a very bad idea not only at The Elysian but also the Mandarin Oriental (project shelved), the Shangri La (bankruptcy) and another eight projects that have all crashed and burned.

The cost of the canceled purchase contracts at The Elysian? Between $80,000,000 and $100,000,000.

And the reason? The debt related to the $280,000,000 Gold Coast condo building's construction loan needed to be restructured.

What this news, reported in Crain's Chicago, means is that The Elysian should open in a few weeks, allowing closings to start for the luxury residential condos that are under contract. It also likely frees The Elysian from the defaults that may have occurred because  some (and possibly many) of the hotel condos wouldn't have made it to closing because funding has become so scarce for hotel condos.

The truth behind this paucity requires looking no further than The Trump Tower Chicago just six blocks south where a hotel condo closed on just last year for $894,524 is now on the market for $389,900. The reason? It has to be a cash deal. No funder today is willing to provide financing for a purchase of this type.

In the meantime, I can't help but wonder what to expect as the risk that The Elysian management team had hoped to foist on private investors through individual hotel condo purchases has bounced back on to The Elysian. Especially as the upper end hotel market has hit a rough patch.

I have no doubt as to the quality of the product at 11 East Walton. I have watched with approval as the building has matured into a handsome edifice. But owners of the units there with purchase prices well into the seven and eight figures must have some misgivings about the shifting nature of their neighbors and the manner in which the hotel and its management team now has singular risk of steering some 180 rooms to occupancy through one of the toughest Chicago hotel markets in memory.

If I was a purchaser awaiting a closing in the next month or so I would be concerned that the risk would not solely be management's.

Every once in a while a listing will catch my eye as I peruse real estate listings in the Chicago neighborhoods where I do the bulk of my business. This listing was for a condo at 1041 Grace in Chicago's Lakeview neighborhood.

To give a little background - at least once each day I will sift through what is called the "hot report," a delineation of changes to listings that include single family homes, condos, multi-units and vacant land. What "hot" means is that the listing is new to the Chicago market, its price has been changed, it's been cancelled or has expired, it has gone under contract or it has closed.

With respect to 1041 Grace, something about this first-time two-year-old resale tickled the back of my brain. So I dug a little deeper.

What I discovered was more than a little disturbing.

1041 Grace was a new construction duplex down condo that was originally on the market in June 2007 for $779,000. It closed in October of the same year for $769,000. The folks who made that purchase from the developer opted to list this Lakeview condo for sale in March 2009 for $779,000. Since originally listing with a suburban real estate agent the property experienced price three reductions until at the end of July it listed at $687,999.

Less than a month later the condo went under contract. It closed last Friday for $635,000. This represents a DECREASE OF $134,000 from what the sellers bought it for just two years ago.

Bear in mind, reductions such as this are not endemic throughout the Chicago market. For whatever reasons specific to these Chicago home sellers it seemed appropriate and necessary to release this home at this firesale price.

One possible explanation for the reason this home sold for its discounted price is dually related to its proximity to Wrigley Field. The seller, after a brief google search, is integrally involved in a rooftop enterprise on Sheffield overlooking the Cubs. On the one hand this business (like so many businesses in the current economy) took it on the chin last year, offering a possible explanation of the why behind the seller's motivations in the case that his business would not sustain his earlier purchase. On the other hand, many consumers just don't have much affinity to live so close to Wrigley. At least not at the premium that this listing initially requested.

Whatever the explanation, the end result is rather sobering.

A peripheral glance earlier this week left an indelible mark on The Real Estate Lounge Chicago. Somewhere on google or yahoo was a reference to scheming thieves turning to your facebook account to gain a toehold on what's yours and making it theirs.

Without thinking at any great length this glimpse planted a seed and an idea took root. And what I came up with was how clever cretins could use new social technology to keep tabs on your updates when you leave your Chicago home and introduce themselves to your Gold Coast condo or Bucktown single family in your absence.

Think about it! While you are off in the hinter lands, grinning from the Eiffel Tower or awed by the Grand Canyon, posting to your facebook page or your twitter account about the pleasures of escargot in a foreign clime or the chasm caused by a river the rogue is jimmying open the back door of your Chicago home to take possession of your plasma tv.

Pretty much puts a dent in posting international or domestic travel itineraries away from your Chicago home for fear of being seen by the wrong eyes with even worse motives.

When I finally did track down the article that pushed the notion in the first place the idea was that techno-crooks are hacking sites like facebook and twitter to gain personal information akin to identity theft and using it to unsettle your life while economically enhancing theirs.

Not quite how I pictured it but yikes, the profit principle without a moral mooring.

For some strange reason the idea of a techno-skulker triggered me to ponder when Chicago home seekers turn to me as their realtor or the real estate listing agent and ask "Is this a safe neighborhood?"

As a Chicago real estate professional I can't answer as to the safety of say Chicago's Wicker Park  or Edgewater neighborhoods. What I can and do answer, though, is that the asker practice care and discretion. Respect the city and be smart.

The same things holds true when it comes to facebook and twitter. Be smart.

Though a big barking dog and a state-of-the-art security system will also serve the cause.

By the way, take your pick from this ezine online safety article, this facebook safety article and this twitter safety article to stay abreast of online safety tips.

The Chicago real estate market is an odd amalgam of elements. You've got first-time buyers looking to buy condos in Chicago neighborhoods like Lakeview and Wicker Park. You've got folks ready to buy their first Chicago single family homes in areas like Edgewater and Bucktown. You've got investors checking out two flats and the like in Chicago areas like Lincoln Square and Ravenswood. And you've got suburbanites, ex-pats and jet setters choosing their Chicago in-towns in the Gold Coast and Streeterville.

Pretty much across the board what we've got on the buy-side of the Chicago real estate equation are good prices.

And on the other side of the equation we've got sellers and their Chicago real estate professionals doing this, that and the other thing trying to concoct scenarios that a) sell the house they are trying to sell and b) trying to push the price as high as possible when they do sell their homes or condos. But sometimes unexpected things happen.

A few weeks ago I was involved in a negotiation for my clients to purchase a corporate-owned home in West Bucktown. It was an odd scenario right out of the box. We had made an offer on the home two weeks earlier but negotiations stalled. Lo and behold two weeks pass and I notice that the seller slashed the price so much that the new price was $15,000 less than where they stopped negotiating with us two weeks prior. (And within five percent of what my clients were willing to pay.)

So the reduction occurred on Thursday and I immediately apprised my clients by email and emailed the agent to let her know that we might revisit with a new offer. She responded the next morning that they had an offer but she urged us to also submit. Without getting into the viscera, before noon Friday we submitted a new offer and by the end of the day we had verbal assent from the seller's representative and had agreement.

At least that's what we thought.

Because the home is corporate owned (not by a bank, but by a relocation company), offers were to be submitted with pre-approval from the seller's lender. But face it, not many among us want to give personal and confidential information that suggests our buying power when it comes to a home save to the lender that we select and wish to work with. Such was the case with my clients - we provided our own pre-approval from Chicago lender Guaranteed Rate and indicated to the seller's agent that once we reached a mutually agreeable number related to the purchase we would allow their lender to provide their own a pre-approval.

By Monday afternoon, having received the seller's assent to our offer, we satisfied their request to obtain pre-approval from their lender. We made arrangements for a home inspection to occur later in the week but the sell-side was unable to provide an executed contract. In fact aside from ostensibly having reach agreement on price, the sell-side really wasn't able to provide much of anything except questions that made my clients more and more uneasy.

It turns out that my clients' edginess was prescient. By midweek the selling agent was badgering me, saying another offer had been received and asking that I check with my clients to see if they would be willing to restructure their offer to the new reality.

Knowing my clients I told the agent that my clients were not likely to pony up with more money if for no other reason than we had an agreement. But for whatever reason, the corporate entity that owned the home never executed the contract. The upshot is that though we reached agreement we didn't have an agreement.

And at the end of this story regarding the Chicago real estate market my clients refused to budge from the number we originally had agreed to. Not only was this the right thing to do based on principle, but it was the right thing to do based on practical concerns given how unreliable the seller proved to be.

And so? I and my clients continue looking for the right single family home while the place we were under contract for remains a pending transaction. My only hope is the guy in a cubicle in New Jersey who is made the decision to kick my clients to the curb suffers from prolonged and undisturbed indigestion.

A couple weeks ago at Jackson's birthday party my friend Mike noticed the robotic way I tilted my entire body when I went to turn my head.

"What happened, did you swallow some glue and it settled in your vertebra?"

I grimaced as I responded, "Funny line if my neck didn't feel like 16 jagged bits of lumber grinding into stone."

"That bad?" he continued.

"Nothing I can't live with." My response sounded oddly like what I figured the Marlboro man would creak as he picked himself up after a night where only a thin blanket separated him from the frozen Montana ground.

Mike and I have known each other for about 15 years. He's a good friend, maybe one of my best friends, and without prying he simply suggested, "I've got a guy for that."

Not one to make random suggestions or recommendations, Mike simply said "Brian Chambers."

It took me a few weeks to move forward on Mike's suggestion, but, with Nicole's gentle prodding, I followed up yesterday. And the results were good. Quite good.

I have respired for long enough to know not to clamber to the mountain top and zealously proclaim that this guy is the ace of massage therapists. But he is good. Just as Bob King, the guy who started the Chicago School of Massage Therapy is good. Just as Kurt Hill at Holistic Health Practice is good. Just as Matthew Sweigart who started Ohashiatsu is good. Just as my profoundly talented wife Nicole Hilario is good.

But anyway, I appreciated Brian's approach and his technique. And I will see him again next week. But as I sit here in my home office in Edgewater, waiting for realtors to respond to 12-hour old requests to see Chicago condo listings in the West Loop, the South Loop and River North I ponder what separates good from bad? I don't mean in the biblical sense. But in terms of how someone does their job.

My point here is not to fully and completely answer this question. I am neither an organizational nor a spiritual guru. I am this morning a Chicago real estate professional waiting for other Chicago realtors to respond to requests to show properties that my condo buying clients want to see tonight.

In other words, I am waiting for these Chicago realtors to do their job.

So what makes somebody good at doing their job? Commitment. Passion. Knowledge. Anticipation of needs and responsiveness. The right tools personally and technologically. A desire to not stand still but to continue to learn and grow and apply.

Even lacking some of these skills as far as the real estate conundrum is concerned a step in the right direction is picking up the phone to respond to a voice mail or  replying (quickly) to an email.

By the way - the quickest response I received came from an agent whose business is concentrated in the South Loop. Within minutes of my initial inquiry she had gotten back to me. On the other hand, several agents simply haven't gotten back to me. I guess they have better things to do than show the residences that I guess their clients would like to sell.

Hmm, one of the oldest truths in real estate - you can't sell if you don't show.

If only I could get in touch with the sellers directly I might give them Brian Chamber's contact info so they could alleviate some of the stress associated with their condo not selling (since it's not being shown).