Elisa, Home Seller in 02129

Sell or Rent? Take a loss in Chicago's market vs. renting out for 1 year in hopes of a brighter tomorrow?

Asked by Elisa, 02129 Mon Jun 21, 2010

Ideally, I would like to sell my Bronzeville (Chicago) condo but I'm afraid of a loss in the current market. I have successfully filed a "petition of hardship" to my Board twice in the past to allow me to rent out the property for 1 year lease agreements. I've had good tenants and wouldn't mind renting again, however, the escalating costs of assessments now puts me slightly ($15/mo) into the red. I know I will more than likely be unable to rent the condo out for more any more than what I'm charging now. Is it worth it to put in a third petition for rental to the Board and absorb these slight costs again in hopes of a better market next year? Or is it time to cut my losses?

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Felicia Bell, , Chicago, IL
Thu Aug 5, 2010
Dear Elisa,

As REALTORS, our job is to provide you with the data and analysis to help you make the best decision possible. So here's a bit of market information regarding Oakland/Douglas/Grand Boulevard (i.e. the primary neighborhoods the comprise "Bronzeville"):

- Bronzeville currently has 297 condo units listed for sale

- the average list price is $189,000

- the average market time for these units is a whopping 271 days (vs 231 days for Chicago overall)

- from July 2009 thru July 2010 the average sales price for a condo in the area was ~$133,000 (this represents sales history, which is quite important from an appraisal perspective)

This, along with corresponding rental data, is what we would use to help you figure out what decision makes sense for YOU.

I have a large number of Bronzeville clients (on the buy and sell side), so please let me know if you would like to discuss further.

Good luck!

Felicia Bell
Baird & Warner Realty
1 vote
Eric Egeland, Agent, Buffalo Grove, IL
Sun Jun 27, 2010
You should discuss your situation with an agent who can run some comps for you. If you've purchased in the last 5 yrs you are almost certainly upsidedown.

It really depends on your situation & finances. If you can stomach the loss, it may be a good idea to move forward with the sale. We are realistically looking at another few years before the market corrects, so don't hold out for a quick rebound.

That being said, it doesn't sound like your current situation is too dire. Although being in the red every month is not ideal a $15 a month hit is not terrible.
Review your finances & see if it makes sense to just cut your losses.
0 votes
Synthia Noble, Agent, New Lenox, IL
Thu Jun 24, 2010
my short answer, if I were you, and had an option of putting a good tenant in the place, I would rent it for now.
0 votes
Synthia Noble, Agent, New Lenox, IL
Thu Jun 24, 2010
Hi, tough position. It is true Bronzeville has been hit really/really hard by the market downturn. I would encourage you to talk to an attorney and/or accountant to take into consideration tax/legal issues when considering your options. For instance if you short sale or let the property go into foreclosure you may have to pay income tax on the foregiven debt. Also the lender can come after you for the short fall (difference between the lien amount and the proceeds that the lien holder gets from a short sale).

Of course we don't know your specifics, there may be other options. Have you tried to modify your mortgage to get the payment down a bit? this is a long shot on an investment property. But who knows you may have a lien holder that actually is interested in minimizing their losses - better to drop your interest rate so you keep the place (and keep paying the mortgage) than foreclose on an asset that is worth less than the lien.
I wish I had a crystal ball like some of the other posts, but frankly I don't know if the market will get better or worse in the short run. There is a TON of inventory on the market which will slow down recovery.
0 votes
John Astori…, Agent, Chicago, IL
Tue Jun 22, 2010
Hi Elisa,

You are not alone in making this decision, and won't be for the foreseable future. I have clients who are in the exact same position as you. This is the advice I am giving them:

Inventory is generally so high, especially in Bronzeville, that the best we can hope for in one year's time is either a stabilization in prices, or simply a slower decline. The bottom line: Your investment will likely be worth less this time next year. If you can, I would continue to rent the property at the small loss you are currently experiencing for as long as you can. Popular wisdom has price recovery taking no less than five years. This also happens to be considered an optimistic estimate among my circle of colleagues. It's a matter of inventory, supply and demand.

If you cannot hold on to the property, your best option may be to try for a short sale, depending on your financial position in the investment.

Drop me a line any time if you would like to discuss your options. I am always happy to help.
Best regards,

John Astorina
Keller Williams Rlty
0 votes
Robert Pratt, Agent, Chicago, IL
Tue Jun 22, 2010
Hi there, Elisa! This is the question that many homeowners are asking themselves in this down market.

In general, when I speak with a potential client or friend about selling property these days, I recommend "If you can hold onto it and rent it, then do itl"
This is a rough market for sellers. It will get better eventually.

That being said, there ARE other considerations . . . .

You already have experience being a landlord - and it seems that it hasn't been a bad one for you.
So good!

Basically, it sounds like it will add up to 15 dollars/month x 12 of loss for you for the next year to hold on to the property (in addition to your time and trouble).
How much of a loss do you stand to take on the condo if you sell now? What is that dollar amount?
Which loss is worse?
Web Reference:  http://www.dreamtown.com
0 votes
Matt Laricy, Agent, Chicago, IL
Mon Jun 21, 2010

The chicago housing market has not hit bottom yet.Meaning the price you will get today, will be much more than the price you will get one year from now. If your barely above water now, what sense does it make to keep it. I would only rent it out if you planned on keeping it another 5 years. Anyone who says chicago prices have bottomed out is trying to make a buck off you or doesnt know the market. Sales are up, prices are down, and will continue to slide.

Matt Laricy
Americorp Real Estate
Brokers Associate, e-PRO
0 votes
Mark Malave, Agent, Chicago, IL
Mon Jun 21, 2010
rent it out. You can take a small loss for a year or two and recover. The rental market is pretty decent.
0 votes
Philip Sencer, Agent, Chicago, IL
Mon Jun 21, 2010
You do not say what you think your loss will be if you sell, but Bronzeville has not faired very well in the past 3 years. It's been ugly! Having a $15/mo negative cash flow is NOTHING!!! There are tons of folks who wish that is all they are losing each month. You should be happy it's not more.
The market has stabilized and should get better as time progresses, but no telling how fast this will happen.....probably not very fast. I would try to rent another year.

0 votes
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