-Source: The Chicago Association of Realtors-

Countywide, property owners will collectively pay a 2.68 percent increase — a rise of more than $300 million — in property taxes this year. 

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That’s because taxing districts countywide — from parks and cities to libraries and schools — are asking for $11.6 billion to cover the bills, up from last year’s $11.3 billion.

Some $4 billion of that money goes to the major taxing districts in the city ofChicago, up from $3.9 billion the previous year.

The 3.4 percent increase in the city is driven largely by the Chicago Board of Education, which is asking for $2.118 billion, up from $2.001 billion — a $117 million jump from the previous year, according to tax statistics released Thursday by Cook County Clerk David Orr’s office.

The complicated task of figuring tax bills not only includes the assessed value of a home, but also a state-issued equalization factor. The county clerk then sets the tax rate to meet the taxing districts’ financial needs.

Factored in to the tax bill equation is the Consumer Price Index, currently 2.70 percent, which sets property tax limits — a guide for taxing districts that are weighing a hike in the levy.

This year, dropping assessed values on homes, along with the state equalizer falling, drove the tax rates up in most parts of the county to meet the demands of the taxing districts, explained Bill Vaselopulos, tax extension manager in Cook County Clerk David Orr’s office.

He points to aChicagohome valued at $200,000 with a homeowner’s exemption. The annual tax bill would be $2,465, up $272 from last year’s $2,193.

The 12 percent hike can be attributed to a drop in the homeowners’ exemption — something that is happening across the board per state law — as well as the tax rate hike in the city of Chicago: from 4.627 percent to 4.931 percent, according tax statistics.

“Just because your assessed value has dropped does not mean that your tax amount will drop accordingly,” Vaselopulos said.

Every three years, a property owner’s home is reassessed — a schedule that depends on which part of the county you live in, according to theCookCountyassessor’s office.

But again, Vaselopulos stressed, the assessed value is only a single factor in calculating the final bill.

Consider the north and northwest suburbs, where properties were most recently reassessed, homeowners may see higher tax bills as the so-called “7 percent cap” or 7 percent alternative homeowners exemption is sunsetting unless the state renews it.

That’s also a factor in the city as well.

“So what you’re seeing is more taxable value is being folded back in to residential properties,” Vaselopulos said.

The tough reality for the average homeowner is that their bills are going up while their property value is going down.  In my opinion this will put even more strain on homeowners that are currently struggling with their bills and as a consequence we will continue to see more short sales and foreclosures.

-source: Chicago Sun Times-

1. How Property Taxes Work

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Property taxes and how they are calculated can be complex for taxpayers and professionals in the real estate field. In Cook County, tax bills are mailed twice a year. The first bill, usually due March 1, is 55 percent of the previous year’s bill and arrives in late January. The second bill, generally mailed in the fall, is far more complicated. It is based on a combination of factors, including an annually calculated tax rate (the cost of government divided by the overall value of property for an area), the taxable value of a home or business (the assessed value determined by the Assessor’s Office), exemptions and the state equalizer.

1. What Bills Look Like

In Cook County, property tax bills are calculated by the Cook County Clerk’s Office. Using the latest available data from the clerk, one can determine a tax bill for a given property in Cook County. For example, the following is this year’s equation for a typical owner-occupied Chicago home:

• Assessor’s Fair Market Value $200,000
• Assessment Percentage x ______0.10
• Assessed Valuation $20,000
• Equalization Factor x ____3.3000
• EAV (before exemption) $66,000
• Homeowner Exemption – $16,000
• EAV (after exemption) $50,000
• General City Tax Rate x_____4.931
• Amount of Tax Bill $2,465

Source: Office of the Cook County Clerk

Last year’s bill for a $200,000 house in the City of Chicago was $2,193, or 12 percent lower. For changes to tax bills in the suburbs, one has to look at changes to respective tax rates.

1. What Happened

In Cook County, the following events impacted the bills of many property owners:

• Taxable values declined, due to reductions from reassessments and appeals, driving up tax rates for many districts.
• For homeowners, the alternative homestead exemption decreased, causing the taxable values to increase.
• Some districts increased their levys, causing rates to increase as value dropped.

So what does the above mean for each property in Cook County? It is virtually impossible, given the number of variables, to give an overall statement to judge whether a bill for a specific property is going up or down. However, more often than not, bills are increasing, which should be reason for real estate professionals to advise their clients to pay close attention to their property taxes.

1. What You Need to Know and Tell Clients

Are there things that can be done to bring down the taxes already billed? Yes and no. Once the bills are out it is difficult to challenge them. However, property owners can take steps to make sure their bills are correct. First, owners need to make sure they have claimed all their exemptions. For example, the Senior Freeze and Long-Time Occupant Homestead exemption require annual renewal. Missed exemptions can be reclaimed for up to three years. Second, all property owners should make sure that their bills match the correct properties both in terms of address and the structures on the property.

Although very little can be done regarding the present bill, property owners need to prepare themselves and be proactive against future tax increases. In Cook County, properties are reassessed every three years. In 2012, properties within the City of Chicago will be reassessed for tax purposes. Owners should pay close attention to when reassessment notices are mailed in their townships. Once reassessments notice arrive, owners should determine whether their properties are overvalued and, if warranted, appeal at the Cook County Assessor. If the owner still thinks the value is too high after receiving an opinion from the Cook County Assessor’s Office, they have the option of appealing to the Cook County Board of Review.

Both venues have limited windows of opportunity within which appeals can be filed and specific rules for filing appeals. Far too often, property owners wait to file and miss important deadlines resulting in the potential for further tax bill increases.

-source, Chicago Association of Realtors-

Market Snapshot

In the Chicagoland Primary Metropolitan Statistical Area (PMSA), September 2011 home sales, including single-family homes and condos, tallied 6,035. That’s up 13.3 percent from September 2010.

The median home price in the Chicagoland PMSA for September 2011 was $160,000, down 8.6 percent compared to September 2010.

In the City ofChicago, September 2011 home sales, including single-family homes and condos, totaled 1,498, up 6.8 percent from September 2010.

The median September 2011 home price in the city was $190,000, up 5.6 percent from September 2010.

In the North Central Illinois region, the monthly average commitment rate for a 30-year, fixed-rate mortgage was 4.09 percent in September 2011, according to the Federal Home Loan Mortgage Corporation.

State of the Market

September home sales seemed to be stabilizing in the City ofChicago, as evidenced by an increase in both single family home and condo sales.

Yet while we are seeing some gain in home sales volume, prices remain lower and economists expect to see more sales among homes priced at less than $100,000.

Economists forecast positive total home sales in October and November on a month-to-month and year-over-year basis.

Interest rates remain historically low and prices continue to be compelling. Nonetheless, consumer confidence is hampered by the continuing effects of unemployment and the slow economy.

The Chicago Association of REALTORS®, other housing groups and real estate associations continue to press for home financing reforms and mortgage refinance programs for homeowners facing foreclosure.

Commercial Outlook (NAR)

Third-quarter commercial real estate vacancy rates were flat because economic growth and job creation have been weaker than expected, according to the National Association of REALTORS®.

Modest improvements are expected in the commercial sector over the coming year. Healthy recovery is already occurring in the multifamily sector, with the average apartment rent expected to rise 2.5 percent this year and another 3.2 percent in 2012.

From the third quarter of this year to the third quarter of 2012, NAR forecasts commercial vacancy rates to decline by 0.3 percent in the office sector, 0.6 percent in the industrial sector, 0.7 percent in the retail sector and 0.9 percent among multifamily rentals.

Source: The Chicago Association of Realtors

The good news? Two key measures now suggest it’s an excellent time to buy a house, either to live in for the long term or for investment income (but not for a quick flip). First, the nation’s ratio of house prices to yearly rents is nearly restored to its prebubble average. Second, when mortgage rates are taken into consideration, houses are the most affordable they have been in decades.

Two of the silliest mantras during the real-estate bubble were that a house is the best investment you will ever make and that a renter “throws money down the drain.” Whether buying is a better deal than renting isn’t a stagnant fact but a changing condition that depends on the relationship between prices and rents, the cost of financing and other factors.

But the math is turning in buyers’ favor. Stock-oriented folks can think of a house’s price/rent ratio as akin to a stock’s price/earnings ratio, in that it compares the cost of an asset with the money the asset is capable of generating. For investors, a lower ratio suggests more income for the price. For prospective homeowners, a lower ratio makes owning more attractive than renting, all else equal.

Nationwide, the ratio of home prices to yearly rents is 11.3, down from 18.5 at the peak of the bubble, according to Moody’s Analytics. The average from 1989 to 2003 was about 10, so valuations aren’t quite back to normal.

But for most home buyers, mortgage rates are a key determinant of their total costs. Rates are so low now that houses in many markets look like bargains, even if price/rent ratios aren’t hitting new lows. The 30-year mortgage rate rose to 4.12% this week from a record low of 3.94% last week, Freddie Mac said Thursday. (The rates assume 0.8% in prepaid interest, or “points.”) The latest rate is still less than half the average since 1971.

As a result, house payments are more affordable than they have been in decades. The National Association of Realtors Housing Affordability Index hit 183.7 in August, near its record high in data going back to 1970. The index’s historic average is roughly 120. A reading of 100 would mean that a median-income family with a 20% down payment can afford a mortgage on a median-price home. So today’s buyers can afford handsome houses—but prudent ones might opt for moderate houses with skimpy payments.

For example, the median home in the greater Phoenix market, including houses, condos and co-ops, costs $121,700, according to Zillow.com. With a 20% down payment and a 4.12% mortgage rate, a buyer’s monthly payment would be about $470. Rent for a comparable house would be more than $1,100 a month, according to data provided by Zillow.com.

Of course, all of this assumes mortgages are available—no given now that lending standards have tightened. But long-term data on down payments and credit scores suggest conditions are more normal than many buyers think, according to Stan Humphries, chief economist at Zillow. “If you have good credit, a job and a down payment, you can get a mortgage,” Mr. Humphries says. “There’s more paperwork and scrutiny than five years ago, but things are pretty much like they were in the ’80s and ’90s.”

Not all housing markets are bargains. Mr. Humphries says Zillow has developed a new price/rent ratio that uses estimates for each individual property rather than city medians, to better reflect the choices facing typical buyers. A fresh look at the numbers suggests Detroit and Miami are plenty cheap for buyers, with price/rent ratios of 5.6 and 7.7, respectively. New York and San Francisco are more expensive, with ratios of 17.6 and 17.2, respectively. The median ratio for 169 markets is 10.7.

For investors seeking income, one back-of-the-envelope way of seeing how these numbers stack up against yields for other assets is to divide 1 by the price/rent ratio, resulting in a rent “yield.” The median market’s rent yield is 9.3% and Detroit’s is 17.9%.

Investors would then subtract for taxes, insurance, upkeep and other expenses—costs that vary widely. But suppose total costs were 4% of the purchase price. That would still leave a 5.3% rent yield in the typical market. With the 10-year Treasury yield at 2.2% and the Standard & Poor’s 500-stock index carrying a dividend yield of 2.1%, rents for residential housing in many markets look attractive.

A few caveats are in order. First, not all transactions are average ones. Even in low-priced markets, buyers should shop carefully. Second, prices could fall further. Celia Chen, a senior director at Moody’s Analytics, expects prices to drop 3% before bottoming early next year and rising slowly thereafter. “If the economy slips back into recession, however, we could easily see a 10% drop,” Ms. Chen says.

And property “flipping” can be dangerous even when prices are rising. That is because, absent a real-estate boom, house price gains simply aren’t that exciting. Research by Yale economist Robert Shiller suggests houses more or less track the rate of inflation over long time periods.

Houses aren’t the magic wealth creators they were made out to be during the bubble. But when prices are low, loans are cheap and plump investment yields are scarce, buyers should jump.

-Source: The Wall Street Journal-

FSBOs accounted for 9% of home sales in 2010. The typical FSBO home sold for $140,000 compared to $199,300 for agent-assisted home sales.

FSBO Methods Used to Market Home:

• Listing on Internet . . . 27%
• For-sale-by-owner Web site . . . 11%
• Yard sign . . . 46%
• Friends/neighbors . . . 39%
• Newspaper ad . . . 12%
• Open house . . . 14%

Most Difficult Tasks for FSBO Sellers:

• Getting the right price . . . 23%
• Preparing/fixing up home for sale: 18%
• Selling within the planned length of time: 14%
• Having enough time to devote to all aspects of the sale: 13%
• Understanding and performing paperwork: 10%

Source: 2010 National Association of REALTORS® Profile of Home Buyers and Sellers

A short sale typically occurs when an owner can’t afford his or her mortgage payments or needs to sell the property for some other reason but the value of the property is less than the owner owns on his mortgage.  The lender or bank holding the mortgage allows the owner to sell the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. Typically the lender would have the right to approve or disapprove a proposed sale.  This is why it can take an extended time for a buyer to receive a response when they make an offer on a property that is in short sale.

A foreclosure typically occurs when a property owner defaults on his mortgage payments for a number of months.  The bank or lender then begins the process to repossess the property.  After repossessing the property the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs, and it is typically said that “the lender has foreclosed its mortgage or lien”. If the promissory note was made with a recourse clause and the sale does not bring enough to pay the existing balance of principal and fees the mortgagee can file a claim for a deficiency judgment.

I hope that this explanation is helpful.  A short sale is typically the better of the two options for the seller as well as the lender.