Tuesday, July 22, 2014

WBEZ: Neighborhood value a challenge for housing recovery

I only wonder how widespread this is. Buying property is all about location and this is anywhere. However, what if it was even difficult to get a bank loan on a property in a distressed area as this case illustrated:
This happened to my friend Leila Noelliste. Her middle class family wanted to put down roots in North Lawndale on the West Side of the city. Last year, 80 percent of its total residential property sales were cash transactions and nearly a quarter were considered extremely low value, like about the price of a car.

Noelliste wasn’t making a cash purchase. She offered $182,000 for a two- flat in the neighborhood.

“When we got it inspected, it was really sturdy. Good foundation, good roof, didn’t need a lot of repairs,” she said. “There were two sets of tenants living in it. It was just a good building on a good block.”

She had plans for her family to live in one unit while renting out the other. But those plans came to a halt because of the home’s value --its appraisal.

“It was appraised for like in the 140s. And we were shocked. I mean, I know this isn’t a great area, but that just seemed really, really low,” she said.

The bank would only finance a loan for the appraised amount. Noelliste and her husband Norman Baldwin didn’t have the out of pocket money to pay the extra $40,000 on top of a down payment, so they had to move on.
A less than 10-minute drive brings you to the Near West Side, where Leila ended up buying a home.

“Upstairs we have a master bedroom with a walk-in closet, with a master bathroom. And then we have two smaller bedrooms. One of the bedrooms we use as my office-guest room. And the other room, my son is in. So it’s a beautiful home,” Noelliste said.

They offered $285,000 for the place, and it was accepted..

“My credit was good, Norm’s credit was good. We had a lot in our savings. All it was [the lower appraisal on the two-flat] was the value of the house. That’s all it boiled down to. Which is baffling, very, very frustrating,” she said.

Here’s a family now living in a $285,000 house, but couldn’t get the financing for a place $100,000 cheaper in a less desirable neighborhood.
I wonder how this is possible, if only I knew people who were involved with mortgages, real estate, and finance.

Beyond that read the whole article.

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