That's No Deal

Buying in a Rocky Housing Market

by Aleksandra Todorova
Tuesday, March 4, 2008

Indifferent to the bleak real estate headlines, 26-year-old Michael Klauer and his fiancée recently bought a two-bedroom condo in the desirable Lake View neighborhood in Chicago. They weren't in a rush to buy, but when an opportunity presented itself only a month after they started looking, they jumped on it.

The apartment, listed at $519,000, was theirs for only $480,000 — an initial offer they didn't back down from, even though they knew the seller had bought the place 10 months earlier for $512,000. Factoring in the broker's fee and sales taxes, the seller lost more than $44,000 on that deal, according to the couple's realtor, Jay Michael, owner of the Estate Property Group in Chicago.

WOW! What a steal. $480,000 for a 2 bed room apartment?! Lucky there was no bidding war...

And even though the condo's value may drop further, the couple wasn't concerned since they plan to live in the place for at least three to five years. "It was a good time to buy," he notes. "Prices are on the down low, and it's something I could sit on for a while."

I hope they can because they will not see $480,001 or more five years from now. Are they not aware this bubble was a historic event, none the likes of man has seen before? Chances are no person alive will see price growth of this magnitude in their lives again.

Stay away from foreclosures

Foreclosures are touted as great deals (especially by services that sell foreclosure listings). In some areas, real estate agents have even started taking potential buyers on "foreclosure tours."

In reality, however, buying a foreclosed property — or even one in a neighborhood plagued by foreclosures — is risky. "A heavy concentration of foreclosures indicates that there's some sort of economic problem in the region that will keep your home value from at least remaining stable," says Miller. "Or that there was some speculation and there may still be some air left to come out of that market."

The author should look at ReatyTrac.com's map function. After reviewing the Chicagoland area tell me what neighborhood DOES NOT have forclosures? I'll clue her in: None.