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Surprising Short Sales and Foreclosures

Chicago real estateFrom Uptown to the Gold Coast, River North, Wicker Park and Ukranian Village to Lincoln Park, West Loop Gate, the Loop, Old Town and Streeterville, one might wonder why these distinct Chicago neighborhoods share a single list. What is the common thread that weaves them together? The answer is simple: they are all ripe with short sales and foreclosures. It is quite significant that no Chicago neighborhood, not even the fanciest and most expensive, has escaped the unfortunate repercussions of the miserable economy. While short sales and foreclosures are certainly an indication of poor economic conditions, they are also the source of virtually unheard of deals for able buyers.

The extension to April of 2010 of Obama’s $8,000 tax credit to first-time homebuyers, combined with substantially reduced interest rates and an exceptional number of short sales and foreclosures mean that the old adage is true: One person’s trash is another’s treasure. Generally speaking, short sales seldom happen. When they have in the past, they have tended to occur in some far flung neighborhood made up of predominantly low-income residents. When and where they have typically occurred has never really been particularly surprising. That there are currently two units in the condo/hotel portion of the over-the-top luxurious Trump Tower undergoing short sales would have been unthinkable in previous years. That one of the two units is listed at less than half of its 2008 selling price is virtually incomprehensible.

trump_towerWells Fargo has foreclosed on another unit in the Trump Tower. In 2008, this foreclosed unit on the 24th floor sold for $895,000. Today, astonishingly, this unit is listed for $389,900. That is 56% less than what it sold for a little over a year ago. Other units in the strictly condominium section of the building are also listed at significant price reductions from when they were purchased. Rex Grossman’s 2 bedroom condo, for example, is now listed for $595,000 under the 2008 list price and $385,000 under the 2008 purchase price. While these price reductions are drastic in nature and therefore almost unimaginable, it is predicted that more units in the building will follow-suit. While such substantial reductions in such a premier building can undoubtedly be considered a bargain for current homebuyers, one has to wonder how much damage these short sale and foreclosure prices will do to the value of the remaining units in the building.

While Donald Trump has ensured owners and potential buyers alike that foreclosure suits and short sales in the Trump Tower are no reflection on the project which is “Doing very nicely”, one has to wonder whether the values will ever recover to their original purchase price? What do you think? Is it really a deal to snatch up a unit at such a significant price reduction if its value will never recover? Or, once the economy has rebounded a bit, will the value increase? Will the value ever be, again, what it once was?

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