Separate bills working their way through the Illinois House and Senate contradict one another on a central point. One says distressed properties in a surrounding neighborhood should be considered in an evaluation of a home’s value; the other says that information is not relevant.
In the Senate, SB1230 would require that foreclosures be factored in when the Cook County Board of Review is considering a homeowner’s appeal of the property’s tax bill. (This rule has been in effect in the other 101 counties in Illinois since last year.) “By definition, an assessment can’t accurately reflect the market value of a property [from which its tax bill is calculated] without including all of the sales in the local market,” says Senator Chris Lauzen (R-Aurora), the sponsor of the bill, which was moved to the Senate’s Revenue and Finance Committee on Monday.
Meanwhile, over in the House, HB0092 would require that appraisers licensed in Illinois disregard nearby foreclosures when calculating a home’s appraised value. “Foreclosures deteriorate the value of other homes,” says Representative La Shawn Ford (D-Chicago), the bill’s sponsor, who is a real-estate agent. “What this [bill] would do is set the foreclosed properties aside in their own category, so we can get a real look at home values in Illinois.” The bill went to the House’s Rules Committee in mid-March.
The two bills look at different aspects of property values. The Senate bill is about giving homeowners a fair break on their taxes if surrounding foreclosures have adversely impacted their property values, while the House bill is designed to boost a home’s value when it’s up for sale or the owner wants to refinance the mortgage.
But which is it going to be? Do foreclosures count in a home’s value, or don’t they?
Lauzen says that Ford’s bill “comes from a legitimate desire to help constituents, but might set up false market values.” Foreclosed properties are in direct competition with nondistressed homes for buyers’ attention, so putting them in their own category would artificially inflate the value of nondistressed homes—potentially setting up another round of losses. But Ford counters that removing foreclosures in appraisers’ evaluations can help prevent another round of foreclosures: Appraisals will then be higher, so homeowners will qualify for refinancing at today’s very low interest rates, bringing down their payments and “letting them stay in their homes instead of losing them in foreclosure,” he says.
Greg St. Aubin, the director of governmental affairs for the Illinois Association of Realtors, considers both bills laudable attempts by “legislators to look for potential legislative solutions to what is obviously a very difficult and wide-ranging problem: foreclosures.” He notes that these two bills are among eight different foreclosure-related bills in the General Assembly during this spring legislative season. Other bills cover everything from fees charged foreclosing lenders to what powers a municipality has to take over a vacant or foreclosed property.
St. Aubin’s organization backs SB 1230 (and backed its predecessor that applies to the rest of the state) and initially opposed HB0092, before several members asked for more review of it, he says. The two bills do seem to be at cross-purposes, he acknowledges. “But that’s OK; it’s part of the process for different legislators to come at something from completely different angles—as long as it’s sorted out in the legislative process.”
Which perspective will prevail? It’s too soon to say, but either way, foreclosures are a still-evolving reality in the real-estate market. “The bottom line is that there is really only so much the state can do to solve that problem,” St. Aubin says. “But that’s not going to stop legislators from trying.”