Bank Eats Over $1 Million on Naperville Short Sale

List Price: $1.199 million
Sale Price: $1.05 million
The Property: This 16-room house on the far western edge of Naperville sold in November for $1.05 million. That’s 38 percent of what it cost to build…

A recently sold Naperville home

List Price: $1.199 million
Sale Price: $1.05 million
The Property: This 16-room house on the far western edge of Naperville sold in November for $1.05 million. That’s 38 percent of what it cost to build. In approving the short sale—where a property is sold for less than the outstanding mortgage amount—the lender, IndyMac, accepted a loss of over $1 million.

“That’s the largest loss I’ve seen a bank take [in the western suburbs],” says Bert Gor, the short-sale specialist and Re/Max agent who handled the sale. He also says that the homeowners lost the $700,000 down payment they had made on the house.

While records are unclear, both Gor and the buyer’s agent, Lisa Byrne of Baird & Warner, believe that at its estimated original cost of $2.717 million, this was the highest-priced home built in Ashwood Park, a high-end subdivision in Will County, about eight miles from Naperville’s downtown core. Construction ground to a halt there as a result of the housing crash. Lots with built houses end just a few doors west of this home, and there are some vacant lots on this street as well.

Byrne says that the buyers of the 11,000-square-foot house were corporate transferees who felt “confident in the value they were getting at this price.” So confident, in fact, that they lived in a two-bedroom apartment while sitting out the three-month short-sale approval process. This house has five bedrooms, as well as an elevator.

While the house doesn’t look all that big in my photo of its street face, take a look at the listing photos, where you will see that it’s much bigger from the rear. The photos also show a grandiose hanging staircase in a large foyer and a family room area with M. C. Escher–like views of staircases, landings, and other rooms. Peterson Elementary School and the subdivision’s large clubhouse are within a short walk of the house.

Last week, RealtyTrac released data showing that, in the third quarter of 2012, the number of short sales in Illinois was up 57 percent from a year before. That’s compared to a national increase of 17 percent. The average amount that sellers came up short in Illinois in the third quarter was $76,098, RealtyTrac reported. (Note that today’s sale was in the fourth quarter of 2012, not the period covered by the RealtyTrac report.)

Short sales are surging in part because of a clearer set of rules for lenders that the Federal Housing Finance Authority issued in August and that took effect in November. Also contributing to the growth in short sales may be the fact that, after six years in the trough, many homeowners have given up waiting for their lost equity to grow back and have determined to move on even if it entails taking a financial loss.

Price Points: Completed or under-construction homes in Ashwood Park that are on the market now range from about $510,000 to about $799,000. Vacant lots start at $99,900. A few doors down from today’s house is a 90-foot-by-149-foot lot priced at $109,900.

Listing Agent: Bert Gor; 630-842-6000 or bert@bertgor.com

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2 years ago
Posted by Bert Gor

Dennis: Great Article! Thanks for including us in it. This short sale was the largest loss on a Naperville short sale in over 24 months. It is important for readers to know that the sellers’ lender forgave the entire deficiency balance. Meaning they did not have to come to closing with any money and they do not owe a dime to anyone now that the home has closed. All associated costs were paid by the short sale lender.
Furthermore, many short sellers worry about the Mortgage Forgiveness Act of 2007 (MFA) expiring at the end of this month. But even if this home had closed in 2013, and hypothetically the MFA expired, this seller would NOT have had to pay tax on the shorted amount. The reason for this is simple and I think this could be a great article for you to consider. An article talking about how the loss of the sale washes the gain of the forgiven amount of a short sale. So here the seller paid around $2.7 million, sold it for $1,050,000, the bank forgave about $1 Million-the difference between what he owed and what the short sale lender netted from the sale. So the loss from the sale to the seller is about $1.65 Million. Therefore, in this case the loss of the sale wipes out the gain of the forgiven amount. The MFA would apply “IF” the forgiven amount from the short sale lender was LARGER than the loss of the sale to the seller. As I said Monday on our 91.5FM broadcast, most of our clients do not need the MFA in order to sell their homes, because the forgiven amount from the short sale lender is less than the loss to the seller from the sale and they avoid having to pay income tax.
On another note, and something I think is monumental for sellers that find themselves in foreclosure needing to short sale, consider the following…….if they forgave the seller of this home over $1 Million there is no reason for others to walk away from their homes. Lenders may “seem” uncooperative when it comes to loan modifications, but short sales are a whole different arena. Sellers just need to make sure they are hiring the right Realtor for the task. If we relate short sales to doctors, one would not go see a dentist when having chest pains. Sellers can’t expect to have these kind of results by hiring the “neighborhood” Realtor. This type of sale requires proven experience, as many times you only get one shot. Everyone needs to remember that a short sale is misdemeanor and foreclosure is like manslaughter. With a completed short sale a seller can avoid Bankruptcy and buy in as little as 2 years. Foreclosure is 4-7 years and Bankruptcy is the same if Real Estate was included.
Rule #1 – Never give up, never walk away when facing hard times. Rule #2 – see rule number 1. Lenders don’t want the homes and will work with homeowners to come up with a viable solution when all is presented properly. Bert Gor

2 years ago
Posted by Lisa Byrne

Dennis -

This article is a perfect example of how buyers and sellers can come together to create a "win win" situation in this challenging real estate environment. The magic ingredients for success are experience and market knowledge. I've worked with Bert Gor and the Short Sale Group on a number of occasions, and each transaction closed successfully. While I consider myself pretty well versed on the short sale process (you have to be if you're working with buyers OR sellers - in any price point - the short sale is not confined to any given price range or area), Bert and his team have demonstrated that their knowledge far exceeds the "average" Realtor. He's definitely the upper crust when it comes to short sale transactions. I was proud to be a part of this transaction and believe whole heartedly that both buyer and seller benefited from the sale. Thank you for sharing this story!

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