Chicago Relocation

May 2014 State of Market

May 30, 2014

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John D’Ambrogio

Spring’s low inventory has created a summer market with remarkably quick home sales and higher average sales prices.  Here’s your May’s market minute.


Call to park? Or – Hello I am going to park here a bit

May 27, 2014

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John D’Ambrogio

Need to park?  There’s an app for that.

OK, as much as many long time Chicagoans feel that the great Richard Daley Jr. (or was it really Rahm?)  squandered some of our future on the way out with his sale of the parking ticket industry to a private company, I have to say the announcement of the new pay by phone system is pretty cool.  And about time we started being a little cutting edge again.

Parkers in Chicago’s west loop are the first to beta test this new system by Chicago Parking Meters, LLC, in which they can literally ‘phone it in.’  It’s just under 300 spots by now, but there are plans to expand throughout the city.  No more excuses for parking tickets, Chicago real estate agents.  That is, assuming you can find a legal spot to begin with.

Unfortunately, this takes away the excuse of “I had no quarters and I just had to run in and get my laundry.”  Although that was pretty much done in by the emergence of credit card parking sticker purchases.  And the irony is not wasted on me, but I am amused that they put in an option for the 1% of the world that does not have a cell phone – there is a separate number you can call to get your parking.  Which begs the question – where are they going to get a phone to call in, since they do not have a cellphone.  The number, by the way, is 877-242-7901.  Oh well.

One cool feature is an alarm to remind you to get back to your car, or put in a few extra bucks.  No more running back to the meter before you get your coffee, and no more excuses!

Oh, by the way, did I mention the 35 cent convenience fee if you don’t sign up for the maximum time?  :(


Home Sale Programs

May 19, 2014

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John D’Ambrogio

By: Steven John, CRP, GMS is SVP, Client Services for RELO Direct, Inc.

Sometime in the early 1960s, American corporations discovered that employers could save significant dollars on relocation tax assistance by acting as an intermediary in the home sale process, purchasing the home from the employee and reselling it to the ultimate buyer. Through these home sale programs, employers avoided reimbursable commission, carrying, and transfer payments and were relieved of the obligation to gross-up such payments, thus reducing relocation costs. Very quickly, third party relocation management companies (RMC) were formed to act as the intermediary in the programs.

With today’s home values and tax rates, employers can save $15,000 – $20,000 in tax assistance expense on each home. As home sale programs gained momentum, two varieties emerged: Guaranteed Buyout (GBO) and Buyer Value Option (BVO).

Guaranteed Buyout (GBO) – Also referred to as an Appraised Value program, a GBO uses a relocation appraisal to establish the value of the employee’s home. Often, two appraisals are made and the value is set at the average of the two. The RMC makes an offer to purchase the home from the employee at the appraised value. The employee accepts the offer and the RMC takes title to the property. This sale transaction occurs without sales commission or other costs, resulting in zero taxable reimbursements to the employee, and zero tax assistance expense to the employer.

The RMC then works to resell the property to a third party. The sales commission and other expenses of this second sale are paid for by the employer, but since the employee is out of the picture, it is a simple business expense and not a taxable reimbursement.

Generally, GBO programs are further modified to provide for a short (60 – 90 days) marketing period before the appraised value purchase offer is made. This allows time for the employee to find a third party buyer and potentially sell the home for more than the appraised value. If a buyer is found, the RMC will purchase the home from the employee at a price equal to the offer made by the third party buyer. The appraised value is “amended” to equal the offer made by the third party buyer and the RMC purchases the home at the amended value. The RMC then sells the home to the third party resulting in the same tax favorable outcome as the appraised value sale.

Buyer Value Option (BVO) – The Buyer Value Option program is based on the same premise as the GBO program. Two home sale transactions are created to shield the employee from receipt of taxable reimbursements, saving the employer additional tax assistance expense. The difference in the BVO program is that no appraisals are made. Instead, the home is marketed by the employee and when a third party buyer is found, the offer price made to employee by the RMC is equal to the third party buyer’s offer price. Thus, the value of the home is the “buyer value”. The home is sold by the employee to the RMC at that price, the RMC then sells the home to the third party.

Each program has advantages and disadvantages. The GBO program can be accomplished quickly and allows the employee to move to the new destination and become productive in his/her new role as soon as possible. Employers risk potential carrying costs and capital losses on homes purchased under this method, which are not resold quickly.

BVO programs protect the employer from the risks and costs of home ownership. Long employee marketing times can sometimes bring hidden costs, though, in the forms of unproductive transferees and additional temporary living and travel costs.

Home sale programs save employers millions of dollars each year. Which program you choose depends on your real estate market, tolerance for risk, and the competitive talent landscape in your industry.


Steven can be contacted at


The 2014 Investment Crystal Ball….

May 12, 2014

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John D’Ambrogio

What is on the horizon for investors?

As an investor in Chicago real estate – single family homes, multi unit, and condos – it has been a great run for investors. Rents outpaced mortgage payments, those paying cash saw double digit cash on cash returns, and things were pretty great (assuming you could get a loan).  But how does the new normal effect that segment?

Well, interest rates, even for investors, are still at historic rates. We’re still at under 4% for the 15 years, and in the modest 4%s for a 30. Rates never really did rise as much as conservative economists had feared.  They thought the Fed cutting back on asset-purchase programs would have more of an effect than it did.

But what about pricing? We all know how the bubble caused unsustainable price increases across the board, and how loose lending gave us the push we needed to blow up the market. Specifically those for one and three year balloons did what balloons often do – pop. And with a mighty loud bang. Hey, if almost half of all subprime loans were auto-approved dirtying the height of the boom, what could we really expect?

Then came the 2012 mini bubble. Supply and demand finally evened out enough that the tables turned, and homes started to sell fast at a steep increase. 2013 saw an incredible amount of multiple offers and over-list price deals. Much to many investors chagrin. But it has evened out a bit since then.

Cash is still king. Many recent months have seen all-cash deals taking up over 40% of the market. While prices have gone up, cash deals still trump traditional mortgaged deals.

Personally I have not bought anything in a year (unless you count the under contract short sale that I have been working on for that entire amount of time). I do not see the returns in my price range. In addition, both Fannie and Freddie have been doing much more to their properties (first look opportunities for owner occupants and extensive repair work) that make the properties less appealing (profitable) to investors. And I hesitate to say most of the ‘good stuff’ has been taken, but returns are not what they were three years ago.

So keep investing if you have the funds and the patience. But the go-go days are over……if only for a while.



Dodd-Frank and Mortgages in 2014

May 5, 2014

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John D’Ambrogio

While Dodd-Frank may be a bit of a dry subject, it’s still important!

The latest Dodd-Frank mortgage regs have seemed to cause a bit of a stir in the industry. And to add to that, the Consumer Finance Protection Bureau has adopted rules which prohibit lenders from making large loans without regard to the consumer’s ability to pay it back.  Lenders reacted by becoming even more cautious. So what gives and how does it affect relocating transferees to Chicagoland?

“The new mortgage rules are a serious challenge, especially in the near term, for mortgage lending,” according to Robert Davis, EVP of the ABA. “The problem will last at least as long as bankers calibrate their compliance systems, and perhaps much longer.”

The American Bankers Association’s (ABA) release the of its most recent Real Estate Lending Survey, shows signs of a little anxiety among lenders. Four out of five surveyed believe Dodd-Frank rules will restrict credit, decreasing the number of candidates able to secure mortgages.

The report shows 95 percent of those who say they will offer non-QMs plan to hold the loan as an investment. Only five per cent plan to sell the loan to secondary market investors.

But it was not all doom and gloom. First time homebuyer mortgages were up for the first time in seven years. And the traditional 30 year fixed was the mortgage choice for a full half on mortgages. The verdict? Those with a good job and good credit (and transferees with employer support) are in great shape. And the over the counter crowd still has some conservative hurdles to address. Not surprising….