McHenry County Woman Newspaper™ © November-December 2007 All Rights Reserved 

Business & Finance

Write me a $20,000 Check?

By Elise Livingston

If I asked you to write a check to me for $20,000 would you do it? Probably not. What if I offered to write a check to you for $50,000 in exchange for your $20,000 check? Would you do it? Now, that’s a great offer and it’s similar to what’s on the table for "move-up" buyers in our real estate market.

As always, the flip side of trouble is opportunity and there is plenty of opportunity in McHenry County. We can enjoy the benefits of the present economic condition by making smart real estate purchases. The time to buy property has never been better.

Traditionally in the midwest, we have been insulated from the volatile swings in real estate values that the coastal states experience. Our highs are lower and our lows are higher than in Washington, D.C. or California. The fact that the Midwest has a long, stable economic history and the fact that our normalizing real estate values are making less drastic moves than in some other regions combine to ease the risk factor of real estate purchases. Our conservative history offers even more protection in our local markets (using the past performance of our local market as a guide) as our home prices have seen a relatively smaller adjustment compared with neighboring markets.

Our local economic stability serves as encouragement to take advantage of financial opportunities like lower home prices while they last! In McHenry county, the increase in home values remained modest through the 1990s. By 2005, the escalation of real estate pricing was at an all time high. I can think of three homes that each sold in 2002 and then again in 2005 with a 35% increase in price! As Judge Judy says, "that’s just not rational!" Our market is normalizing—and that’s OK—but it means that these low priced real estate opportunities will not be around forever.

Let’s get personal with this information – back to the $20,000 check. If your house has adjusted downward in price by about 10% – say from $205,000 to $185,000 in the past year or two, you would be smart to PAY someone to buy your house now. Write that $20,000 check and then go buy a house for $500,000 that might have been listed last year for $550,000 or even $565,000. Ten percent of your existing house is a loss to you at about $20,000, but 10% of your new house is a GAIN to you at more than $50,000. That’s a profit of $30,000 in money that only this type of real estate market can offer. Depersonalize the transaction and make it a smart business decision. You can move up now for less, but you have to be willing to sell your house at today’s realistic price to get the advantage. In past times of stable or ascending prices, the move up buyer paid more. Are you squeezed into your house and you just need more room? Price your house to sell and move up! Especially if you have been thinking of a larger home, the time to buy is now.

Yes, there is good news in this market. Have you been reading the papers? Such stories of real estate desperation! Mortgage lenders closing their doors, all time high foreclosure rates and stories of price declines around the country. For the past few years, homeowners have depended on the rising value of their home to pay off credit card debt, buy cars and in general live beyond their means. In other words, instant gratification through mortgage refinance. Free money came in the form of real estate value margins to bail us out of the problems we caused ourselves by over spending. Well, free money is still available, but as a long-term investment benefit rather than instant gratification.

Elise Livingston is a Real Estate Broker in Illinois and Wisconsin, Treasurer for McHenry County Association of Realtors, Certified Real Estate Specialist, Accredited Buyer Representative, Graduate of Realtors Institute and McHCAR Member of Influence.