Some of the stories are heartbreaking. Others are maddening and baffling.
All over the Chicago suburbs and the country, homeowners are getting into trouble on their homes because of a job loss, illness or because they've overextended themselves. Add to that a drop in real estate values and you have a recipe for disaster.
Take, for instance, the story of the unemployed 50-something nurse in the Fox Valley who is fighting cancer. Her husband recently left her and now she has approached a Realtor to sell her duplex so that she won't have to go through foreclosure.
In Lake County there is a 75-year-old widow who took out a mortgage 10 years ago on the home she and her husband had owned free and clear. She needed money to live on. But today she can no longer afford to pay the mortgage payments, along with utilities and other expenses, so she is trying to refinance to decrease her monthly payments. If that effort is unsuccessful, she will have to sell her home for an amount that will leave her with only about $5,000 to her name. Her children are unable to help because four of them have lost their jobs.
Then there are maddening stories of homeowners who buried their heads in the sand when they knew they were in trouble, didn't try to avert doom by working with their lenders, and then before they were evicted stripped their homes of kitchen cabinets, furnaces, toilets, doors and even trim in order to sell it on eBay or just junk it out of spite.
These are the things distressed property experts and seasoned Realtors say they have been confronting every day for the past few years. Realtor estimates of what percentage of properties now on the market are distressed in some way range from 15 to 20 percent in St. Charles to 75 percent in the Buffalo Grove, Lincolnshire and Glenview area.
"Sometimes I feel like a therapist," Pattie Palzet-Taylor of RE/MAX American Dream in Wauconda said. "I now have a constant supply of Kleenex on my desk. If you are a good real estate professional, you have been doing a lot of counseling over the last three years."
She estimates 61 percent of the Wauconda area market is currently distressed.
And Palzet-Taylor's job isn't done once she sells someone's property. Then she is helping them to find new shelter in a rental property.
Even that isn't easy today. She said you have to make sure the owner of a rental property is current on his or her mortgage because otherwise, after paying their rent faithfully each month, the renter might wake up one day to find an eviction notice slapped on their door.
Palzet-Taylor, a Realtor since 1983, said the industry is facing a "whole new world of real estate." That is why she and many other Realtors are taking the time to get additional training on how to help desperate homeowners face the new reality.
Palzet-Taylor took a course through the National Association of Realtors and she is now a Short Sale and Foreclosure Resource, or SFR. Others have earned the residential distressed property certification, also through the National Association of Realtors, while others have become certified distressed property experts through the Distressed Property Institute. Some large companies like Baird and Warner have brought experts on the subject in to train their entire sales force.
"It is important that real estate professionals take these courses and earn these designations so that they can keep up on the changing laws and know how to protect their clients," said Cindy Banks of RE/MAX Cornerstone, serving DuPage County and the Fox Valley. She earned the CDPE designation.
Banks said Realtors cannot give legal advice to clients in regard to finances. But they can lay out the options regarding home sales.
"When someone gets in trouble, they need to talk to their lender because until they make that call, the lender doesn't know there is a problem," she said. "It won't be a fun call to make, but you have to approach the people you have financial situations with so that you can assess the damage and work through the process."
Every lender is different. Some tell the homeowner to put the house on the market and call them when they have an offer and they will evaluate the situation at that time, Banks said.
Others opt for a formal short sale where they agree upfront to take whatever the homeowner can sell the house for, and either "forgive" the remaining debt or put a lien for it on the original owner. But that will hurt the homeowners' credit rating for a number of years, said Rachel Hausman of RE/MAX Experts in Buffalo Grove.
Yet others work to keep people in their homes by increasing the term of the mortgage, for example, from 15 to 30 years, in order to lower the monthly payments; refinancing the mortgage to give homeowners a lower interest rate; or adding any missed payments to the back end of the loan, bringing the homeowner back to current.
"These solutions are usually offered for people who got behind on their payments because they lost their job for a time and now that they have new employment, they are trying to dig themselves out," Palzet-Taylor said.
Obviously, these options are best for the homeowner, but sometimes they cannot be worked out and the home must be sold.
"A short sale is better than foreclosure because a short sale only ruins a homeowner's credit for two years and they are eligible to buy another house in five years. If someone goes through foreclosure, on the other hand, their credit is ruined for seven years and they are not eligible for another mortgage for 10 years," Hausman said.
But while a short sale is the best option for the homeowner, it is also the most difficult path to take. Most Realtors will not list a short sale unless the homeowner retains a law firm specializing in such sales to handle the paperwork.
"Banks don't answer the phone for Realtors, only for lawyers," said John Lane of Baird and Warner in St. Charles. "And if one little thing is missing from their paperwork, they just throw it in the incomplete stack and never look at it again."
"The paperwork is very complicated, so we recommend great attorneys who specialize in real estate law and short sales," Hausman agreed.
Once the home is formally listed as a short sale, it can be a test of tenacity on the part of any interested buyer. The banks are overwhelmed with the volume of short sales they need to address.
"Right now they are involved in a monster learning curve," Banks said.
"You can wait two to five months to get a response to an offer from a bank on a short sale," Lane said. "Anyone interested in getting one of those tax credits should forget about bidding on a short sale. They won't get an answer in time for the deadline of April 30 for a contract."
Bidding on foreclosures or real estate owned properties (REOs), which are already owned by the banks, is much easier, the Realtors agreed. Since the banks already own the property, they are willing and able to respond to offers quickly.
Lane now has a listing for such a foreclosure in South Elgin.
"It was a great house in its day," Lane said of the brick farmhouse built circa 1845 by Asahell Hinsdell. "But now it will need a buyer who wants to restore it. The exterior cannot be changed because it is the only house in Elgin that is listed on the Historic American Buildings Survey.
"The former owner purchased the home in 2004 at the height of the boom and quickly refinanced in order to remodel the interior," Lane said. "Money was readily available at the time and an excessive mortgage was given to him."
Unfortunately, the repairs were never completed and the money was spent on other things. By the time the man was evicted, he had totally gutted two bathrooms, shut down the furnace and was using five gallon buckets for water.
The home now needs major repairs.
"This story is a lesson to those who choose to wait and ignore all lender notices," Lane stated. "Some lenders are willing to recast their mortgages if the homeowner shows an interest and a willingness to work with the lender. But those homeowners who ignore the warnings will lose everything."