But Milwaukeeans are more likely to be high and dry. The four-county metro area’s median price was down 4.9 percent last year, but that followed a 2.8 percent gain in 2007. All told, values have slipped just 2.1 percent since 2006. By contrast, U.S. single-family home values have dropped by 11.6 since the end of 2006, according to the National Association of Realtors (NAR).
In Phoenix and Las Vegas, median home prices plummeted 36 and 34 percent, respectively, in 2008. One of the biggest drops occurred in a favorite Wisconsin snowbird retreat: Cape Coral-Ft. Meyers, Fla. It had one of the country’s top three foreclosure rates, and prices fell 50.8 percent in 2008, according to the NAR.
Milwaukee-area homeowners who were most hurt purchased their homes at the market’s peak in 2006 with a small down payment or none at all, says Don Madisen, a senior mortgage adviser for Coldwell Banker Home Loans.
“Many homeowners borrowed money against their equity or took out second mortgages believing values would continue to go up,” says Buffy Godfrey, a Realtor for Coldwell Banker in Mequon.
Given the depressed market, such a homeowner may be forced to sell a home with, say, a $100,000 mortgage, for $95,000. Include closing costs and the debt is $107,000, putting the seller $12,000 in the hole. At that point, the person has two options, Madisen says: “Come to the table with cash or negotiate a ‘short sale’ with the bank that owns the mortgage.”
Under the latter scenario, the owner would present the offer from a buyer and request that the lender write off the $12,000 shortfall. The seller must prove hardship: The bank will take an “overall photograph” of the seller’s assets, retirement funds, job strength and debt-to-income ratios. Then, says Madisen, “the bank has the right to say, ‘All right, we’ll accept the $95,000 and be done with this,’ or they may reject it altogether.”
Or the lender could require the homeowner to sign a promissory note for the shortfall, Madisen adds.
If a short sale can’t be worked out, the next step is foreclosure. In many cases, lenders prefer short sales because they’re cheaper, Madisen says. They’re also faster than foreclosures.
While short sales do stay on a person’s credit report for seven years, they’re not recorded if the lender doesn’t demand a promissory note. But even then, the homeowner isn’t off the hook, Madisen explains, because the lender can present a 1099 tax form, which leaves the owner paying taxes on the value of the write-off, essentially treating it as income.
Short sales now account for 10.9 percent of all home sales nationally, according to Zillow.com. Local lenders offer resources to help struggling homeowners. M&I Bank started a Homeowner Assistance Program (888-600-9327). Associated Bank has several options for customers, like extending the loan length or lowering interest rates through its Mortgage Modification Program (866-504-2774).
And several nonprofits provide free services for distressed homeowners, including ACORN Housing Corp.’s Home Equity Loss Prevention hotline (888-409-3557) and The Homeownership Preservation Foundation at 888-995-HOPE.
Record High
It’s a new record. In the face of a depressed market, a Waukesha County lake home nonetheless fetched a record price of $5.8 million.
The home is on Pine Lake’s eastern shore on Highway 83. It never appeared on the Multiple Listing Service. There was no “for sale” sign, says a local assessor.
County records show that the Jay and Holly Jensen Trust sold the home to buyers James and Nancy Lindenberg in October 2008.
The Jensens are associated with Kennedy-Hahn Appliance Inc. James Lindenberg founded New Berlin-based World Class Wire & Cable Inc. in 1994. He sold the company, which was often heralded for its entrepreneurial ways, to Illinois-based Anixter International Inc. for $62 million just days before the home purchase was recorded. Nancy Lindenberg operates a creative design studio in Hartland.
The sale price was more than twice the total assessed value for the $1.7 million home and the $875,000 lot. That left appraisers wondering if the sale also included art and antiques, but Nancy Lindenberg says no.
“What better place for an investment in a really bad investment time?” she says. “My husband and I pinch ourselves every day we’re here.”
Since 1999, 14 Lake Country properties have sold for more than $3 million, according to MLS. The previous record price came in 2003 with a $3.7 million sale of another Pine Lake home.
– Mary Van de Kamp Nohl
