I recently had a client who was attempting to short sale his property in order to avoid foreclosure. He had a ready, willing and able buyer. He had short sale approval from the bank. But, the buyer was attempting to do an FHA loan, and his Association had the right of first refusal. The buyer and my client spent two months trying to convince the Association to file the documents to get rid of the right of first refusal. The Buyer's attorney even drafted the Amendment free of charge. But the Association could not muster up the votes to pass the Amendment, and the deal fell apart. My client will lose his property in foreclosure as a result.

So what happens if you are one of the parties involved in a deal like this? It's difficult to justify retaining a right of first refusal in an Association that they are likely never to exercise.

First of all, to exercise the right of first refusal, the board of directors must first choose to purchase the available Unit at the price offered by the Seller. Then it must obtain anywhere from two-thirds to three-fourths of the unit ownership. If the Unit Owners approve, then the Board must either pay cash for the property, or obtain financing to purchase. Given the process that it takes, Associations very rarely ever exercise the right of first refusal.

I have not experienced it first hand, but I do know of some larger high rises who have exercised it in the past. The instances that I know of were to avoid a Unit to go into foreclosure, and most often, the Unit purchased was then used for the benefit of the Unit Owners (i.e. a place for Mom and Dad to stay when they come to town, etc.)

I am hearing rumors that FHA is currently working on lessening these restrictions to make it easier for FHA buyers, but I have not seen anything come through yet...stay tuned!In the meantime, if you are trying to finance a condo with an FHA loan, find something that is either FHA approved or does nto have the right of first refusal.

According to the National Association of Realtors, new details under the Making Home Affordable Program have been announced by the U.S. Treasury and the U.S. Department of Housing and Urban Development.

FHA has announced a deal to 'monetize' the tax credit for first time homebuyers depending on the mortgage amount, but it's not yet available from FHA lenders in Illinois. The Illinois Association of Realtors (IAR) is currently working with the Illinois Housing Development Authority to determine the feasibility of developing such a program that can be used in conjunction with an FHA mortgage loan. The tax credit applies to qualifying home purchases made by first-time homebuyers on or after Jan. 1, 2009 and before Dec. 1, 2009. Read the Mortgagee Letter 2009-15 regarding the monetization program released by HUD last week.

Signs that the real estate market decline is slowing are here! According the Crain's Chicago Business' June 1 issue, single family home prices in the Chicago area are forecast to drop 6.1% this year, which would be the third straight yearly decline, but much less severe than the year before. The market is expected to stabilize next year with a dip of only about 0.4%, and if prices do drop 6.1% this year, that would bring the median price in Chicago down to $247,000, the lowest since mid-2004.

The biggest drop happened last year, when prices fell 13%. The hardest hit neighborhoods were the low-income city neighborhoods and close-in suburbs where there was a lot of subprime lending going on.

The three hardest-hit towns were Oak Lawn (-22.3%), Burbank (-21.5%) and Berwyn (-19.5%). In the city, the biggest losers were on the South Side. Single family homes in Chatham dropped 39.9%. Auburn-Gresham dropped 37.8% and South Shore dropped 37.2%. Wealthier areas like Lincoln Park, prices only dropped about 2.7% and seemed to have stabilized.