Once again, the auction is this Sunday at the W Hotel on Adams St.

That’s why I was shocked to discover that a luxury building, built in Chicago in 2005 and under consideration by two different buyer clients, has electric heat. Well, it was under consideration until we found out about the heat. Just to give you an idea…the December 2008 electric bill for a bit over 2100 square feet was $950! If it had had gas heat I bet it would have been under $300. Both of my clients said essentially the same thing to me: “What the hell was the developer thinking?”

When you have electric heat you might as well be running a bunch of space heaters because they use the same basic technology – resistive coils. Electricity runs through high resistance metal coils and, in the process, generates heat. You see, there is a fundamental inefficiency in turning electricity into heat because at the beginning of the whole chain is a power plant where they generate heat to create kinetic energy (a spinning turbine) which creates electric power. Then the electric power has to be reconverted back to heat at the other end. Of course, at each step of the process there are losses, including transmission losses along the way. So the whole thing is very inefficient.

And while I’m on the subject…eventually they are going to figure out that plugging a car into the electric grid suffers from the same basic flaw because you will be reconverting the electricity back into the kinetic energy that was spinning that turbine at the start of the process. And electricity is not cleaner if 50% of it is produced by burning coal. What’s next? Turning food into auto fuel?

But I digress.

The unit is priced at $399,900 plus an additional $30,000 for the parking space and the monthly assessments are $484. It is a 1659 square foot northeast corner unit with 2 bedrooms, 2 baths, and a fabulous view. You get to see a nice mix of high rises, green space, and smaller buildings.

In this photo of the living room you can see that the unit has expansive floor to ceiling windows and a steel ceiling – you don’t see too many of those.

The kitchen island has a polished concrete counter top with a swerve design embedded, supported by a metal pipe – one of the many interesting architectural details in this unit.

The master bedroom has a partially dry-walled ceiling to break up the monotony and you can also see two other unique design elements. All the HVAC ducts are flattened as opposed to the standard circular shapes seen in almost every other loft. And on the left side of the picture you can barely tell that the bathroom door hangs from a metal bar above the doorway and rollers allow it to glide across. I can’t remember if there are multiple types of doors in the unit but I do remember that the front hallway closet door is made of a heavy metal screen.

Check out the interplay of several unique design elements in this master bathroom: mosaic tile wall, circular mirrors, high neck faucets, single wide basin sink, and a vanity supported by a metal pipe.

There are two things people might not like about this unit: 1) The balconies are bright yellow and 2) the ceilings are unfashionably low – not the 17 feet that seems to be irrationally popular. In particular, the clearance can be a bit tight when standing under the duct work. Nevertheless, I think this place is way cool!

The unit is listed by Keller Williams and has been on the market for 90 days now.

The original program, set to expire at the end of the month, provided an $8,000 tax credit to first time home buyers who made less than $75,000 individually or $150,000 jointly. The new program extends the credit until the end of April, raises the income limit to $125,000 individually or $225,000 jointly, and also introduces a $6500 credit for people who already own a home and want to buy another one. The reason for the inclusion of people who already own homes is…well, they just want to spread our wealth around.

The NAR is jumping for joy at the success of their lobbying campaign – over 500,000 realtors begged congress for this handout. And I assume they will be lined up in the spring with their hands out yet again for the third sequel to this horror show. I can only imagine the concept: Ckash 4 Shacks – a tax credit for bulldozing your house and replacing it with a house that has energy efficient windows.

They’re changing the terminology of the industry. Currently, a Salesperson is what most people think of as a regular agent and Broker is the person that the Salesperson works for. Of course, the public thinks of everyone as a broker because, well, they broker deals. So they’re changing the terminology to match popular usage. The new terms will be Broker and Managing Broker. Probably a good idea since realtors aren’t supposed to be selling anything when they are working for a buyer (yeah, you heard me right).

They’re increasing the course work required in order to become either a broker or a managing broker. The broker requirement is going up from 45 classroom hours to 90 hours, while the managing broker requirement is going up from 120 hours to 165 hours. 15 of these hours have to be situational (not exactly sure what they have in mind here but with any luck it will include how to answer your phone, how to return phone calls, and how to use email). In addition, they are increasing the ongoing educational requirements for both licenses.

The increase in coursework is definitely a good idea because, let’s face it, there are a lot of Bozos running around as real estate agents. If nothing else this should clear the ranks out a bit, pushing some of the marginal players over the edge. You would be surprised at how much is missing from the current curriculum that we have had to figure out on our own. For example:

• How to handle a short sale
• How to find and pull up public records
• How to determine zoning
• Where to find the building codes
• How to find out what the development plans are for adjoining properties
• All the documents required for a closing
• Typical inspection issues to look out for
• How to use the MLS effectively

Of course, there’s no guarantee that they will apply the additional course hours to this practical stuff.

In addition to a host of consumer protection initiatives, another new requirement is that a broker will have to be licensed for at least 2 years before becoming a managing broker. The cynical part of me thinks that this is an attempt to restrict competition but I guess it makes sense – for the average person. However, given that the job is not exactly rocket science, I know of at least a couple of people who were able to move quickly into this role, without a lot of time in the trenches, and became more effective than most overnight.

This new law takes effect December 31, 2009 but existing licensees have until April 30, 2012 to comply with the new requirements. So, there’s still plenty of damage that can be done in the meantime.

One of the more significant items we’ve been waiting for is some relief on the restriction that condo associations can not be approved if they have the right of first refusal. On the one hand, I’ve never understood why condo associations have this right anyway – like they’re going to have the funds to buy a condo and do what with it? On the other hand, I never understood why FHA cared – as long as it’s not discriminatory. But forever promising to remove this restriction on the right of first refusal one month from now is leaving condo associations in limbo. Why incur the legal expense of changing the bylaws to relinquish the right when the government is going to relax the requirements in just one month? However, with 36% of the buyers using FHA mortgages how can the associations afford to keep waiting?

As if this issue weren’t thorny enough, some folks within the mortgage industry aren’t exactly optimistic that things will get better even with the new rules. According to Tom Fishwick of Guaranteed Rate, “I am not sure how much easier it will be once whatever changes do go into place. Clearly they are having trouble figuring out how to implement the changes. As it stands now, they will need to review every single condo building that gets an FHA loan. Currently the spot approval allows an FHA underwriters to sign off on the easy projects once they confirm those basic questions. [with the new process] I am expecting long delays, if not a tougher qualification process, even if they will allow for a right of first refusal. For now I am cheering every time they announce another delay.”

Here is the list of condominium units up for auction:

These units are being auctioned off without parking. Indoor, heated parking spaces can be purchases separately at a flat fee of $35,000. Notice that most of the units being auctioned off have the less desirable exposures. Units are available for previews daily through November 14. Every time I’ve been to the building it has been swamped with potential bidders so I’m thinking there aren’t going to be any bargains at this auction. Then again, all these people could be bottom feeders, who will drop out once the bids rise $20K above the minimums.

Bidders will be required to register in advance of the auction and should check in by 12:00 noon on the 15th at the W Hotel, located at 172 W. Adams St., in Chicago. Bidders must bring a cashier’s check or the usual substitutes for $5000 along with a blank personal check, which will be used in combination to leave a 5% deposit (of the winning bid amount). A separate cashier’s check is required for each property that the bidder is approved to bid on. It sounds like they won’t let you into the auction without presenting the checks.

Bidders can work with realtors but their realtor must be present at the bidder’s first visit to the building and all must register in order for the realtor to earn the 2% commission.

There will be a practice auction at 7:30 PM on November 14, also at the W Hotel. Interested bidders would be well advised to attend this event as it will provide an opportunity to find out what the bid increments will be, whether or not you will be able to understand the auctioneer (why the hell do they talk so fast?), and get a feel for the overall process.

We are now down to levels last seen in May, 2003 and December, 2002. Coincidentally the Case Shiller home price index is also currently at May, 2003 levels. In addition, employment is also lower than it was 10 years ago, so Chicago has its own lost decade.

This definitely undermines my theory that Chicago housing prices have bottomed but I’m going to stick with that thesis for the time being until I see a change in the Case Shiller index.

Why would they do this? Incentives. Once they accept the short sale they have to take a loss – the difference between what the the real estate is on their books at and what the short sale price is. And these guys don’t want to take the loss this year because it will affect their earnings and their bonuses and their stock price. I used to work in the corporate world and I have witnessed first hand the bad decisions which are routinely made for personal gain. So, personally, I completely believe this story.

You might want to think twice about putting an offer in on a short sale if you would like to get an answer in the next 3 – 4 weeks. At the very least find out what the listing agent’s expectation is about turnaround time.