Rising Number of Foreclosed Condos in Chicago Suburbs

by Simon Lindsay on cities

An increase in the number of foreclosed condos in the Chicago suburb of Buffalo Grove is set to occur after Harris Bank sued to foreclose Buffalo Creek Condominiums, a 154-unit condo complex bought for $13.25 million by investor Marcin Malarz in February last year.

Malarz and partner Jacek Sienkiewicz failed to pay Harris Bank their loan of $9.84 million which is already past due.

The condo project is one of the results of several condominium conversions that quickly sprouted in Chicago suburbs during the housing boom. Condo conversion laws allow developers or buyers of multi-unit properties currently under a single title to convert the units into individually-titled condo units.

Malarz and his partner sought to make money out of condo conversions, but unfortunately they bought the condo complex just when the housing sector was about to collapse.

The condo complex, built in the 1970s, is located in the northwest portion of Buffalo Grove.

An analysis of the Chicago condo market by Appraisal Research Counselors said that new and foreclosed condos were among the best-selling residential properties in the Chicago area during the boom because condo sellers were allowing buyers to make condo purchases with no down payments and banks were financing the condos 100-percent.

But the mortgage crisis happened and the 100-percent financing scheme dried up. Eventually, Buffalo Creek sold only 8 condo units. Malarz’s default on his loan will result to about 146 foreclosed condos.

Harris Bank stated in its foreclosure suit that Malarz owed also real property taxes aside from not paying due loan payments.

Nearly 100 foreclosed condos are also expected to result from another condo conversion project by Malarz. He is currently facing a foreclosure suit on the 96-unit Burton Grove Condominiums, his condo conversion project located in the northwestern part of Elk Grove Village.

Malarz’s condo projects are not the only multi-unit properties facing foreclosure problems in Chicago suburbs.

The 400-unit McDowell Place apartment complex in Naperville has been targeted for foreclosure by Metropolitan Life Insurance Co. after the complex owner BlackRock Inc. defaulted on its loan of $33 million which was due last May 2009.

Another apartment complex project, the 221-unit 17-story Howard Street Station in Evanston, was foreclosed by PNC Bank after an enterprise led by BlackRock failed to pay its loan of $38.2 million loan.

Because of the lack of credit available for prospective condo buyers in suburban Chicago areas, more foreclosed condos are expected in these areas.