Rezko Primer VI. House Purchase

Updated 3/17/2008 with Chicago Tribune and Sun-Times interviews

The 94 page pdf of documents related to the sale of the house. Includes Listing Ad, Trust Agreement, Mortgage and other goodies.

Obama bought a house on the same day as Rezko’s wife bought a vacant lot which had been subdivided from the main lot. Obama answered a series of questions from the Sun-Times on the deal:

Q: The seller of your house appears to be a doctor at the University of Chicago . Do you or your wife know him? If so, did either of you ever talk to him about subdividing the property? If you ever did discuss the property with him, when were those conversations?

A: We did not know him personally, though my wife worked in the same University hospital. The property was subdivided and two lots were separately listed when we first learned of it. We did not discuss the property with the owners; the sale was negotiated for us by our agent.

Q: Did you approach Rezko or his wife about the property, or did they approach you?

A: To the best of my recollection, I told him about the property, and he developed an interest, knowing both the location and, as I recall, the developer who had previously purchased it.

Q: Who was your Realtor? Did this Realtor also represent Rita Rezko?

A: Miriam Zeltzerman, who had also represented me in the purchase of my prior property, a condominium, in Hyde Park. She did not represent Rita Rezko.

Q: How do you explain the fact your family purchased your home the same day as Rita Rezko bought the property adjacent to yours? Was this a coordinated purchase?

A: The sellers required the closing of both properties at the same time. As they were moving out of town, they wished to conclude the sale of both properties simultaneously. The lot was purchased first; with the purchase of the house on the adjacent lot, the closings could proceed and did, on the same day, pursuant to the condition set by the sellers.

Q: Why is it that you were able to buy your parcel for $300,000 less than the asking price, and Rita Rezko paid full price? Who negotiated this end of the deal? Did whoever negotiated it have any contact with Rita and Tony Rezko or their Realtor or lawyer?

A: Our agent negotiated only with the seller’s agent. As we understood it, the house had been listed for some time, for months, and our offer was one of two and, as we understood it, it was the best offer. The original listed price was too high for the market at the time, and we understood that the sellers, who were anxious to move, were prepared to sell the house for what they paid for it, which is what they did.

We were not involved in the Rezko negotiation of the price for the adjacent lot. It was our understanding that the owners had received, from another buyer, an offer for $625,000 and that therefore the Rezkos could not have offered or purchased that lot for less.

Q: Why did you put the property in a trust?

A: I was advised that a trust holding would afford me some privacy, which was important to me as I would be commuting from Washington to Chicago and my family would spend some part of most weeks without me.

Q: A Nov. 21, 1999, Chicago Tribune story indicates the house you bought “sits on a quarter-acre lot and will share a driveway and entrance gate with a home next door that has not yet been built.” Is this shared driveway still in the mix? Will this require further negotiations with the Rezkos?

A: The driveway is not shared with the adjacent owner. But the resident in the carriage house in the back does have an easement over it.

While news sources have never explicitly said there were any discrepancies in Obama’s version, there have been no stories based on actual investigations that have disputed the story. Given the number of Chicago reporters who have spent time on the story it’s safe to say at this point that Obama’s version is accurate.

Hence, there are four key points to what happened:

1. The land was subdivided before listing
2. The winning bids were the highest bids for both properties
3. Different Realtors handled the purchases for both plots
4. The owners wanted to sell quickly

One thing that is clear is that Rezko wanted to get in Obama’s good graces, but there is no evidence Obama received a favor.

Frederic Wondisford confirmed several points of this in an e-mail provided to the campaign:

Burton said a campaign adviser discussed the sale with Wondisford by phone and followed up with an e-mail to Wondisford repeating his points. Wondisford responded: “I confirm that the three points below are accurate,” according to the e-mail, provided to Bloomberg News and authenticated through records shown by the adviser.

The e-mail says that the sellers “did not offer or give the Obamas a `discount’ on the house price on the basis of or in relation to the price offered and accepted on the lot.” It also says that “in the course of the negotiation over the sales price,” Obama and his wife, Michelle, “made several offers until the one accepted at $1.65 million, and that this was the best offer you received on the house.”

Wondisford has declined to talk directly about the matter.

Three Bids

The Obamas submitted three bids: $1.3 million on Jan. 15, 2005; $1.5 million on Jan. 21; and $1.65 million on Jan. 23, according to a copy of the sale contract shown to Bloomberg News. Obama received more than $1.2 million in book royalties and a book advance in 2005, the year he was sworn in to the U.S. Senate, his financial disclosure statement shows.

The e-mail between Wondisford and the campaign adviser also says that the sellers had “stipulated that the closing dates for the two properties were to be the same.” In January 2006, Rita Rezko sold the Obamas one-sixth of the lot, for $104,500, to expand their yard. She later sold the rest of the land to Michael Sreenan, who said by e-mail yesterday that he bought it in late December 2006 for $575,000.

The e-mail is contained in the 94 page pdf document linked above.

Tribune Interview statement:

So just fast-forward, I win the Senate’s race, I, we go to Washington because of the good fortune of publicity, my book starts selling. I had more money, our kids are growing and we become interested in moving out of our condo and buying a house.

So at that point, I contact our broker, who had helped us buy our condo, a woman named Miriam Zeltzerman and who was with a real estate agency called Urban Search, which is very prominent in the Hyde Park area. And told her that we’d like to list our condominium for sale and that we were interested in buying a new house.

I was in Washington much of this time so this is the beginning of 2005, or somewhere in 2005. So Michelle started taking some tours with Miriam. And at some point ends up being shown the house which we now live in, on [street name redacted]. Michelle calls me and says, “I’m in, I love this house, but it’s more than we were talking about paying for, but I really think it’s a great house, you should go take a look at it.”

I did, and I also thought it was a terrific house. And what the seller, the seller’s broker described to me was that the way that the house was configured, it had this huge yard on the side, on the south side of the lot, that the lot had already been divided in half, that the lot was being sold separately, that somebody already had an option on the lot, so that that was not part in any way of the transaction. And that the house, was selling, was listed at $1.9 [million], but in conversations with my broker afterward, she said that although the lot had an option on it, the house had been on the market for over, for quite some time.

I think originally the sellers had tried to sell it as just in, in one big chunk, both the lot and the house, and it had been on the market for at least six months, maybe close to a year. They hadn’t been successful. That’s part of the reason why, I think, they divided it. The lot was apparently fairly attractive, and they had gotten offers on that. The house was the thing that was difficult for them to sell, and it was owned by a doctor, a pair of doctors named the Wondisfords who were at the University of Chicago. They had to join Johns Hopkins because they had gotten a new job, so they were moving and so they were anxious to sell.

So, I then discuss it with Michelle as well as our broker and said, “Well, maybe it’s worthwhile us putting down an offer, but we should get a better sense of what it’s valued.” And our broker said, “You certainly shouldn’t be paying the list price on this because it might be a little bit overpriced.” And so at that point, Michelle and I talked about who did we know that knew Kenwood who might have a sense of these properties.

And that’s how Tony Rezko’s name came up, because he was an active developer in that area and owned lots in that area and had done development in that area.

So I don’t know, I don’t remember exactly how this transpired, whether it was in a face-to-face meeting or I called Tony or what have you, but I said, “I’d like your opinion on this property.”

He asked where it was, I told him, he said, “Well I’m going to be in the neighborhood. I might go by and take a look at it. I think he may have done so prior to me being with him, but I don’t recall exactly how that conversation transpired.

The bottom line was that he said, well, he called me back or we spoke and he said, “If you want me to take a look at it, I’d be willing to go into the house and take a look at it.”

I said, “Great.” I arranged with my broker, he and I looked at the house, he said, “This looks like a very sturdy house.”

And at that point, I think, he had found out, perhaps because he knew the seller’s broker, that the person who was, who had the option on the lot was also the person who had renovated this house six years ago. It had gone through a gut renovation six years ago. That that individual was a former employee of Tony’s who was also a fellow developer.

Tony asked me during the course of one of these conversations why I might not be interested in buying the lot and keep the property intact. And I said that, you know, it wasn’t worth it to us to spend an extra $600,000 or so on a lot next door when Michelle and I were really interested in the house. So he said, “Well, I might be interested in purchasing the lot,” and my response was, “That would be fine.”

And my thinking at the time—and this is just to sort of flag this, this is an area where I can see sort of a lapse in judgment where I could have said, “You know, I’m not sure that’s a great idea”—but my view at the time, when he expressed an interest, was that he was a developer in this area that owned lots, that he thought it was going to be a good investment.

And my interest, or my motivation was, here’s somebody that I knew who, if this lot was being developed, it’d be better to have somebody who knew, who I knew, who, you know, would give me schedules, keep me apprised of what was taking place and so forth. So I didn’t object.

He then said, “Well, let me look into it since I know the guy who has the option on the lot.” And in the meantime we simply proceeded to then get an inspector to come in, take a look at the house; it passed inspection. And so we decided to put down a sales contract.

We put down a sales contract, or we put down an offer of $1.3 [million]. The sellers came back, they lowered their offer. I think it was to $1.8 [million] or $1.75 [million].

We raised our offer to five, uh $1.5 [million], and all this was done through our respective brokers. The issue of the lot and the lot price never came up.

It was never an issue in our purchase. Tony Rezko was not involved in those negotiations. Those were negotiations between our brokers, and we ended up agreeing to a sale price of $1.65 [million].

I have in the documents a statement by the sellers indicating that at no time did they ever consider the lot in relation to the price of the house, that they did not offer a discount on the house, that there was no contingency with respect to our house purchase relative to the lot. There was simply no connection between our purchase of the house and our price of the house and the sale of the lot.

As I indicated before, the lot was already for sale. I wasn’t involved in that transaction. I’m not aware of how Tony ended up getting the option from the previous individual. That was not something that I was concerned with. I didn’t know exactly what the price was that he paid. I knew that there had been an option there for 600 and something dollars because the broker had told me when I had first gone to visit.

But the notion, now, this is the area where I want to be absolutely clear, because, frankly, this has appeared in various, in various reports, or the intimation, and John [Kass, Tribune columnist], you’ve been very specific about this, this notion that somehow I got a discount and Rezko overpaid or was somehow involved in that is simply not true. And the sellers have confirmed that it is simply not true.

Rezko bought this, and I don’t know his motives, and I think it is perfectly legitimate to say that he perhaps thought that it would be nice to have a lot next to me, he perhaps thought that this would strengthen our relationship, he could have even thought he was doing me a favor.

But I also think that he thought that he was engaging in a sound business practice and that he was going to develop the property. And the, the fact that there wasn’t some steep discount, is in part born out by the fact that he has now, he transferred the lot to his attorney, his attorney put it on the market and it appears that a sale is about to be consummated on the property for a price that I think reflects the legitimate value of that lot. So that’s the house purchase.

And so the intimation that somehow the purchase of my house was somehow aided by Tony Rezko is simply factually incorrect, and it has been confirmed by the sellers that that is factually incorrect.

Sun-Times:

Fast-forward to shortly after I’m inaugurated. Or sworn in. I’m getting ahead of myself. Because of the attention I received during Senate campaign and the convention, my book sold well, I came into a sizeable amount of money that allowed us to move. We’d outgrown our condominium. We contacted our real estate broker, Miriam Zeltzerman. She was the person who sold us our condo in East View Park. Told her we were interested in putting our condo on the market, interested in having her show us houses in the area. She and Michelle went off and probably looked at 10 houses. One of the last ones they looked at was the house on Greenwood, which Michelle fell in love with and was actually slightly above, well it was above, what we’d originally intended to pay.

Michelle called me. She says, “I saw this house, I really like it, it’s more than we originally budgeted for. I’d like you to take a look at it.”

So I went with Miriam to take a look at the house. It was a wonderful house. The asking price was $1.9 [million].

The sellers, the Wondisfords, had originally sought a higher price because it was not just the house, but because there was a lot that was basically the side yard. They had put that on the market in quite some fashion for a very long time. It had not sold. So they decided to break it up, separate the lot, which was fully developable from the house. So they were listing house separately at 1.9. The lot already had option on it when we went to look at it. The reason the lots were separated was because of seller, and the two transactions were entirely separate.

We come back. I talk to the broker and she says you should probably give a lower offer. You never know. They’ve had this on the market. I think the house had been on the market for six months. And the sellers, the Wondisfords, wanted to make sure they sold both, not just one.

The lot was not their difficulty. Their difficulty was selling the house. This is what my broker told me. . . . Michelle and I talk about it, and we decide is there somebody that we should – there are some people we should talk to who know more about the real estate market in Kenwood – because we had never purchased a house before. Tony was a developer in that area, was active in that area, owned lots in that area and had developed in that area. So, I don’t recall whether I called him, whether we saw each other, whether it was something that was already scheduled, I don’t remember the exact circumstances. But I did bring to his attention, we are looking at this house. We are interested in it. I’d love for us to give your opinion on it.

He got the address, and I think he may have looked at it separate and apart from me when he was in the neighborhood. . . . The upshot is that we found out the person who had renovated the house six years earlier was also the person who had an option on the lot, and that person had worked for Rezko, and so he knew him and was an active developer. So Tony then arranged with me and Miriam Zeltzerman to take a look at the house because I wanted to get a basic assessment. He took a look at it with me. Miriam Zeltzerman was there. And he asked me about the lot, and I said, there’s already an option on it. It’s not something we want to purchase. It’s not worth it to us to spend an extra $600,000 on a lot. We’re just gonna buy the house.

He, at that point, expressed some interest potentially in purchasing the lot.

So my response was, and I’ll be honest with you, my basic view at that time was having somebody who I knew, a friend of mine, who would be developing the lot if he could, would be great. It would be somebody who we know. If we had problems or there were complaints, etc . . .

We then put in a bid for $1.3 [million]. The sellers came back. We went up to $1.5 [million]. Ultimately, we settled on a price of $1.65 [million].

This was conducted entirely between my broker and the seller’s broker. [Discussion of the documents brought by Obama about the house.] Tony Rezko had nothing to do with negotiating the price of the house. The lot was an entirely separate transaction. There’s confirmation from the seller that this idea that I somehow got a discount on the property is simply not true. It is not factually correct. We negotiated it in the same way that housing transactions are negotiated all across the country. And I should add, by the way, in terms of the Wondisfords, just to give a little context, the reason this appears in an email that first comes from our lawyer and we had not put this out earlier, is that they did not want to be caught up in a media circus. They’re very private people. They were the ones who originally contacted us when the story first broke. . .