Foreclosures are a great way to get your dream home or investment property at a low price. In the northern and northwestern suburbs of Chicago, bidding on foreclosures can get quite competitive.
Unlike a standard home purchase, buying a foreclosure is more complex and carries its own risks. This is why the assistance of an experienced and knowledgeable broker is a must.
Get in touch with Rory James and HomeSmart for up-to-date information on foreclosures in Schaumburg Real Estate, Elk Grove Village Real Estate, Arlington Heights Real Estate and the rest of the region, and for thorough professional guidance throughout the process. Call them at 847-971-0674 or send them an email at rory(at)hotillinoishomes(dotted)com.
If you’re considering buying a foreclosure, here’s a quick guide to help you get started.
Overview
In Illinois, it normally takes 7 months from the time the homeowner receives a notice of default from the lender to the time the property is put on public auction. The 7-month period is referred to as “pre-foreclosure.”In many cases, homeowners on pre-foreclosure decide on selling their homes before actual foreclosure to cut their losses.
The home goes into foreclosure when the state court enters a final judgment to foreclose. At this point, the property goes into public auction, which often involves tight competition among buyers. Foreclosure auctions are announced publicly.
If the lender, who often participates in auctions, comes out as the highest bidder, the title goes to them. The property then becomes Real Estate Owned (REO), which the lender typically endorses to a broker for listing.
Pre-foreclosure sale
Buying a home on pre-foreclosure is often the best course of action for several reasons:
- The price at this stage is lower than when the home becomes REO
- You get to deal directly with the homeowner or their representative instead of the lender at a time the homeowner is willing to sell
- You get to avoid highly competitive and nuanced public auctions
If the property is listed, you can get in touch with the listing agent. If not, you may opt to contact the owner or their representative directly, or work with your own broker to initiate the contact with the homeowner.
Buying pre-foreclosure can be a sensitive process, as the homeowner may be in an emotional state and will not be as cooperative as you would like. Your opportunities to view the home may also be limited. With this in mind, it’s best to work with a real estate broker who has the experience in working under such circumstances and is knowledgeable on state laws affecting pre-foreclosure sales.
Buying at an auction
An important thing to keep in mind is that, in auctions, you’re buying the property “as is.” If you find any problem or defect after the sale, you alone have to shoulder the cost of the repair. This is why it’s important to view and inspect the home before the auction, and in most cases, you will need the help of an agent or another third party to do that.
At the auction, you will need to present earnest money to the lender’s representative before the bidding starts. If you win the bid, the earnest money becomes non-refundable.
You can still get a good price for foreclosures during auctions as the lender has no opportunity to profit from them. However, lenders may participate in the bidding and often end up as the highest bidder.
Buying REO
Real Estate Owned properties are listed similar to standard homes for sale. Often, the lender, who now has the title to the property, gets the services of a broker to list and market the home.
Buying REO is the safest and easiest way to purchase a foreclosure because you’ll get all the chances you need to inspect the home and make a well-calculated offer. However, home values at this stage are often higher than during pre-foreclosure or auctions, as the lender would typically try to make a profit or get as much as they can from the home.
For more inquiries on buying foreclosed properties in Schaumburg Real Estate, Elk Grove Village Real Estate, Arlington Heights Real Estate, and the rest of the region, call Rory James and HomeSmart at 847-971-0674 or send them an email at rory(at)hotillinoishomes(dotted)com.