Kara,
I find most of the answers here somewhat correct and somewhat inaccurate. I am a Chicago Realtor who has helped my clients buy foreclosed (and not yet listed) property, foreclosed (REO) property, and listed "short sale" (pre-foreclosure) property. I have listed and sold forecIosed property for lenders, I have listed and sold pre-foreclosed property for my clients. What I can tell you un-equivocally is that each and every one of them has been a different experience.

On the buy side, the most difficult has been where the seller's realtor is not the one negotiating with the bank; rather, some other 3rd party entity is negotiating the short sale for a fee. This type of arrangement seems to require the most patience, and a buyer's agent has very little ability to move the process along, if any. (This may also be true of the selling agent in this scenario--I don't know.) The longest my buyer client had to wait from offer-to-close was 3 mos. He almost walked away several times.

The most rewarding experience, for my client and myself, was a situation where my client had been tracking a pre-foreclosed property in his neighborhood, a very desirable area of the city. My client made an offer to the absentee owner contingent on seeing the property, which had a tenant. The offer was accepted but the property was purchased at auction the day the owner signed. It took a month before the sale was registered and in the interim my client was convinced someone else would get the property before he could. Eventually the property was registered, but the challenge was now locating the acquisition company who purchased it. I can't tell you how many dead ends we bumped up against until we found the holding comapny reference buried in a lawsuit. We made contact, submitted our original offer to the putative listing brokerage, and pushed and pushed until we got it accepted. It helped that the holding company rep was impressed by our persistence. In fact, this led to my becoming a listing agent on one of their properties. My client obtained the property at thousands below its 2002 price.

Buying listed foreclosure properties for cash (not as in cash as proceeds from a loan) yields yet another set of experiences. Generally 3% earnest money and a quick close (2 weeks.)

Be sure that you have an attorney who is foreclosure experienced. Sometimes the bank on a foreclosed property will attempt to corral the buyer into paying back assessments that should have been wiped out when they took back the property. My advice: don't pay the back assessments. It's the bank's mistake--not your obligation.

I could go on and on but I think you get the drift. This can be an exciting and rewarding game to play if you're patient, persistent and practised. Happy to help anytime.

Thu May 29 2008, 11:02

Kara,
Headaches, pain, fortitude, hopefulness, luck, patience, randomness and capital to buy repeatedly so you increase the odds of success.
All the best.

Tom McCarey
The Real Estate Lounge Chicago

Wed May 28 2008, 13:42

This is a great area to look in the market right now. I would suggest picking an area, working with people in pre-foreclosure to get a great deal. Illinois foreclosure laws and process takes longer than most other states and is handled through the courts. We are a judicial state so it can get a little more complicated than other areas. Hope that helps.
Greg

Wed May 28 2008, 12:12

Are you working with a Realtor or buying without one? I think if you use a Realtor it would be a wise choice. A realtor should know the ins and outs and make it easier for you.

Sat Apr 19 2008, 07:15

In REO's typically the "highest and best" offers are considered even if at below "market". They really want to recoup most money from the debt owed on these homes.

I've been through many of these types of homes and trust me, there are some that are run to the ground, but there are great "clean", winterized and maintained homes is great shape that you can get at $ .50 -$.70 on the dollar!

It's all about the "hunt"!

Fri Apr 18 2008, 14:29

There are so many deals out there in REO's! Short Sales/REO's the bank will take "less than" what is actually owed on the property and are willing to take a loss (& judgement filed against any loss they may have incurred). Some Realtor's do not know how to phrase the lingo, but if you get a good Realtor w/a great attorney that specializes in short sale/foresclosure (to perform due diligence and thorough lein & title search), you can make out like a bandit and get a great home at an outstanding price!

But the thing that most people are unaware of is that you cannot "low ball". You must make a fair market offer or the bank will flat out refuse it. Learn more on my website on how to make short sale offers...

If you are patient (it takes patience) willing to take a chance and wait for a few weeks for the lender to accept/refuse your offer

Sat Mar 15 2008, 18:52

As a local Chicago area Home Inspector, I would recommend you have the property thoroughly inspected before you close.

I have been doing more and more foreclosure inspections lately and while most homes are in reasonably good shape, there are a several major things you want to look out for. At a minimum, the home inspection is a good idea to get a punch list of required maintenance items so you can weigh your cost of getting the place in order before you move in.

A good home inspector will keep your best interest in mind and has no self interest other than your fee, the desire to do a good job, and your future reference.

Wed Feb 27 2008, 09:15

I have free info about buying foreclosures on my site. Hope it helps.

Wed Feb 27 2008, 06:40

It depends on what you mean- actually buying at a foreclosure auction or buying a bank owned home.
If you are at the auction, you must pay cash and are responsible for investigating title yourself. The bank will announce the opening bid and then you make yours. The challenge is to know how much work the home needs as you probably won't be able to see the home other than driving by. Auctions are not for the feint of heart- usually pro rehabbers with a lot of cash and team of contractors. For a bank owned home, you still by as-is, but you can tour the home just like any other. Most are on the MLS so you can enlist a buyer agent to help you with the process. If the property is in ok condition, you can secure a loan and you will get clean title from the bank. The process is drawn out, from negotiating to attorney review, as banks are swamped and often on the east coast. Email me if you want more details as I am familiar with this process and in the middle of buying a foreclosure myself (instant $80,000 equity at closing). The trick is to find the good property in a good area in a sea of crappy foreclosures. Short sales are another possibility with similar issues as a bank owned home.

Tue Feb 5 2008, 06:43

Luck and patients.
For every deal that you think that you have locked up you will have be prepared for someone else to offer more than you did to the bank.

Good Luck!

Mon Feb 4 2008, 16:50