Market Conditions in Chicago>Question Details

Mark10, Other/Just Looking in Chicago, IL

Are foreclosure and short sales really a bargain? From what I am seeing, many foreclosure prices are pretty

Asked by Mark10, Chicago, IL Thu Jul 17, 2008

high, and the down payment required is also high, so I don't how they are bargains?? I am guessing most of foreclosure are from recent purchases, I would see a bargain if someone after owning their house for 7 or more years and cannot pay no longer as a bargain. And for short sales, it seems requires a long process of time before it can become a short sale. Is there really people out there buying up the foreclosure or short sales like when rehab purchases?

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What area(s) are you referring to?

I've had client's that have purchased foreclosures and short sales and they've received very good deals in my opinion. Some of them have purchased them in hopes of rehabbing and flipping and the key is to be able to purchase them at a price that even after the rehab you'll be able to price it below similar properties in the area. I understand it isn't always easy to identify these properties, but with the assistance of a good realtor who's familiar with the area(s) you're interested in, you should be able to accomplish this. In fact, one of my clients purchased a property for less than 50% of the original loan amount!!! These deals are out there, but they require a lot of work.

The banks are requiring a larger down payment to protect themselves from lower housing prices and their spreads have widen, making it more expensive to borrow money.
1 vote Thank Flag Link Thu Jul 17, 2008
What area(s) are you referring to?

I've seen banks get a lot more aggresive with their pricing on foreclosures. Asset managers are asking agents what it will take to sell the property in 45 days and are pricing it accordingly.

In some cases banks are losing over 50% of the loan amount. So I think that would represent a bargain. However, in most cases these properties will require a lot of work.

I have had some client's purchase foreclosures and short sales in hopes of flipping them and the key is to buy it cheap enough that even after the improvements you can price the property below similar properties in the area.
1 vote Thank Flag Link Thu Jul 17, 2008
Something to keep in mind is the precise reason so many homes are getting to the foreclosure status, which is the owners/sellers have either maxed out the equity by the refi boom over the past 15 years, as well as buying homes with no money down, and even in some cases acquiring loans which were actually over 100 percent financed(103% for example). Now that values have declined, many of these loans are upside down, in other woeds the amount owed to the lender is more thatn the value of the property. Now is the time when quality, informed, eduacated realtors are very helpful (like myself haha). Due dilligence, as well as aggressive negotiating can facillitate the purchase of homes at 65-75% of the actual value. My answer explains why you may see homes being foreclosed on, which may not seem like great bargains.
0 votes Thank Flag Link Mon Jul 21, 2008
Hello, my clients and I buy foreclosures in all stages with success. If you do your homework and get a little luck, you can acquire a home for 60-70% of its value. Timing has a lot to do with it, as sometimes you are looking at a place and then the lender drops the price $50,000 and you have to act quick (then wait a long time). It would be hard to pursue them with professional help though I imagine. You are correct- most of them are dogs, you have to find the diamond in the rough and financing is harder now. Good luck!
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0 votes Thank Flag Link Mon Jul 21, 2008
Hi Mark10-
I am a realtor based out of Barrington, however, I'm also a personal investor.

My expertise is Northern Lake County. I have personally and professionally acquired properties at auction, REO, Foreclosure, Pre-Foreclosure and short sales.

Each transaction has their own quirks. Each can be great deals but they can also be a HUGE Loss.

If I were you, I wouldn't get caught up in what type of sale you are purchasing unless you are on a time constraint.

Auctions are cash deals with a 24 hour turnaround. Usually without a loan until they have been rehabbed.

REO, Pre-Foreclosures, Foreclosures, Short Sales are all bank associated. They all can still be Loan-able.

Remember whatever you do, you make your money when you buy, not when you sell.

So, find yourself an agent that you can trust and work with openly. Explain to them exactly what you are looking for.

When it comes to investing, you need an agent that is well versed in the arena that you have chosen to invest and one that treats your transaction as if it were their money. Ask for past successes.

Hope that helps. If I can help in any other way, please feel free to contact me directly.
0 votes Thank Flag Link Sun Jul 20, 2008
Hello Mark,

I am a realtor based out of Hyde Park. We have seen a rise city wide in forclosures and short sales. I will say that in my experience, forclosures and short sales are available and offer a bargain for investors. These sales have to be approached on a case by case basis. Sometimes a property seems like a deal, but so much capital has to be reinvested, you may find a private seller willing to give you a similar deal on a property with less capital reinvestment needed.

Bank sale processes can be cumbersome, but a Realtor with sharp negotiating skills usually can get the best outcome for you. Banks can be slow to reply, want to hold the financing, etc...etc....

My advice to you is to engage a Realtor you are comfortable with, and look at the recent sales in areas you are interested in. You will be able to see what people are paying for property, regardless of who the seller is. You may find that a private transaction turns into a short sale, depending on how much you offer!

Email me with any questions or for help with your search.

Best of luck!
0 votes Thank Flag Link Sun Jul 20, 2008
The area I've been observing are mostly the south, southwest and north of Chicago, it's seems the south has the highiest rate of foreclosure. I don't have access to MLS, so I've browsing, Trulia and Tribune, they have a section of homes recently sold.
0 votes Thank Flag Link Thu Jul 17, 2008
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