Foreclosure in 60622>Question Details

Kara, Other/Just Looking in Chicago, IL

what is involved in buying a foreclosure?

Asked by Kara, Chicago, IL Mon Feb 4, 2008

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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
4 votes Thank Flag Link Sat Mar 15, 2008
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"!
3 votes Thank Flag Link Fri Apr 18, 2008
I just got a response from asset manager for an offer on a REO that I put in back in SEPTEMBER 2008 saying he wants to schedule the appraiser to come out and value the property for close! Just goes to show you what incompetency is going on. I canceled the contract after I found another property for my client! WOW!

Never even received a call that the contract was accepted.

Just thought I would share...
2 votes Thank Flag Link Fri Mar 13, 2009
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.
2 votes Thank Flag Link Thu May 29, 2008
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.
2 votes Thank Flag Link Wed Feb 27, 2008
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.
Web Reference:
2 votes Thank Flag Link Tue Feb 5, 2008
The banks and affiliates are in this to make money.

The reason may be that they are gaining "x" amount of dollars somewhere in this big plan (in spreadheets, QTR reports, etc.).

I don't believe it's incompetence. They may be milking it.

After all, they learned the rules and how to get away with breaking them for sooo long!
1 vote Thank Flag Link Wed Dec 17, 2008
Carl, right on the button. NO ONE on the Buyer or Seller side knows anything until the last minute. Most of my Buyers gave up after a month after not hearing anything then "the call" comes in. Lost many at the table.

Buyers require patience, patience patience...definitely.

But some that wait walk away with a super great deal!

They (banks/attorneys) really have to come up with a better game plan to move this inventory much faster. There's so much red tape. More properties would sell!!!
1 vote Thank Flag Link Wed Dec 17, 2008
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.
1 vote Thank Flag Link Sat Apr 19, 2008
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!
1 vote Thank Flag Link Mon Feb 4, 2008
Good thing your client has a great RE!

I too was surprised that an offer I put in last May was accepted....meanwhile, the selling RE must still be going through her e-mails and faxes to finally read my cancelation notice back in Dec......

Go figure with these lending institutions...
0 votes Thank Flag Link Fri Mar 13, 2009

Maybe the Feds didn't throw enough money at the banks in round one? It just blows me away that the banks have not figured out a system to unload these distressed properties. It's amazing how clueless they are...hence the RE are with the whole process.

On a funny side note, while I was driving to the Title company to meet my lawyer and RE to close on this foreclosure last Thursday my RE received a call, while he was driving to the meeting. It was the Lawer from yet another foreclosed property calling to see if I was interested in their property that I gave up on after waiting 6 months with not a peep from anyone!

Here's the kicker, when my RE told the Lawyer that we were on our way to close on a different deal, where we waited 6+ months on, and that we were no longer interested in their property. The Lawyer then offered up the place for 10k less than what we had offered!

Goes to show you what a mess the banks are in...
0 votes Thank Flag Link Wed Dec 17, 2008
You will need sometimes up to year of patience to wait for an answer then you can snap up a great deal. Just remember this, no one, and I mean no one, from your Realtor to the selling Realtor ever knows what's going on. I hear some say they do but don't believe them.

The banks keep everyone in the dark and then Wham!, the lawyer for the bank ( that's who the bank calls first here in Chicago) calls your Realtor and says "OK, we have accepted your ridiculous low ball offer but you have 7 business days to close or the deal is off, or something along that line.
It's best to be working an all cash deal to get a sweet heart of a price on a foreclosure.

Short sales work pretty much the same...everyone is clueless until the bank gets to your file...

Did I mention that you need patience?

Happy Hunting!
0 votes Thank Flag Link Tue Dec 16, 2008
The process is long and, frankly, at times frustrating. Too many agents claim to be foreclosure experts when they have little to no experience to back that up. I am affiliated with the biggest banks out there and have worked with hundreds of foreclosed properties both as a buyers and sellers agent. If you're looking for honest, accurate, and candid answers to specific questions please get in touch with me privately as I do not like to post answers to questions like this in public forums.
0 votes Thank Flag Link Tue Dec 16, 2008
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
0 votes Thank Flag Link Wed May 28, 2008
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.
Web Reference:
0 votes Thank Flag Link Wed May 28, 2008
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