Maybe you’ve heard about people making a living buying and selling foreclosures. It isn’t something you want to just jump into. There are processes and strategies that are far different than buying a regular home off the MLS.
This article will let tell you what you need to know about working with the banks and how to buy foreclosures in Chicago.
What Type of Foreclosure Do You Want To Buy?
There are three stages of foreclosure, and each requires a different strategy.
- First, you have the house in Pre-Foreclosure, or, more commonly called a “short sale.” During this period, the current owner may still sell the home themselves in an effort to save them the pain of having the bank take their home. The homeowners are usually eager to sell but will want to recoup what they owe on the house so they are able to pay off the bank. Owners in this situation do not typically have much time until the bank comes knocking at the door, so you’re able to find a great deal, and help a fellow homeowner save themselves from doing horrible damage to their credit.
- Once a home is out of the pre-forclosure phase, there will often be a public auction of the home. You may have heard of this happening on the courthouse steps, and while some auctions are now done online, others are done in person, some still on the courthouse steps. Purchasing an auctioned home offers both great risk and reward. The bank can only get back what is still owed to them on the house, they are not allowed to make a profit. If you are able to find a hidden gem, you can find a great deal, paying the bank only a fraction of what the home is worth. However, you must remember you are buying as-is. Without a proper inspection, you could end up buying a home in need of extensive repairs or that in encumbered with liens.
- The third type of foreclosure is a Bank Owned REO (Real Estate Owned.) This is the most common as it is typically the easiest way to buy a foreclosed property. The bank will want to get this property off their books fast, however, the home will still be priced close to market value. You can definitely find great deals, but make sure the costs to repair and maintain the home don’t outweigh the deal you are getting.
Work With A Pro
If you are in the market to buy a home for yourself or your family, and you want to find the best opportunities, you will want to work with a licensed realtor. They can help you to work with the bank, set your terms and navigate the process of purchasing foreclosed properties.
They can help you find deals as they become available, and help to steer you away from homes with potential problems.
However, at the end of the day, you are ultimately responsible for the home you buy. This is why you will want to have your own, independent inspection done if possible.
If you are looking to buy a foreclosure for a fast flip, you might want to think about partnering with a seasoned investor who can show you the ropes, or work with a company like Chicago Home Buyers who can help guide you throughout the entire process.
Get Your Financing In Order
Depending on the home, obtaining traditional financing might require you to jump a few additional hurdles. The banks are investing in you, and if the home appraises for a low amount, you might not be able to get the loan you’re after. Many foreclosure buyers deal in cash.
A cash offer can speed up the process by avoiding additional red tape from another bank. Many foreclosure investors deal only in cash, making the process highly competitive.
Making Your Offer
Know your limits. Sure, you might pay a bit more if you are trying to buy a home you want to live in for the next 50 years. But if you are only looking to flip, you will not want to pay a dime more than you have to.
You must have predetermined price guidelines you stick to. You are better off losing a deal than losing money. The banks will often ask you to submit your “highest & best” offer.
In essence, this is the bank, asking for all interested parties to submit their maximum bid. If you’ve ever bought anything on eBay, you’ll know those last few seconds, trying to get the highest price can be invigorating and stressful!
Don’t get caught up trying to outbid what you think your competitors will offer. Stick to your price, and walk away if you have to.
At Chicago Home Buyers, our mission is to help you navigate the world of foreclosures and help you find a great deal. If you have any questions about the process, or if you would like to receive early access to deals, fill out this short form, or give our office a call now! (312) 300-2043