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Foreclosures, Auctions, Short Sales, REOs, Bank Sales...
At a dinner party hosted by a Lakeview couple last night the topic of foreclosures came up as I'm sure it has at thousands of other social gatherings during these past tumultuous months. As the owner of Best Chicago Properties in the West Loop, after answering the hushed question "how are you staying in business" twelve times I found myself dispensing advice to party goers clearly trying to figure out if they were missing the investment opportunity of a lifetime by not buying a foreclosed property.

So, as promised, here is a quick wrap up of the types of deals to be found...they come in four basic varieties, all requiring lots of patience, all with a different level of difficulty:

1. Short Sale, also called a pre-foreclosure sale normally via an auction or via a real estate broker working for a bank to help sell portfolios of seized property. With this type of deal, the homeowner is usually in arrears and is trying to sell the property before it is taken by the bank. Here you might end up with a difficult negotiation with a stressed-out seller. If the price turns out to be less than the bank is owed we call it a short sale wherein the lender would need to agree to the deal taking 60 to 90 days. One of my buyers has been waiting 3 months so far to hear if the deal is approved...one bank has signed off but there is a second mortgage so the second bank also needs to agree...this means even more time...another 30-60 days? Or never if the second bank which stands never agrees.

2. Bank Auction; Buyers at bank auctions most often are flying blind...no inspections, no title insurance...hey but it's fun to say "Yeah, I bought the place at auction" Kinda implies you got a great deal...right? Maybe, maybe not. If you?re the winner, you've bought a home, no backing out. If by chance the place you?ve bought is occupied then you'll experience the joys of trying to evict in Chicago...not a short or pleasant process. If you're a fan of the unknown then go for it! To me it all seems so unpleasant.

3. R.E.O. Properties; Properties that don't sell at auction are called R.E.O.s (real estate owned) and are the most transparent of foreclosure transactions. Buyers can do inspections and the bank owner will deliver a "clean" title, ensuring there are no outstanding taxes or other liens. If you look up the definition of red-tape you will find R.E.O. properties. You're dealing with a bank, not a person, and that bank may be in the process of trying to sell hundreds, even thousands, of other houses. Could be worth the wait.

4. Relo; OK, this is not really a foreclosure type thing but I thought I'd stick it in here since I've found buyers awesome deals on relo properties...I mean deals that easily rival deals from Short Sale, Bank Auction and R.E.O. Companies that transfer their employees often get caught holding their real estate and then need to dump it. The last one of these I did, my buyer got the place for about 75% of the market value. The drawback is you are working at a snail's pace since the giant relo companies are just as slow as banks!

Call me if you want to discuss!
February 20, 2009