Buying REO property or a foreclosure in Chicago?
Just as with any property purchase, your wisest move is to hire a professional real estate agent.
If you have questions about real estate in Chicago, Illinois, call me
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What is an REO?
"REO" or Real Estate Owned are properties which have been foreclosed upon and are currently owned by the bank or mortgage company. This is not the same as a property up for foreclosure auction.
When buying a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees accrued during the foreclosure process. You must also be willing to pay with cash in hand. To top everything off, you'll get the property totally as is. That may include existing liens and even current denizens that need to be thrown out.
A bank-owned property, on the other hand, is a much cleaner and attractive option. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The bank will handle the removal of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing.
You should be aware that REOs may be exempt from typical disclosure requirements.
For instance, in California, banks do not have to give a Transfer Disclosure Statement,
a document that normally requires sellers to disclose any defects they are knowledgeable of.
By hiring Reflective Realty Inc, you can rest assured knowing all parties are fulfilling Illinois state disclosure requirements.
Is REO property in Chicago a bargain?
It is frequently thought that any foreclosure must be a steal and a possibility for guaranteed profit. This frequently isn't true. You have to be very careful about buying a REO if your intent is to make money off of it. Even though the bank is usually eager to offload it promptly, they are also looking to get as much as they can for it.
When pondering the value of a foreclosure, carefully analyze comparable sales in the neighborhood and be sure to take into account the time and cost of any repairs or remodeling needed to prepare the house for resale.
It is possible to find REOs with money-making potential, and many people do very well buying and selling foreclosures. But, there are also many REOs that are not good buys and may lose money.
Time to make an offer?
Most banks have a department dedicated to REO that you'll work with when buying REO property from them. Commonly the REO department will use a listing agent to get their REO properties listed on the local MLS.
Prior to making your offer, you'll want to contact either the listing agent or REO department at the bank and discover as much as you can about what they know about the condition of the property and what their process is for accepting offers. Since banks most commonly sell REO properties "as is", it may be in your best interest to include an inspection contingency in your offer that gives you time to check for unknown damage and cancel the offer if you find it.
As with making any offer on real estate, your offer may be more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender.
Once you've presented your offer, it's customary for the bank to counter offer. From there it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer.
Realize, you'll be contending with a process that most likely involves a group of people at the bank, and they don't work evenings or weekends. It's typical for the process of offers and counter offers to take days or even weeks. Reflective Realty Inc is accustomed to these situations and will work to ensure there are no undue delays.