Interested in REO property or a foreclosure in Chicago?
What's an REO?
"REO" or Real Estate Owned are homes which have been foreclosed upon that the bank or mortgage company now owns. This is not the same as real estate 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 amassed during the foreclosure process. You must also be ready to pay with cash in hand. To top everything off, you'll receive the property totally as is. That possibly will include current liens and even current tenants that may require removal.
A bank-owned property, on the contrary, is a much cleaner and attractive deal. The REO property didn't find a buyer during foreclosure auction. The lender now owns it. The lender will deal with the elimination of tax liens, evict occupants if needed and generally plan for the issuance of a title insurance policy to the buyer at closing.
Take notice that REOs may be exempt from normal disclosure requirements. For instance, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that usually requires sellers to reveal any defects they are knowledgeable of. By hiring Patti McDonald - Carrington Real Estate Services, you can rest assured knowing all parties are fulfilling Illinois state disclosure requirements.
Am I guaranteed a good deal when purchasing a bank owned property in Chicago?
It is commonly presumed that any REO must be a good deal and a chance for easy money. This isn't always the case. You have to be very careful about buying a REO if your intent is to make money. While it's true that the bank is typically anxious to offload it soon, they are also motivated to get as much as they can for it.
Look closely at the listing and sales prices of similar homes in the neighborhood when making an offer on an REO. And factor in any repairs or upgrades necessary to prepare the house for resale or moving in. The bargains with money making potential exist, and many people do very well buying foreclosures. But, there are also many REOs that are not good buys and may not be money makers.
Time to make an offer?
Most mortgage companies have a department dedicated to REO that you'll work with in buying REO property from them. To get their properties advertised on the local MLS, the lender will usually hire a listing agent.
Before 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 their knowledge concerning the condition of the property and what their process is for accepting offers. Since banks most commonly sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for hidden damage and terminate the offer if you find it. As with making any offer on real estate, you'll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender.
After you've made your offer, it's customary for the bank to make a counter offer. From there it will be your decision whether to accept their counter, or submit another counter offer. Your deal could be settled in a single day, but that's usually not the case. Since offers and counter offers usually give the other party a day or longer to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer.