Today, buying Chicago foreclosures has become a popular strategy among real estate investors. They find it to be a great investment process that helps in reducing their initial costs and increasing the profits. To be honest, the biggest advantage of purchasing a foreclosed property is the discount. Although the phase of the foreclosure process may vary, still the discount achieved on buying the property is huge.
Buying a foreclosed property not only ensures a potential return on your investment but also allows you to invest in real estate with less capital. In the case of an auction, you can be fortunate enough to get the largest discount on a foreclosed property. Remember, you can come across several investment opportunities as a real estate investor due to the high foreclosure rate. But this requires the right strategies and approach.
You can buy a distressed property for sale in any phase such as pre-foreclosure, auction, real estate owned (REO), or government-owned. While many real estate investors consider buying a property in the REO stage to be the safest and easiest approach, they fail to realize that the foreclosure procedure is generally lengthy and heavily regulated by the government. As a result, it becomes a tough job to get a good deal.
So, this guide will help you to learn the important steps for buying Chicago foreclosures from the bank.
- Finding Out a Great Deal
You may find several options for buying a foreclosed property in Chicago. But, always make sure to focus on your business objectives. Proper research will help you to identify great deals that will align with your investment goals and also be the greatest potential for a healthy return on your investment.
- Evaluate the Property Carefully
Most often, investors neglect to take a good look at the foreclosed property before investing in it. Remember, foreclosed homes are always in distressed condition. This is because the owners fail to make the loan payments, so it’s quite likely that they cannot afford repairs and proper maintenance. Furthermore, a vacant house deteriorates quickly, especially due to Chicago’s harsh climatic conditions. Therefore, you should always include a budget for repairs.
- Research the Hidden Costs
Researching is one of the most essential responsibilities before investing in real estate. You should always find out if there are any tax liens associated with the foreclosed property. In some cases, you may also come across lis pendens real estate. If you are unaware of lis pendens then let us tell you that it is an official notice provided to the public stating that a lawsuit regarding a claim on a real estate is filed.
- Estimate Your Profit
Always make sure to evaluate the last three to six months’ sales in the neighborhood where your potential investment property is located. You can easily access this information with the help of a real estate agent or by checking public records. Then select at least three properties that are the closest matches to your potential investment property in terms of area, the number of bedrooms, baths, and amenities. Note, comparing these properties will help you find out how your Chicago foreclosure purchase will look after buying and making the repairs in the property. Then calculate your profit margin by deducting the purchase price, closing costs, and repair costs from the full market value.
- Make a Reasonable Offer
Perhaps you will always try to get the best possible deal. But do not mistakenly assume that the bank will accept an insultingly low offer just because they want to offload the foreclosed property. Keep in mind that banks are never in the business of selling houses. They outsource real estate agents for the job. While the agents try to get the house sold at the earliest, they also look for the best possible sale price to maximize their commission. An unreasonably low offer can stop the negotiation process. So always make sure to make a reasonable offer that they won’t refuse.
Remember, real estate investors must be always cautious. Buying a distressed home in the foreclosure phase allows you to purchase a discounted property with potentially less risk and hassle.