Should you consider a foreclosure property when buying a home in Chicago?
The Chicago real estate market was hit very hard by the recent financial crisis in the United States. Home values plummeted virtually overnight, causing many homeowners to suddenly own a home that was worth less than what they owed on the mortgage. The real estate market collapse coupled with high unemployment rates and an overall economic downturn led to historically high foreclosure rates throughout Illinois and in Chicago specifically. Although the economy overall, and the real estate market in particular, appears to be rebounding, Chicago foreclosure listings remain plentiful. If you are in the market to purchase Chicago real estate, it may be worth your time to look at the Chicago foreclosure listings as you can often purchase a property for considerably less than its true market value when you purchase a foreclosed property. Before going that route though, be sure that you understand how purchasing a foreclosure differs from a traditional sale.
During the 12 month period ending in April of 2013 there were 31,804 foreclosures completed in Illinois with over 20,000 of those taking place in the Chicago metropolitan area. Illinois’s foreclosure inventory was 4.3 percent in April of 2013. At 5.6 percent, Chicago’s foreclosure inventory was almost double the national average of 2.8 percent. The good news, however, for the Chicago real estate market is that the foreclosure inventory actually decreased (as the market improved) during the previous 12 month period – a strong indication that the economy overall, and the real estate market specifically, is recovering.
For a buyer looking for a deal among Chicago real estate, foreclosed properties remain abundant. Understanding how purchasing a foreclosure differs from a traditional sale is crucial to maximizing your savings. Finding available foreclosures can be more of a challenge than locating traditional homes for sale. While some foreclosures remain on the market for weeks, even months, highly sought after properties can be gone within hours. Working with a real estate professional who has the inside track to Chicago foreclosure listings gives you a significant advantage.
You should be prepared to act fast if you find a property you wish to purchase that is a foreclosure. Unlike a traditional sale that is often made contingent upon the buyer obtaining financing, a bank expects you to already have the financing lined up if you are not paying cash. This typically means you need to meet with a lender ahead of time and get a pre-approval letter. Another difference when purchasing a foreclosure is that very little (if any) negotiation will likely be involved. A bank often either rejects or approves an offer. Unlike a private seller, a bank is unlikely to bother submitting a counter-offer so it may be best to go in with your best offer. Determining the true market value of the property, in the condition it is in, is crucial when making your offer. Because a foreclosure is sold “as is” in most cases, you will need to factor in the estimated cost of repairs or renovations that need to be made. Again, working closely with an experienced real estate agent is the key.
Once you have submitted an offer, however, don’t expect a rapid reply. You could wait weeks, even months, to hear back from the bank. Because of the time it often takes to conclude the purchase of a foreclosure it is usually best to steer clear of foreclosed properties if you need to get into a home within a limited time frame.
Although it can take longer to get through the purchase of a foreclosed home, it is often well worth the wait in the end. Chicago foreclosure listings frequently include some magnificent properties at excellent prices. Consult with your real estate professional if you think purchasing a foreclosed home is right for you.