Chicago Real Estate Investors

Foreclosure is a termination of all rights of the homeowner covered by a mortgage. It is a process in which the estate becomes the absolute property of the lending institution. The number of homes going to foreclosure grows daily. Some of the homeowners are able to work their way out of foreclosure, but many cannot. Foreclosure threatens these homeowners because they are late or seriously behind on their mortgage payments.

The process begins when the homeowner fails to make payments on the mortgage as agreed. This can be due to several reasons. Unemployment, divorce, medical challenges, terms of the loan, sick of property management, and even death. At this point borrowers and lenders now face a challenging situation. Both look for a compromise that is a win-win for both parties. The borrower to keep his home or business, the lender to keep receiving mortgage payments.

The proceedings usually start with a demand for payment which is usually a letter referred to as a Notice of Default (NOD). The lender will issue this notice when the homeowner has not paid the mortgage for 3 months.  In Illinois the following information may be useful:

There are many places to look when you want to find foreclosure properties. The key is finding them before someone else does. You can find them on the web, newspapers, lis pendens lists, seminars, direct mail, word of mouth, friends, real estate agents, real estate offices, and lending institutions just to name a few. Another option, you have might be to place an ad in the newspaper to attract those who are in foreclosure. If you have a good ad, your phone will begin ringing off the hook. 

The idea is that it's a numbers game. You've always got to be working to find more deals. Find out which methods of finding works for you and go with it.

Pre-foreclosures:

The buying of pre-foreclosures is a way to create a situation where everyone wins. This strategy involves just you, the homeowner, and in sometimes the lender. Remember that  you may not be the only investor looking at this property. When buying pre-foreclosures like this and in turn make a profit, you must do your due diligence. The following are some basic guidelines:

1- locate properties in distress

2- inspect the properties

3- determine the property owner's needs, his motivation and flexibility

4- determine the market value of the property, fix-up costs, potential sales price and profits

5- negotiate with the owner and the lender to build a win-win solution

6- close on the property, fix it up, and flip it quickly

Buying Foreclosures At The Auction-

Buying foreclosures at the auction is another way to purchase a property under the market value. The property is auctioned off to the public and the highest bidder walks away with the property. Most auctions require a small deposit down of the purchase price on the spot and the remaining balance usually within 1-30 days. In Illinois you must pay interest on any unpaid portion. Make sure you have your deposit ready and your financing is in place before you bid. If you are unable to pay the balance within the allotted time, you will Illinois lose your down payment, and they will auction the property off again.  This is also the riskiest place to pick up a foreclosure. Remember you are buying the property in "As Is" condition so if you did not do your homework then do not be surprised if you get a shack.

When buying foreclosures at the auction, you should:

1-visit a local auction and get a feel for the bidding procedure, find out the required down payment and when is the rest due

2-get your financing in order

3-do your due diligence to research the properties prior to the auction date

4-calculate your possible profits

5-determine your highest bid for the property

6-Go for it then work the deal to sell it quickly

Buying Real Estate Owned (REO)

Buying REO’s primarily involves the lender. REO means the lender reclaims the property and has taken control to minimize its losses. Buying REO’s is the easiest way to pick up a distressed property. Lender's are always listing properties that come back from the auction, because they cannot maintain excess inventory. These properties are considered to be a huge expense which needs to be eliminated. This gives the investor numerous ways to creatively negotiate with the lender on a purchase price. A disadvantage when buying  REO’s, is that you will pay close to market value for these properties because the lenders will have paid off any outstanding liens, taxes, and other expenses.

Financing foreclosures is the part of this business that people are worried about most. Most people automatically think you must have money to invest in foreclosures, which is what keeps them from going for it. You will find that this is not always the case, you don't have to have money to start investing. Even people with bad credit, no money, or no job can invest in foreclosure opportunities. You will find that financing is the easiest part , finding them will be the hardest, unless you know where to look. 

Disclaimer: The foregoing is not intended to be given as legal, financial or tax advice, but intended for instructional use only. If you require legal, financial or tax advice you should seek the assistance of a qualified professional.