It doesn’t seem like it was that long ago that I spent a lot of time trying to buy investment properties in Illinois from foreclosure auctions. The word around town was that some of the best deals on distressed homes could be found there. As a new investor, I believed it. Starting prices for bank foreclosures were cheap and bidding on some of these properties looked easy, even fun. Unfortunately, I soon found out that it was tough nabbing a house from an auction that I could renovate cheaply and sell for solid returns. That didn’t stop me from trying, though.
If you’re a new investor, or an experienced one looking for more opportunities to buy, renovate, and sell houses for profit, you might be thinking of paying a visit to one of several foreclosure auctions in Illinois. But, before you do, I’d like to let you in on what to expect.
How to Buy from Foreclosure Auctions in Illinois
Foreclosures in Illinois are down in most major housing markets across the state. In Chicago, according to the U.S. Foreclosure Market Report, all foreclosure activity is now 20% below pre-recession levels. And, in the Chicago-Naperville-Elgin area, foreclosure starts dropped by almost 13% in the third quarter of 2017 from the same time the previous year. Even still, banks serving the Chicago-Naperville-Elgin region started foreclosure proceedings on almost 4,400 homes last year, according to the same report. So, while there are fewer foreclosures overall, there are still thousands of auction houses coming down the pipe.
Because two of the most populated counties in Illinois—Cook and DuPage—have the largest number of foreclosures, let me tell you how buying from three auctions in those areas works and what you can expect. Of course, there are some variances between the auctions in these counties and you’ll want to take note so that you arrive prepared to win. The devil is in the details, as they say, and if you don’t come prepared, you won’t leave with a property.
DuPage County Sheriff’s Sale
There are limited opportunities to buy properties from the Dupage County Sheriff’s Sale but, in some ways, this county makes it easier and faster to obtain the homes than other counties. Foreclosure sales are held every Tuesday and Thursday morning in the jail visitation lobby. Deposits are 10% of your opening bid for any given property. Expect to pay the deposit and the balance, if you win, within 24 hours. Court approval takes about a week, which is less time than it takes for other auctions, and possession is granted 30 days after that. If the property is vacant, however, you can petition the court to take possession sooner. Viewing the properties for sale in person, however, is prohibited unless you’re invited by the occupant or the owner. And, you won’t know the opening bid amount or any other information about a property until 3:30 p.m. the day before the auction either. This makes coming prepared to buy at the right price difficult at best.
Cook County Sheriff’s Sale
Buying from the Cook County Sheriff’s Sale is difficult for a number of reasons, but not impossible. Auction days and times can vary from week-to-week at the Cook County Sheriff’s Sale since the lender is given the choice of sale date. Deposits by certified check are required and the full balance is due by a second certified check within 24 hours. Court approval is listed as taking about three to four weeks, but the backlog of cases in Cook County makes it more likely to take months. This can be problematic for investors who want to take advantage of selling at current market values or to simply avoid having to rehab, or sell, during Chicago’s cold winter season. Plus, these days only about 10% of foreclosure properties are sold through the sheriff’s sale, making your selection of deals pretty slim.
The Judicial Sales Corporation
The Judicial Sales Corporation operates one of the more challenging auctions to purchase a foreclosed property from, but they also provide more opportunities to do so. They auction homes from every county in the state on weekdays in the foreclosure sale room. When you register, you have to provide up to 25% of the maximum bid you plan to make on a property to be used as the deposit, even if you’re able to buy the house for less. That’s a lot of cash out of your own pocket to be without. If you win the bid, the balance is due by 2:00 p.m. the following day. If you’re late paying the balance, not only do you lose your deposit, you could be assessed additional penalties by the court. Court approval for houses bought through this auction can take months and possession takes at least 30 days after approval. This can delay the renovation and upend your profit margin if you have to sell your investment property during the wrong season or when the market takes a dip.
It’s also important to keep in mind that there are several problems that nearly all auctions pose, not just the auctions listed here. You must consider these issues carefully before bidding so that you don’t get stuck with a property that’s more of a financial burden than a good buy.
- Money. You won’t have an opportunity to work in a home inspection before you bid and the condition of auctioned homes are not guaranteed. If you can’t properly evaluate a property, you can’t know if you’re buying at the right price—or if you’ll see any returns after the rehab.
- Time. You will have little, if any, time to uncover whether there are any unpaid back taxes, liens, or other encumbrances—all of which you become responsible for as the new owner.
- Risk. You may end up inheriting the responsibility for evicting any occupants still on the property, whether they are the homeowners, tenants, or squatters. This can delay your ability to renovate the home, as well as cost you thousands in legal and relocation fees.
In addition to these difficulties, you may also find it hard to win a property in the first place. There can be a lot of investor competition at auctions, but there’s also significant competition from the foreclosing lenders. Lenders often bid on and buy back their own auction properties. So, you could easily end up wasting your time at an auction.
I’ve found it’s easier to approach distressed homeowners before their home is foreclosed on. At this stage, you can still purchase a home at below market value and help a homeowner get out from under a house they can no longer afford. It’s a better and less risky way to invest in real estate. But, how do you get those leads?
Get Bigger Potential Returns With Better Leads
When I was hanging out at foreclosure auctions and bidding on investment homes, it wasn’t really any fun. It certainly wasn’t easy. I never won an auction property either. But, back then, I didn’t have enough of the right lead generation tools and resources to find motivated sellers and bring them my way. So, I spun my wheels a lot—at auctions and everywhere else.
Then, I saw one of those “We Buy Ugly Houses®” TV commercials by HomeVestors® and did some research. When I learned how effective this national advertising campaign is for independently owned and operated HomeVestors® franchisees to connect with motivated sellers, I knew what I needed to do. I became a part of the team that’s bought and renovated over 140,000 houses nationwide since 1996.
Don’t waste your time expecting to find great deals at local auctions. Join the team that gets better leads on the best investment opportunities. Call HomeVestor® today.
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