Finding leads on investment properties is hard. When I first started my real estate investment business, there were times when it felt like I was spinning my tires as I sought to find properties to buy. It was a time-consuming and frustrating process because distressed properties were everywhere in Chicago. I mean, if you took a drive through the West Pullman neighborhood, you’d see house after house either in complete disrepair or abandoned altogether. Buying up and rehabbing these houses seemed like it could be good for the neighborhood and my real estate investment business. That’s precisely what the Chicago forfeiture process aims to help you do… but it’s not as simple as you may think.
What is the Chicago Forfeiture Program?
The City of Chicago is serious about fighting neighborhood blight. As one of the states hardest hit by the housing crisis, the Treasury began allowing Illinois to distribute funds to demolish or rehabilitate vacant, decrepit properties. Chicago’s forfeiture program is one of the ways that federal monies are used to clean up neighborhoods and re-establish property values. Effectively, the program enables the city to sue property owners for dangerous and hazardous conditions that have not been addressed. Through this program, the city helps investors request that the Cook County Circuit Court forfeit ownership to them for rehabilitation.
Real estate investors can find potential properties on their own and then apply through the city to become the recipient. To qualify as a recipient, you need to show that you have the ability to pay any associated costs for rehabilitating the property and can do it in a timely manner. Qualified applicants will then work with both the Department of Buildings and the Department of Law to run a title check for any back taxes or liens. The property is eligible to be declared a forfeiture if one of three conditions are met:
1. The owner is deceased and there are no known heirs or mortgages;
2. The owner agrees to forfeit the property and does not owe a mortgage; or
3. All lien holders agree to release the lien.
If these conditions are met, you can work with the city’s legal team to bring the case to court and ask the judge to issue a judicial deed to you.
Are There Any Downsides to Chicago’s Property Forfeiture Program?
Acquiring a property from the city should be pretty straightforward, right? Their goal is to offload the properties for rehabilitation, after all, and that’s just what you do as an investor. Well, at the end of the day, it’s a little more complicated than that. Let’s take a look at some interesting facts about the process.
- The court is very busy. There are over 3,000 cases filed with the Chicago housing court per year. As a result, it takes about a year to secure a forfeiture through the courts. That’s a long time to wait on a ‘maybe’ deal.
- It’s a gamble. If, during the court process, an owner or other interested party is discovered, they can contest the case. This can prolong or even halt the transfer of ownership to you.
- There’s a lot of paperwork. Before you even know whether the property qualifies to be a forfeiture, you will have to submit an application proving your expertise and financial backing, along with a listing of any delinquent property taxes, a detailed overview of rehab costs, and a schedule of compliance.
- It’s a tight schedule. The schedule of compliance must include definitive dates for when plans and permits will be obtained, when construction starts, and the date when the property will be code compliant. There’s not a lot of wiggle room, which can make those virtually inevitable project delays a real problem.
- You may be held liable. If you fail to adhere to the schedule and don’t get the renovations completed in time, you could face court-ordered fines.
As you can imagine, it could begin to feel like you are trapped in a labyrinth of bureaucracy when trying to get a property from the city. If you do not have an administrative staff to handle the paperwork and ensure that everything is filed on time, the deal becomes even riskier.
There’s a Better Way to Find Investment Properties
Sure, working with the city is not always a sure bet. But generating qualified leads for privately-owned investment properties to purchase requires a comprehensive approach, too. From direct marketing to radio spots and even billboards, you will need to get the word out to prospective home sellers. What’s more, you will need to gain their trust. This takes time and some heavy lifting to get your real estate investment business off the ground. However, HomeVestors® makes it easy with the nationally-recognized “We Buy Ugly HousesⓇ” advertising campaign. Together, HomeVestors® franchise network have bought over 140,000 houses since 1996. If you are looking for more investment opportunities, reach out for more information today.
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