The Foreclosure Process
Understanding the Foreclosure Process
Foreclosure properties can be a terrific investment and
give home buyers a much more affordable option than
purchasing properties in the traditional manner. But,
before you jump in...Get educated!
Due to the sub prime mortgage challenges and the
difficulties this has caused both individuals and
businesses, we here in the tri city area have also been
affected. The homes in St. Charles Geneva and Batavia
Illinois and the surrounding areas have all taken a hit!
As in all cases in business, when many fail, few
prosper. Today, the people or investors who have the
means to buy today will prosper due to the widespread
down turn in values in the tri city home market.
So where do you start the foreclosure process in
Kane county?
You need to first realize that buying a foreclosure is
not like buying through a real estate agent or a FSBO.
You need to know what you are doing when it comes to
navigating your way through the process and making sure
you do as much research on the overall foreclosure
process as well as the property you’re focusing on.
For people willing to put their time into learning this
market, foreclosures offer some great opportunities.
Web-based web sites can help investors and homebuyers
tap into this previously hidden market by providing
access to foreclosure and pre-foreclosure information
typically available only to professional real estate
brokers and investors.
Today, anyone can use these services to identify and
research potential properties, as well as to find the
tools and professional resources they need to help them
close the deal. This said, you still need to understand
the terms, numbers and risks.
Even seasoned real estate investors have something to
learn when it comes to approaching the foreclosure
market. It’s important to go in with the appropriate
knowledge. I strongly advise going to several auctions
(held weekly in Kane county at the court house). This is
the last step in the foreclosure process.
So what happens first?
Buyers must first understand the difference between the
varying types of foreclosure properties. It’s important
to review the basic types of properties, each
representing a different stage in the foreclosure
process.
Pre-foreclosure Properties
A property enters pre-foreclosure after a default notice
is filed by the foreclosing lender against the borrower
who owns the property. The different notices that are
filed during pre-foreclosure include Notice of Default
(NOD), Lis Pendens (LIS), Notice of Trustee Sale (NTS)
and Notice of Foreclosure Sale (NFS). For most
consumers, buying a pre-foreclosure property from a
private homeowner is the most favorable of options. This
is a best-case scenario because the seller is able to
get out from under a mortgage without destroying his or
her credit rating(but this is a case by case basis). The
lender can save the time and expense of foreclosing on
the property, and the buyer gets a below-market price on
a home. In addition, buying at this stage of the process
allows you, the buyer, a chance to fully evaluate the
property before making an offer. At a foreclosure sale,
it is unlikely you ever have the opportunity to do
inspections or even view the property.
The disadvantages associated with purchasing a property
during the pre-foreclosure stage are few, but worth
mentioning. As with any major purchase, negotiations
between the buyer and seller can be difficult,
especially since the seller would typically prefer not
to have to sell the property in the first place.
Secondly, transactions are time-sensitive, since there
is pressure to complete a sale before the property goes
to auction. While in this stage you may find the current
owner owes too much on the property, this is where a
possible "short sale" opportunity exists. A short sale
situation is where the lender will take less for the
property than is owed on it just to get the bad loan off
of their books.
Auction Sales
Foreclosure auction sales are typically the domain of
the professional investor. These properties are formally
in default, and sold to the highest bidder at an
auction. In Kane county buyers are required to be
physically present at the auction and must be prepared
to pay 10% of the judgment amount with certified funds
and pay the remaining 90% within 24 hours. So much for
traditional financing.
It is my recommendation that any person interested in
this market, start with the pre-foreclosure process and
get your feet wet in a still relatively safe buying
process (always use a proven real estate attorney).
Though foreclosure auctions can offer significant
savings as well as immediate property ownership, they
are not for the uninformed! Unless the buyer is already
familiar with a particular property, there is usually
little time to examine it. And, the buyer will be
competing against professional investors—and sometimes
even the lender—at the auction.
Real-Estate-Owned Properties
Once the lender reclaims a home through the foreclosure
process, it is classified as Real Estate Owned by the
lender (REO). While REO properties typically offer more
time for evaluation and a more standard bank-managed
transaction, their prices are usually very close to full
retail market value. Therefore, they offer buyers the
lowest potential savings.
It’s definitely possible to find great deals in the
foreclosures market. You just need to know where to look
and be able to differentiate exactly what you’re looking
at. With an understanding of the pros and cons of buying
at each stage of the process.
For more information visit the
Kane County Sheriff Foreclosure Auction site.
Please contact Joe at 630-747-8709 or contact us via our
contact form. Thank you! |
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