Buying Short Sales in Chicago Real Estate.
Foreclosures…Short Sales…Bank-Owned…What do these terms mean?
Definition/Terms . Let me make it simple:
Short Sale: When a homeowner has stopped making mortgage payments and is trying to sell their home which is worth LESS than what they owe on their mortgage(s) it is a SHORT SALE (the lenders are being “shorted” on their mortgage payoff).
Foreclosure: This is a generic term in it’s usage when a house may be in the foreclosure process or has been foreclosed upon and the title to the house has been legally transferred to the lender. In the Chicago the foreclosure process may take months to complete.
Bank-Owned: This is where the lender is the title-holder to the house and is selling it. They have completed the foreclosure process and are in legal ownership of the house. In most cases I have seen the lenders evict the occupants of the house so that they can get it ready for sale.
What to expect when you look at any of these types of homes:
Short-Sale: there are probably occupants living there (owners or tenants). The showing condition may vary from beautiful to poor (in disrepair).
Bank-Owned: most likely it will be vacant. It could be boarded up and the heat and utilities turned off, the house winterized (all plumbing systems drained and the water service turned off). It is advisable to see these homes during daylight hours and in the winter dress appropriately! It could be FREEZING in there!
Time-Table: What to Expect. If you make an offer:
Short-Sale: This process could take 3-4 months before you get an initial response from the lender’s representative. Once they respond, the process will be quicker as you work to put the deal together. So it may take a total of 4-6 months from start to finish. However, be prepared to close quickly once you and the lender are in agreement. Have your mortgage pre-approval/commitment ready and the property inspection done. Lenders typically are selling the property “as-is” without any repairs or repair credits and they typically want to close the deal in 30 days or less.
Bank-Owned: I’ve found that they respond within about 3 weeks to an offer. They also want loan approvals or cash offers, certified funds for earnest money and quick 30-day closings. The simpler the offer terms of your offer and the quicker the closing date, the better your offer will be received by the lender.
This has been a quick and simple guide to help you get started. PATIENCE is necessary when embarking on this path to home ownership. With the proper guidance, expectations and preparedness you will increase your chances for success.