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Below is part three of three part series on the Foreclosure crisis that appeared in the the Northwestern suburb newspaper July of 2007.  The information is still fresh today. Enjoy!

Foreclosures – Caveat Emptor

Part 3 of a 3 part series

By Dan Chiappetta

Caveat Emptor is a Latin phrase that means “Let the buyer beware”. Buying foreclosed property can be rewarding, but it also can be very risky. Due diligence should be performed when evaluating any type of property, but it is a mandatory when it is foreclosed property. Visions of buying property twenty cents on the dollar may be dancing in through your head and if they are, you are setting yourself up for a let down. The banks are not giving away the property they own and in some cases the property is worth less then what is on their books. Here are two popular ways that you can buy foreclosed property. Call your real estate agent to find out the many other ways that are available.

Sheriff’s Sale is an auction that is held at the county’s sheriff’s office for properties that were ordered by the court to sell. You can get a list of properties that will be sold that contains the property address, sale date, the case number and the attorney assign to the case. Be aware that liens are filed against a property, not the owner of the property so you are buying the property and ALL liens that are against it. Have your attorney perform a title search to check if there any liens against the property. The title search may not show liens that have been entered within the past 30 days or outstanding judgments that have yet to be filed. Sheriff’s sale auctions are absolute auctions, which means it will absolutely be sold regardless of how low the wining bid may be. You have to have 10% of your opening bid in a cashiers check and if you are the winning bid the balance is due in 24 hours. Please visit the DuPage County’s Sheriff’s web page (www.co.dupage.il.us/sheriff/Civil/foreclosure_research.htm) to view the buying foreclosures process in greater detail. You will not have access to view the inside of the property. Drive by and to check out the outside and neighborhood. Have your real estate agent do a comparative market analysis for the house. You should assume that the inside of property is in bad condition when determining your offer. There have been instances where the owner has taken out all the copper piping, the staircase to the second floor, furnace, etc., just leaving a shell. If you were the winning bid for this property and assumed these items were there, your bid was too high. If the property is in a town that does an inspections upon sale, you will be responsible to correct all the problems the village finds when they do the inspection. Sheriff’s Auctions are the risky property to buy because you can not see the inside of the property and there may be future liens against the property that have not been filed yet.

Real Estate Owned (REO) is property owned by the bank. It has gone through the auction process and no one bought it. These properties are listed with a Real Estate Broker and are available in the Multiple Listing Service for anyone to view. Your real estate agent can make an appointment for properties that you may be interested in. This gives you the opportunity to inspect the property so you can make an informed decision/offer. In most cases the bank will want the offer written on their contract. Some of these contracts do not allow an inspection/attorney approval period that is available on most real estate contracts. Have your attorney do a title search (checking for liens) and review the contract before you make the offer. The inspection may also have to be performed before you make the offer. Be patient after you put in the offer. It will take the bank awhile to come back with their response because there are many departments within the bank that have to review the offer. During this review period the bank may receive other offers. If this happens the listing agent will notify your real estate agent (if the bank wants them to) that you are in a multiple offer situation and ask you to put in your best and final offer.

Buying foreclosed property can be great opportunity. Make sure you take the necessary steps that will help you make an informed decision because if you don’t, you may end up holding a white elephant that is a money pit!

Dan Chiappetta is a Broker/Owner of Chiappetta Realty Group servicing the near west suburbs. He can be reached at 847-542-2076 or visit his website at www.ChiappettaRealtyGroup.com.