Thread: Foreclosed Property for $1,350...what's the catch?

Hey everyone,

I was curious, so last night I searched online for foreclosed properties in Chicago. Some were listed as "auctions" which I ignored. I looked mainly at properties that were listed as "foreclosures." I assumed you can simply contact the bank and buy the property for the listed price if labeled as a "foreclosure."

There are plenty of properties around Chicago and in the suburbs that are from $10-30,000, but a couple stood out. I found three properties listed as "foreclosures" that were under $10,000.

The lowest priced house is a 1,300sq. ft. wooden house on a busy street and on a small lot. It is listed at $1,350...so $1/sq. ft. thats one hell of a deal!....but what's the catch?!

I am not 100% certain how all of this works. Would there be back-owed taxes on the place that the buyer would have to pay for? What other legalities could there be? Or is the house just in horrible condition making it uninhabitable?

Any thoughts would be greatly appreciated.

Most likely poor condition. Title issues could persist depending on your state foreclosure laws, just make sure you get title insurance when you purchase. For most foreclosure purchases if you are contacting the bank directly you can buy without an agent representing you, if they are FHA foreclosures you will have to be represented by one. Financing can be difficult depending on the property as well. If there are structural problems some banks will not finance conventionally and will require a larger amount down.

That's all I got without somemore details of the houses or situation etc.

First thought:

Condition is poor.
Possible mold and mildew.
Possible structural issues.
Seller will not pay any associated costs with selling the home.

etc.

Did you google foreclosure homes in Chicago or is there a site?

They are normally destroyed! I have seen the houses first hand. They rip all of the copper outs of the walls(conduit and wire), they take all appliances, cut wholes in floors, take all the lights, doors, counters, even the floors!

Unless you plan on doing the work yourself, its expensive! I have a few houses to go look at this week. If i remember, I will take a pic

Originally Posted by BicepKaz

Did you google foreclosure homes in Chicago or is there a site?

This is a good question too^^^ if they are just on a random auctioneers site or companies site they want you to contact them so they can sell you a bill of goods that will be different most likely. If they are actually listings by different companies or banks then that is a different story all together.

I have bought close to 50-60 foreclosures in my real estate career and most of the time the only way to get real deals on them is to be in contact with the bank directly, specifically the disposition officer at most small to medium size banks.

My main question was that if it is listed at $1,350, is that all a buyer would have to pay to Own the property?? The land is definitely worth more than a couple thousand.

My dad was telling me there would probably be taxes owed on the property so the $1,350 will turn into much more for the buyer. Is this true; does the buyer have to pay taxes that are owed from the past?


edit: site is www.bankforeclosuressale.com . I just started searching on this topic yesterday, so if you know of a better website, let me know. Thanks

And I bet this tiny 60 year old house is definitely run down too, you guys have to be right!

Generally in a real estate transaction the seller is responsible for paying back taxes on a purchase. But that is to be negotiated in purchase contract. Someone will have to pay for title insurance, closing costs, geration of the deed, and filing fees to file the deed, and there could be a variety of other fees based on your state.

Originally Posted by Luigi2Times

My dad was telling me there would probably be taxes owed on the property so the $1,350 will turn into much more for the buyer. Is this true; does the buyer have to pay taxes that are owed from the past?

It varies depending on the terms of the sale. That being said, most foreclosure sales are "as is" in terms of property condition and, at times, certain title issues such as tax and other liens. If the property has truly gone through the foreclosure process, most liens are eliminated through the judicial process. However, property taxes and similar governmental obligations are not. Consequently, you could get stuck paying back taxes (including penalties) and/or get stuck with a property that is violating building codes that you must pay to fix.

Also, a lot of these homes in the Chicago area are in bad neighborhoods. Consequently, selling them after you buy them is difficult even if they gave you the property for free. Most require work...but you have to be careful when you perform the work. The streets have eyes and that new copper piping, bathroom fixtures, kitchen appliances you just installed, may not be there from one day to the next.

You can find good deals out there, but it's not as easy as some think. Just because a property is selling at 30% of what is last sales price, doesn't mean it's a good deal if that's what the new market price is.

As a thank you for helping out with SCS this summer, I'd be happy to review any property you're considering and give you my impressions. Let me know. Depending on what price range and type of property you're looking for I may have some suggestions.

I've bought a couple foreclosed properties in the Detroit area, and from experience, the ones that are still on the market, or even make it to online listings are really bad. The best way to get yourself into a decent foreclosed house is to hire a realtor that specializes in foreclosures, as they have the connections. Get some cash lined up, and be ready to drop the cash on a house, within hours of receiving a phone call about it.

I don't know how Chicago is, but I can bet that it's similar to Detroit and the surrounding metro area, good houses go really quick, most without even hitting the mainstream market.