Since there are so many people are interested in knowing about the foreclosure and shortsale process, I would like to talk about some details here. This year I have closed 3 foreclosure units in Chicago, two units are in the north of Chicago and one unit is right at the Streeterville. I have helped my clients to bid on numerous times on Short sale and foreclosures in the new eastside neighborhood, some of them we are only a couple of thousands below the winning bid. Some of the short sales we were the winning bid, however, the bank would not even come down for 2% of the price for a property over half a million dollars.
The difference between foreclosure and short sale is that the foreclosure units are owned by the bank, so the bidding process is fast, the buyer is submitting the offers to the bank. We have seen some foreclosures in the new eastside that the bank has priced 25 percent below the average sale price, then immediately you would know that there will be multiple offers for the unit. When you enter into a multiple offer situation, you will only have very little chance to win it. This is like throw a dart in the dark, hard to guess what is other people offering. For this instance, I have recommended my client to offer $15K more than the bank asking price. But they think that is too much, although it would still be $50K below the other regular sold price. They took a discount of what I have recommended, then they were only a couple of thousands less than the winning bid. When I told them the bank has accept other offers, they would like to offer more, but after you have submitted your highest and best bid, you would not have another chance to bid when you heard that you are not the highest and the best.
In order to get foreclosure unit in the new eastside or anywhere else, first you need 100% cash (this is like 90% true for other good value foreclosures, but I think 100% true for the new eastside since there are so many investors are watching), this has to be bank statement printed within 30 days, under the buyers name with bank name, better to be in accounts other than checking account, the reason is if it is in the checking account, then the bank would think you just got the money from someone and you might not really have it, they do not want to take any risk for the bidder they have selected. Second, you need to put the closing date within 2 weeks, as the banks want to see that you could close ASAP. I know most banks require the dates to be within 30 days(from this we can tell that they do not want mortgage contingency, as normally mortgage would take around 30 days to get). Third is to remove all the contingency if possible. (that means you do not have any requirement to the bank). Fourth is that you need to give the highest and best bid, especially if there is multiple offers. All foreclosure units, the buyers might be entitled to pay up to 6 months of the association fees according to the Illinois law, therefore you need an attorney to fight for you as some of the association might put on all the balance of the association fees.
Short sale is a long and painful process, it is around 3-6 months. After the seller accepted your offer (do not get excited as the seller would accept any offer in most of the cases since they do not get move than $1 from the closing), then the file is sent to the lender for approval, in the mean time, the lender would order appraisals, if you do not have a good listing agent who knows what she or he is doing, the appraisal amount comes back high, then you are stuck as the lender would not accept your offer if it lower than the appraisal value. Then either you withdraw or come up price. So that means even you see some great listing prices for the unit, you will not be able to get it if the appraisal amount is higher than that. Some lenders might negotiate a little, most lenders would not negotiate at all. The good thing for the shortsale is that normally the seller is on target for the association fees, so the buyer does not need to pay the extra 6 months assessment.
