Buying foreclosures through the sheriff’s office is VERY unique. There is no guarantee of title, no keys, no vacant home (most often), no tax credits, no tax prorations, etc. You can’t even get inside these properties most of the time. There is a long list of pitfalls, but it also has huge upsides.
Choosing Areas of Interest
Most people who look everywhere find nothing. Narrow your scope to villages or Chicago neighborhoods. Properties across the street, past the railroad tracks, etc., make a HUGE difference in our values when analyzing the Chicagoland area. In this competitive market, you need to know how aggressive you should be—or, even more importantly, know when not to chase the property.
Picking Your Potential Properties
You receive a PDF of all the properties being foreclosed in the following month. You should be selective in what you may want to pursue. Sometimes, someone only buys brick homes, only homes with basements, or must have a garage, etc. Having only a handful of properties you are familiar with allows you to do a more comprehensive condition report. You can spend $50k+ on the outside before stepping in the door. And someone who cares for the outside of their home is usually indicative of how the inside is maintained. The opposite holds true as well. Crappy outside usually means crappy inside.
Knowing What Your Buying
After a few properties are chosen, a limited title search is completed. We need to make sure a 1st mortgage is being purchased, determine what taxes are due, what taxes have been sold, etc. You then need to calculate the tax credits you’d receive if this were a traditional closing. How much will it cost me to vacate the occupant versus a vacant home I get at regular closing. The goal here is to make adjustments from what I’d pay at a closing with all the guarantees and credits versus how you are buying through this process.
What Should I Pay?
First, we need to KNOW our ARV (After Remodeled Value). What can I realistically sell this home for in 30 days or less. Then you need to be realistic on what your rehab will cost. You’ve assessed the outside, but the inside is the question. ALWAYS assume it’s destroyed on the inside unless you have information otherwise. Sometimes you find somewhat recent photos online from a previous sale or rental. If you assume the worst, there is only upside. You know your ARV, subtract your estimate for rehab, subtract the costs of no credits/occupied home/back taxes/etc, subtract the costs of selling like commissions/title/survey/etc, subtract what you find as an acceptable profit, and it equals you maximum bid.
Taking Deed and Possession of the Property
Illinois is a judicial state, which means a judge has to approve the sale that was done in accordance with the law. This usually takes less than 2 months after the sale IF things go accordingly. Sometimes people fight the approval, mostly just to buy more time. Having someone who understands the complexities that can occur is so important to your success in buying sheriff’s foreclosure sales. If occupied, this is when things can get very tricky and complicated. Cash for keys is ALWAYS the best option, especially when trying to perform evictions in progressive counties such as Cook. The eviction process can be a nightmare if you, or a trusted expert, do not know the rules. For example, Chicago has its own rules that can automatically put you on the hook for close to $30k in fines/fees/etc.