As a real estate investor, you know that foreclosure properties are the best deal. But how do you find them? And what exactly is a foreclosure property, anyway? Here’s a rundown on some of the best things to keep in mind when it comes to Chicago foreclosure properties.
To find a foreclosure property, you’re going to need to be sure you know your neighborhood. The following map is a great place to start when looking at the foreclosure market in Chicago. You can view it by going to the Neighborhood Guide (PDF) section of the Chicago Neighborhood Impact Report.
The map is based on data collected by Trulia in 2009 and is updated quarterly (see the last revision on the website).
You’ll notice that there are two main areas that have particularly high foreclosure rates: some of the central areas, near the Loop and the North side of the city, and the South side. As you can see, foreclosure rates are generally about 50-60% greater on the South side of Chicago than on the North side, and they’re about the same on the South side as the North side.
How to Find Foreclosure Properties
One of the best things about foreclosures in Chicago is that they’re located everywhere. Whether you’re looking for a foreclosure outside the city proper or a neighborhood in the city with lots of foreclosures, there are going to be many properties. What makes it even easier for investors is that many of the foreclosures are vacant. This makes them highly desirable for investors looking for houses to tear down, making them a great investment even in bad economic times. In fact, the Chicago Tribune reports that Chicago has 1,250 vacant properties for sale as part of the city’s efforts to reduce blight.
What Happens to Foreclosure Properties
The city of Chicago is home to about 20,000 foreclosed properties. About 80 percent of them are residential and the rest are commercial. (There are about 250,000 properties in the city in total.) Roughly half of those properties are owned by banks or mortgage companies. The remaining half are owned by third parties, meaning that you could be the lucky buyer of one of them. There are three main types of foreclosed properties: residential properties, foreclosed commercial property and foreclosed residential property.
A residential property is one that’s been foreclosed because it’s been behind on paying its mortgages. A foreclosed commercial property is one that’s been foreclosed because the business it’s housed in the building has closed and it needs to vacate.
Chicago foreclosures are properties that are in foreclosure or are likely to be foreclosed. In general, foreclosure means a bank has stopped servicing a mortgage on a property and is planning to repossess the property. At the same time, repossession means the borrower has moved out, and the bank is trying to sell the property, if they can.
Foreclosure is almost always a bad thing for investors. On the one hand, the property is being sold for less than what it’s worth. That means you could make a sizable profit. On the other hand, it means you could lose a significant portion of your money, if the property doesn’t sell for enough.
Fortunately, in Chicago, foreclosure properties aren’t nearly as risky as you might think.
Avoiding the Scams
Foreclosure properties are where it’s at, but there are a lot of scams out there, specifically those involving the actual properties, the neighborhood they’re in and the management company that’s managing them. Avoid these scams at all costs by doing your homework. Find out what makes a true foreclosure property and if they’re managed by a legitimate firm. You can see their CRS profile on the Illinois Secretary of State website. Another great resource is in the pages of Realtor.com (the national industry’s best resource for real estate deals). There, you can look up a specific foreclosure property in your area and read reviews from fellow real estate investors on how to spot them.
Know Your Neighborhood
Being aware of your area’s foreclosure properties is important.
Foreclosure properties in Chicago are plentiful, though there is no guarantee that your dream property will even be available for purchase. So before you start shopping, take a deep breath and dive in. Remember that in the world of real estate, there is no such thing as bad press. In fact, it might be the best type of press you’ll ever get.