REOs vs. Foreclosures which one provides a better property investment? Chicago | Illinois
It’s probably not a week that goes by that I hear this question asked from either new real estate investors or home buyers looking to get the best deal. Unfortunately in this economy there is a surplus of both REOs (Real Estate Owned) and Foreclosures. In September alone there were over 8,000 homes which went into Foreclosure in the Chicago metro area alone.
In my experience some Foreclosures can be bought at a drastically low price, however if one doesn’t do their homework the ones that look like great deals might not end up as such. Multiple liens can be attached to the home, and if you don’t look this information up on your own, you will be stuck with it after a purchase. Tax liens are attached to the property and not the owner, so when buying a Foreclosure you would really need to check that out. A place to start would be to look at the public records for the property. Also, you may want to see if the taxes were sold to an investor. There are investors that all they look for are tax liens to purchase. Tax liens holders can hold 1st position over a mortgage company, so if you catch this too late, you can owe the taxes, fees, and interest as high as 18 percent with a short redemption period. Personally I tend to only deal with the “free and clear” properties, which the banks pay all the taxes and liens.
In Illinois, Foreclosures are typically “as is” condition, with typically 10% cashier’s check due at auction and 30 days to have the total amount. Even though coming up with the amount of funds for those trying to get it financed, is very difficult working with other banks; sometimes financing can be easier to obtain through the foreclosing mortgage company that doesn’t want the home to be placed on its books as a REO.
REOs are a safer bet and simpler way for first-time homebuyer and those not willing to go with the risks of buying a Foreclosure. Due to the need for a quick sale the lender usually covers all taxes and other problems, such as evictions etc, making the purchase as straightforward as possible for the homebuyer. Prospective buyers also have immediate access to a property for inspections. Also you can typically negotiable rehab costs, interest, closing points, loan amount, etc. Less than normal down payment and clean and clear title are major benefits to foreclosures.
Both REOs and Foreclosures can prove to be wise investments, and both require one to do their homework before purchasing; however one requires a little more homework involved.
Contact Prime Market Realty for a list of both Foreclosures or REOs and let us help you find the best deals. We work with all types of investors and the first-time home buyer looking for that deal.
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