Chicago Real Estate Attorney Giving You the Representation You Need for Buying Foreclosed Properties

The recent drop in mortgage rates could mean good news for Chicago. In August of 2024 the average rate on a 30-year fixed mortgage fell to 6.4%. Brokers are optimistic this will lead to quicker turnaround times on sales. It could also mean a higher rate of sales than in recent history. People who in the past may not have been able to purchase property might now have the opportunity to buy their dream home or start a business. Foreclosed property may be a good option for cautious buyers looing to take advantage of the current market. It allows them to inexpensively purchase property they may not have been able to afford under other circumstances. While it may lower costs, purchasing foreclosed property comes with several legal risks.

What is Foreclosed Property?

Foreclosed property is property that has been taken possession of by a bank, mortgage company, or other entity after the owner failed to meet their financial obligations. This could include not making timely payments, not making complete payments, or abandoning the property.  

Foreclosure is an involved process that takes several months to complete. The government knows people can run into financial hardships that prevent them from making every single payment on time. Because of this, there is a strict timeline for how and when a property can be foreclosed following late payments:

•       Two Months Late: Lender Contacts Owner
•       Four Months Late: Loan Defaults
•       Six Months Late: Owner Receives Foreclosure Summons
•       Seven to Eight Months Late: Court Enters Default Judgment
•       Nine Months Late: Right for Owner to Reinstate Loan Expires

While a home is in foreclosure through the entire process, it is officially considered to have been foreclosed on following the nine-month mark. Foreclosure can be halted or slowed at any step in the process if the building owner files documents with the court and/or appears before a judge. If the owner has failed to pay financial compensation to the lender at the end of the process, the building can be foreclosed on. At this point it becomes the property of the bank or lender. A foreclosed building owned by a bank or lender is known as a Real Estate Owned Property (REO).

What Happens to Foreclosed Properties in Chicago?

Once a building has been foreclosed, the bank or lender will attempt to sell it in order to reimburse themselves for lost income. This can include money owed to them by the previous mortgage holder and/or court costs. Foreclosed buildings will usually sell for a lower amount of money than other similar buildings on the market. This can be for a number of reasons.

Owners who neglect their payments may also neglect the upkeep of the building. This can mean it is in need of serious renovations or repairs. Other owners may have defaulted because the building was old or in need of repairs already. The bank or lender may also feel they have spent too much time or money on the foreclosure process and want to get rid of the building.

A bank or lender in Chicago must make a public notice of their intention to sell a foreclosed building. This notice must run in a local newspaper for a minimum of three consecutive weeks. The bank or lender must also notify the previous owner of the sale at least ten days in advance. Once these requirements have been met, the bank or lender can sell the foreclosed property. This can either be done at auction or direct to a buyer via an attorney.

What Legal Risks Might I Take Buying a Foreclosed Property in Chicago?

Buying a foreclosed property in Chicago may present homeowners and entrepreneurs an opportunity to purchase an otherwise expensive building at a lower cost. However, this can come with a series of legal risks.

Because the foreclosure process is long and complicated, the bank or lender may not have taken all of the appropriate steps. This could mean the title to the property isn’t clear. A clear title means a new owner is within their legal rights to take possession of the building. If the bank or lender didn’t clear the title, the previous owner may still have legal rights to the building. There may also be third parties who can claim some kind of ownership.

The previous tenant may also refuse to vacate the building. Although squatters do not technically have rights in Illinois there are some loopholes that allow people to continue inhabiting buildings they do not legally own. There are even some situations where a previous owner or tenant may be able to claim something called adverse possession. This allows them to continue occupying a building that no longer legally belongs to them.

What Should I Do if I’m Considering Buying Foreclosed Property in Chicago?

Buying foreclosed property can be an excellent way for potential homeowners or business people to obtain property they might not otherwise have been able to afford. However, there are numerous legal risks. This is why it’s important to consult an attorney prior to any purchase. An attorney can walk you through the entire process and make the right legal inquiries to make sure the title is clear. An attorney can also evaluate the worth and condition of the property and advise you if the price is good. 

If you or a loved one are considering buying foreclosed property in Chicago, don’t hesitate to contact the law offices of Nery & Richardson, LLC.  We’re located at 4258 W 63rd St, Chicago, IL 60629, half-a-mile West of the West Lawn Branch of the Chicago Public Library and half-a-mile Southwest of Richardson Middle School. Our bilingual staff is well-versed in Illinois real estate law. We’re ready and able to help you make the right financial decisions about your future as a property owner. Our attorneys have years of experience in dealing with foreclosed property purchases and can guide you through every step of the process. We want Chicagoans to thrive as home and business owners and recognize the opportunity purchasing a foreclosed property offers.

If you’re considering buying a foreclosed property in Chicago, contact Nery & Richardson, LLC today at 773-232-6643 or email us for a consultation. We want every Chicagoan to have the opportunity to live their dreams of being a property owner.