With an abundance of foreclosed properties on the market in Chicago, there has never been a better time to find a great deal. Foreclosures and other bank-owned homes offer a an excellent opportunity to get discounted prices on every type of real estate, from million-dollar mansions to one-bedroom condo units.
RealtyTrac/Trulia recently released a survey that revealed 85 percent of potential homebuyers are considering distressed properties. However, buying a foreclosed condo can be a risky proposition if one doesn’t practice due diligence during the buying process. Unlike buying a single-family home purchasing a condo means shared ownership, which can be tricky.
Condo’s Assessments
It is imperative to know the status of the condo’s assessments. In Illinois the buyer of a foreclosed condo is responsible for up to six months of delinquent assessments. However, law also requires listing sheets to itemize what is actually due, so there should be no surprises. Buyers may also be able to engage in negotiations with the bank in order to find a common ground so they don’t get stuck footing the bill for the previous owner’s failure to pay.
Status of homeowners’ association
Most banks won’t finance a purchase if more than 15% of the building’s homeowners are delinquent on their assessments. In order to guarantee a smooth purchasing process ask for this information up front. There are questionnaires that lenders use to determine a property’s status; ask your agent to get one and use it as a measuring stick to find out the health of the homeowners’ association.
Homeowners’ associations may have first right of refusal on purchase contracts
Again this is information you want to know up front in order to avoid a sticky purchasing process. A “first right to refusal” means residents of the building can see what the market is commanding and then match any offer that comes in. This can drive up the price and delay the buying process. Make sure that, if this is the case, you are aware of the situation right off the bat so you don’t get blindsided halfway through the process.
Contractors are your friends
Know exactly what state the condo is in before you submit an offer. The bank is going to sell the property as it is and there won’t be room to negotiate at the back end of the sales process. So you need to factor remodeling and remedial costs in your financial plan. Plus, you don’t want any unhappy (and costly) surprises after you’ve closed on your dream condo.
Steer clear of blacklisted buildings
Don’t waste your time and effort on a unit that you’ll never get financing for. Mortgage brokers have lists of buildings that are considered off limits, so ask your lender which ones they won’t issue loans for.
Residents are your best source of information
Get information about a condo straight from the source. Who knows more about the building than its current residents? Ask people how they like living there. What are the pros and what are the downsides? Find out if there are any extra assessments looming in the near future. Make sure that the homeowner’s association is strong and active. Don’t be afraid to get an outside perspective, the more information you have the better informed your decision will become.
Whether it’s time for a change of scenery or you’re simply looking to make an investment, there has never been a better time to get an affordable condo in Chicago. If you’re planning on buying a bank-owned property, just make sure to go through your checklist to ensure a smooth purchasing process.
