A new investor contacted me after I gave a series of talks at a couple of real estate investing clubs here in Illinois to get my opinion on buying properties from the Judicial Sales Corporation in Cook County. He said he was just starting out and felt overwhelmed by the recommendations he’d received from other investors on where to find good leads. He assured me that he wasn’t opposed to working hard at finding distressed homes for sale in Chicago but that he simply had a hunch there must be an easier way. I reassured him there was, but that buying from a judicial sales auction wasn’t the direction I’d recommend. I shared what I know about buying judicial sales properties since he’d asked–and since I’d done it myself in the past. Then, I gave him a better answer for finding the best deals.
How to Buy Judicial Sales Properties in Cook County
The state of Illinois, and Chicago in particular, was hit hard by the housing crisis and didn’t bounce back as easily, or as quickly, as other areas. In response, several government programs, like the Cook County Land Bank, were devised to facilitate recovery in Chicago’s housing sector by offering inexpensive distressed properties to investors to buy and renovate. Lenders, on the other hand, repossessed houses from homeowners who were unable to pay their mortgages. These homes were sent to auction where the highest bidder could get a potentially cheap Chicago property and the bank could recoup a portion of the defaulted loan.
For years, the auction sales of Chicago REOs were conducted either by the judges handling the foreclosure cases or by the Cook County Sheriff’s Office. That changed in 1987 when the state of Illinois began allowing lenders and their attorneys the right to choose who would conduct the sale of repossessed properties. So, in 1991, the Judicial Sales Corporation (TJSC) was established as one alternative for providing foreclosure auction services and, since that time, has grown to serve over 350 law firms and their clients. Now, approximately 90% of all lender-owned properties in Cook County that go to auction are sold through TJSC.
If you’re a real estate investor and you’ve attended auctions at the Illinois Circuit Court of Cook County or the Cook County Sheriff’s Office in the past, you might find that the process of buying a foreclosed home from TJSC is somewhat similar. But, whether you’ve bought from other local auctions or not, it’s critical that you understand what’s expected of you—and what you should expect–when you purchase property through the Judicial Sales Corporation in Cook County. Here’s what you need to know to decide if you want to bid and buy.
Foreclosure auctions are held daily, Monday through Friday, beginning at 10:30 in the morning. Doors open at 10:00 for registration and every prospective buyer must register, with a certified check for the deposit payable to The Judicial Sales Corporation, in order to place a bid. A list of the day’s sales, which sometimes exceeds 50 properties per day, can be found on TSJC’s website. There, you’ll find property addresses, auction times, opening bids, and deposit percentages–everything you need to prepare for bidding. So, once you register and receive your bidding paddle, you’re all set to bid on and buy discounted properties.
But buying foreclosed homes at the TSJC auction is not that easy, nor is it that cheap. Of the properties listed for sale each day, a large portion of them—sometimes more than half—get canceled on the day of the auction. Investor competition at foreclosure auctions is already pretty steep and, with a limited number of properties actually going up for sale on any given day, that competition only gets steeper. You’re not just competing with other real estate investors either. You’re also competing with the plaintiffs—the lenders—who want to buy back the properties they were court-ordered to sell. So, the prices on these properties often get driven up past what you can, or should, pay.
If you are the winning bidder, the balance is due by certified check or wire transfer no later than 2:00 in the afternoon the following business day. If you fail to pay the balance on time, you forfeit the property. You also run the risk of forfeiting your deposit, which is usually 25% of your purchase price, though it can be more, and incurring additional penalties deemed appropriate by the court.
Even when you’ve paid in full and on time, however, you won’t be awarded possession of the property until the sale is approved by the court. Unfortunately, this can take months. If the motion is approved, it can take another 30 days or more to gain possession. The timeline for taking ownership is up to the court. For most real estate investors, the long wait to renovate and sell an investment property could weaken their potential returns if the market shifts downward or they’re paying high interest and fees on a hard money loan.
Additionally, the Judicial Sales Corporation does not guarantee the condition of the houses sold at auction or that they come free and clear of any encumbrances. So, because there is little, if any, time to perform an inspection before you close, you could end up with a money pit of profit-sinking repairs. And, if there are liens against a property, you become responsible for their remediation as the new owner. You also inherit any eviction proceedings and their related costs for removing occupants who may be in the home. Combined, these potential problems can add up to a risk that’s not worth taking with your money or your time.
Of course, one of the benefits of attending a mortgage foreclosure auction at the Judicial Sales Corporation is the opportunity to purchase property at what seems like rock bottom prices. For real estate investors who buy, renovate, and sell houses for profit, the chance of realizing good returns on a home won at auction is enough of a reason to go. But winning a foreclosed property isn’t everything, especially when you stand to lose as much or more than you gain. So, my go-to for finding good investment opportunities is getting great leads on distressed homeowners before the banks repossess their homes.
A Great Lead on the Best Investment Properties in Cook County
When I first started investing in Chicago real estate, I got a lot of recommendations on where to find the best deals and I followed up on them all. I even attended several foreclosure auctions. But, I was always outbid—sometimes by the lender! After a few more rounds of spinning my wheels, I decided to become an independently owned and operated HomeVestors® franchisee. Since then, homeowners in distress can come to me before they lose their homes and when they need to sell fast. So, they don’t have to worry about facing a foreclosure and I don’t have to attend any judicial sales auctions. It’s a winning strategy all around.
If you need a great lead for finding the best investment properties, I have a recommendation for you. Contact HomeVestors about their franchise opportunities today!
Each franchise office is independently owned and operated.