Knee-deep in giving Chicago rental property management tips to my friend and fellow investor, Harris, he shifted gears to ask about real estate auction deals in Cook County. I was thrown for a minute because I knew he’d been weighing the pros and cons of being a landlord, which is why I was giving him my opinion. But, it turns out that his real interest wasn’t necessarily in adding buy-and-holds to his portfolio.
More than anything, Harris was simply trying to find a way to make more money as an investor. For him, that means that his part-time dabbling in real estate needs to become a full-time job. But, if he sticks to buying, renovating, and selling single-family homes, he needs more deals and a better way to find them, which is why he was now considering attending local auctions. So, I shifted gears to give my thoughts on that too.
Should You Buy Real Estate from a Cook County Auction?
Real estate auctions are often one of the first stops for investors, like Harris, who need to expand their strategy for finding deals on distressed property. The majority of the properties sold at auctions have been seized, usually due to foreclosure, and priced well below market value at the start of bidding. The minimum asking bid usually reflects the condition of the property, which leans towards the poor end of the spectrum, and the foreclosing lender’s interest in quickly recouping some of its costs. It’s that combined low price and room for adding value by rehabbing that attracts a lot of real estate investors like bees to honey.
There are several problems with buying a foreclosure auction home, however, that you should be aware of—and not just in Cook County. You almost never get a chance to perform an inspection before you bid and you won’t be granted a contingency period if you’re awarded the property either. This makes it nearly impossible to know if you’ve got a minor fixer or a major money pit on your hands until you’re given the keys. If you can’t evaluate a property’s condition, how will you know if you’ll see any returns? Unfortunately, you won’t.
Falling into a potential money pit isn’t the thing that could trip up your returns if you buy property from an auction. You’ll also inherit any back taxes, liens, unpaid utility bills, or other encumbrances whether they were disclosed at the sale or not. The same goes for all occupants still on site, even if they’re squatters. So, in addition to the cost of buying and renovating the property, you could find yourself responsible for a number of other issues that could steal thousands of extra dollars from your pocket—and your ROI.
Now, if those gory details don’t scare you and you’re still interested in checking out the real estate auctions in Cook County, you’ve got two to choose from. A few specific facts about each, including whether you really can find some of the best real estate investing opportunities at them, are below.
The Judicial Sales Corporation
The Judicial Sales Corporation (JDC) holds auctions on approximately 90% of the homes foreclosed on in Cook County. The auctions are held throughout the day, Monday through Friday, and you can find the day’s schedule on their website along with opening bids. Deposits, paid with a certified check, are usually a hefty 25% of the amount you hope to purchase a property for and must be presented prior to bidding. If you win, the balance is owed the next day by 2:00 p.m. If you miss the deadline, you can kiss your deposit goodbye and say hello to the possibility of court-ordered penalties.
Even when you do everything right, you won’t be able to take possession of the property immediately. Court approval is always required and, if it’s granted, when you can take ownership is still up to the court—which is at least 30 days after approval. So, if you win a property—and that’s a big if, since investor and lender competition is strong at these auctions—you could end up rushing the rehab to avoid trying to sell during a harsh Midwestern winter. And, if the market winds shift, you could find yourself in even bigger financial trouble. Being out of so much cash at the front end of the deal, only to then possibly lose big at the back end too, isn’t a risk any investor should take.
Cook County Sheriff’s Sale
The Cook County Sheriff’s Office conducts real estate auctions on the remaining 10% of the county’s lender foreclosed properties. For auction dates and times, you’ll need to check their website. But, the Sheriff Sales in Cook County are usually held throughout the week. You can also find some information about each property and the terms of sale online, including the minimum opening bid. Deposits are 10%, payable by certified check at the time of registration. If you win the bid, a second certified check for the balance is due the following business day. Keep in mind that if you fail to pay you forfeit your deposit.
But, even when you’ve paid up, you won’t be given the keys. Court approval is required, which means your bid could still get rejected just like with the JDC. And, due to the backlog of cases at the courthouse, you might not know either way for months. This can stall your renovation plans and push the sale of your rehabbed property into unknown market territory. In the meantime, funds you could be using to invest in other opportunities will be tied up and out of reach. With so few options, to begin with, I think that finding and actually buying a good deal at this auction is a bit of a stretch.
If you’re still tempted to believe that attending one of Cook County’s real estate auctions might be worth your time, let me ask you this. If you could approach distressed homeowners before their homes were sent to auction and increase your chances of sealing those deals, would you? I bet you would. Of course, in my opinion, you also should.
Buying Directly from Distressed Homeowners is a Better Deal
There are several reasons why it’s better to work directly with homeowners and not auctioneers. When you buy houses from their distressed owners, as I do, it’s just much less of a hassle than dealing with the auction process. And, because you can take the time to perform your due diligence, it’s also less of a risk to your bottom line. Additionally, it helps the homeowners who’ve been unable to meet their mortgage payments or care for their properties get out from under a financial burden and move on with their lives. It’s not only an easier way to invest in real estate, it’s a kinder, more ethical one too.
But, that’s just how I do things as an independently owned and operated HomeVestors® franchisee. With the nationally-known and trusted “We Buy Ugly Houses®” ad campaign, we’re able to reach motivated sellers throughout Cook County through print, radio, and TV. So, individuals and families in deep financial water know where to turn to get a helping hand. It’s a lead-generating strategy that’s brought over 100,000 deals to franchisees across the U.S. since 1996. And, it’s helped as many homeowners too.
Shift gears and make your lead-finding strategy worth your time. Contact HomeVestors to ask about becoming a part-time, or full-time, independently owned and operated franchisee today.
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