Buying a Property Through Sheriff's Sale in Illinois
This guide will walk you through the process of finding a property offered at sheriff's sale, making sure it's the right fit for you as an investor, securing your purchase with title insurance, and finally taking possession of your property. This is a guide for the State of Illinois, only.
Finding the Right PropertyYour first step to buying a property at sheriff's sale is to actually know which properties are being offered. The classic way to do this is to buy a copy of the legal circular for your area, which is a completely archaic way of doing things. In Kane County, the Sheriff typically posts all properties pending for sale in a given month around the first. At the time I'm writing this guide, I easily pulled off the sheriff's website a list of 50+ properties being sold at auction. Your attorney will be able to find homes that meet your parameters and get you into the room.
But the next question is, what's the right price? If I had $100,000 to spend on an investment property at a foreclosure auction, I think the best that I could hope for is a property worth about $150,000. However, 30-50% profits after repairs is certainly nothing to sneeze at! You will likely spend $3000 researching your acquisition, and then the rest is yours to bid with. Most counties require 25% down payment and the rest to follow within 24 hours.
You might ask your attorney, "Hey? Where's my money going?" and the answer to that is pretty simple.
For starters, the very first thing any prospective foreclosure purchaser should do, coming into the market as a third party buyer, is to order a title search on the property from a reputable title agency. Many of these companies are out there, and any attorney who does real estate will know exactly where to look for one.
The title search makes sure that your money spends successfully. The last thing you would ever want as a purchaser is for your money to not get you a sound investment. The title search insures there is nothing scary in the history of that property, such as tax liens, property judgments or other liens that are superior to the one you're buying. The title company will prepare for you a document that lists everyone in the world who can be tied to this property as of the date you order the paperwork. You and your attorney can use that to find how safe your investment will be.
Taking Control of the InvestmentOnce your title search comes back clean and you put your deposit down, the question you need to ask your attorney is how to bid. You should ask your attorney where the auction is, whether it's a telephonic auction or an in person one, and get the information on the reserves of the properties if known. The sheriff often has this information, and a minimal amount of digging by the attorney can inform you, the investor, of many of the best deals out there.
After you have purchased the property successfully, you will need to move the local court for an Order Approving Sale. These orders are nearly always granted, but they rely on 4 key factors that you will have to work with the bank to prove. 1) You must prove that the notice was good, 2) You must prove that the terms of the sale were reasonable, 3) You must prove that the transaction was done properly and without inside trading and 4) You should show that this transaction was fair and just. In many cases, there is no large hurdle to overcome here, and you just need to appear on the correct day and receive the order.
After you have that order, it will provide for 30 days for whoever is currently in the premises to exit the home and find somewhere new to live. On Day 31, you are more than welcome to schedule your entry of the property with the Sheriff of your local county and get some help entering the property to see what you have bought. Your attorney can help you negotiate the terms and timelines here to make sure you take possession in a peaceful way, so you can get started on the rehabilitation of your new property. With a little time and work, it won't be long until your attorney can send you a referral for a realtor who will help you sell the property for profit and get going on the next one.