Are you thinking about investing in a foreclosure? It’s looking like the real estate market is going to be a bit tougher this year. Although the Chicago area saw more than 20,000 foreclosures between February of 2012 and 2013, competition for those Illinois properties is likely to increase this year. If you want to buy a foreclosure, you may need to act quickly.
What’s Driving Prices Up?
According to a recent article in the Chicago Tribune, foreclosures are being listed strategically. Real estate agents are listing these properties for prices that are far less than the likely final selling price. This strategy creates bidding wars around the foreclosed homes, driving prices up. This marketing technique generates wider interest and multiple bids on these properties.
Liz Sidorowicz, a Re/Max Signature real estate agent, described the process as generating a lot of “overbidding.” She described a client’s bidding process on a “gutted Mount Prospect foreclosure” in which “even the switch plates were missing.” The house was listed for $350,000. The client submitted a bid of $421,000—nearly $100,000 more than the asking price—and still “lost out to a higher bid.”
In addition to a shift in the marketing strategy, there are other factors at work. The slowing rate of foreclosures nationwide, along with falling mortgage rates and increasing home sales, is leading “those once-in-a-lifetime bargains” to fade from the market, according to a report from NBC News. The supply of these homes is becoming more limited—the housing market is no longer saturated with attractive foreclosed properties.
In other words, the slow rebounding of the housing market is reflected in the diminishing backlog of distressed properties that were once selling at “deep discounts.” Now, according to a RealtyTrac spokesperson, there’s a noticeable “shortage of inventory.”
Rehabbed Properties More Plentiful Than in Years Past
Another factor that’s affecting the availability of foreclosures for sale is the increasing curb appeal of many of these properties. While once many areas saw homes in varying states of decay, a lot of these houses “are looking better than they have in years past.”
Why is this? Some housing advocates suggest that it’s a result of the government’s increased effort to rehab properties before listing them on the market. For example, the Chicago Tribune reported that Fannie Mae and Freddie Mac are taking greater steps to preserve neighborhoods, hoping to attract owner-occupants instead of people who are only interested in making some money from a rental property.
So in order to make many of these foreclosures attractive, or to fix them up so that they “look like the house next door,” government agencies are providing funds for new paint and carpet, as well as for the installation of new kitchens, furnaces, and other new appliances. Fannie and Freddie know that they’re not going to attract owner-occupants with completely gutted homes—those are going to be purchased by investors instead.
And relatedly, these improvements are adding to general increased housing prices and availability. It makes sense that a “fixed-up foreclosure costs far more than one with a long list of repairs needed,” since it “doesn’t carry the problems that come with trying to secure financing for properties that are not in habitable condition.”
But keep in mind, even properties that are still in need of substantial rehab work are “going fast.” If you have questions about foreclosures and the real estate market in Illinois, contact a licensed attorney today to discuss your concerns.
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