Sara Benson Real Estate Expert and Consumer Advocate Delivers Advice

Critical Contract Contingencies Protect Foreclosure Buyers

Posted in Chicago Real Estate by sarabensonexpert on January 23, 2010

The Sterling

January 22, 2010

Chicago’s Hot Foreclosure Market: Part Two

SURVIVING FINANCIAL RUIN WHEN BUYING A DISTRESSED CONDO

By Sara Benson, CRB, ABR

As mentioned earlier, foreclosures, corporate-owned and estate sale properties are sold without any warranties–in “AS IS” and “WHERE IS” condition. There are typically no property disclosures and no survey. The purchaser is buying “at their own risk.”

So how does a consumer ensure protection? Before writing an offer, a few basic questions need to be answered. These questions should include, “Who holds legal title?” During the foreclosure process, there are various stages of ownership and it is important to know who actually owns the property.

“How long has the unit been on the market?” Properties often get re-listed by different Realtors. Get an accurate aggregate number of days, weeks or years the property has been offered for sale—not just the most recent listing period. Also find out how long has the unit been vacant and if the unit was professionally winterized. It is also crucial to properly budget for necessary repairs and any hidden costs.

Once these key questions have been answered, disclosures are necessary. Sometimes a diligent Realtor can get answers in advance of writing the contract in order to weed out sick buildings or poorly run associations, but under all circumstances, make certain the purchase contract is subject to the following disclosures:

  • Building’s owner-occupancy ratio, or if new construction, the number of units sold and contract pending.
  • Percentage of units within a single project that are more than 30 days delinquent on condo fees.
  • Percentage of ownership transferring with the unit and upon what basis that percentage is calculated.
  • Any lawsuits or liens filed by or against the condo association or the developer.
  • Any municipal notices of code violations against the unit or the building.
  • Verification of current assessments, including any special assessments levied, due date and total amount due for the special assessment.
  • Name and contact information for the management company and/or association directors.

Finally, once a suitable unit in a well run building is identified, buyers should ask their broker to make the sales contract subject to an attorney’s review and the purchaser’s approval of the following:

  • An inspection of the unit AND the common areas by a State Licensed Inspector.
  • A property report detailing planned improvements in a conversion, or the specs of new construction.
  • Two years of operating budgets including current financial reserves.
  • Twelve months of most recent board minutes. (Minutes are typically considered confidential documents and are not published.)
  • Condominium declaration and association by-laws.

With proper preparation, a consumer can greatly benefit from the “high risk, high return” maxim—except the risk is substantially minimized–and the reward much greater if care is taken to thoroughly research all aspects of the foreclosure purchase with an experienced buyer broker.

A veteran real estate broker and appraiser, published author and national speaker on real estate issues, Sara Benson, CRB, ABR, is president of Benson Stanley Realty in Chicago. Email: Sara.Benson@BensonStanley.com. www.bensonstanley.com Telephone: 312-337-4600

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