Foreclosures and Short Sales in Chicago

If you are behind on your mortgage

Act early. You usually have more options, and more time, than it feels like when the letters start arriving.

• Before any court case: under federal rules, a mortgage servicer generally cannot make the first foreclosure filing until the loan is more than 120 days delinquent.
• Foreclosure in Illinois goes through the courts. The lender has to file a case, and you are served with a summons.
• Reinstatement: Illinois law lets an owner bring the loan current, including past-due amounts, fees and costs, within 90 days after being served.
• Redemption: for a home, the redemption period usually ends 7 months after the owner is served or 3 months after the foreclosure judgment, whichever is later. Until then the owner can still pay off the loan.

Depending on your situation, the options can include a repayment plan or loan modification with your servicer, selling the home before the foreclosure sale, a short sale, or a deed in lieu of foreclosure. A HUD-approved housing counselor can review your options for free, and a real estate attorney can explain your rights in court.

This page is general information, not legal or tax advice. Deadlines depend on your case; talk to an attorney about your specific situation.

How a short sale works

A short sale is a sale where the lender agrees to accept less than the amount owed on the mortgage. The steps are:

1. We review your situation and price the home from recent comparable sales.
2. The home is listed, and offers are accepted subject to the lender's approval.
3. We send the lender your offer with the documents it asks for, usually a hardship letter and financial information.
4. The lender orders its own valuation and reviews the file.
5. If the lender approves, it issues a written approval letter, and the sale closes like a regular sale.

A short sale usually takes longer than a regular sale because the lender has to approve it. Two questions to settle before you sign: whether the lender waives the remaining balance (ask for it in writing in the approval letter), and whether the forgiven debt is taxable for you. Ask a tax professional about the second one.

Buying a foreclosure or a short sale

• Bank-owned (REO) homes are usually sold as-is. The bank adds its own addendum to the contract, and repairs are rarely made. You can and should still have the home inspected.
• Financing: homes that need major repairs may not qualify for some loan types. Talk to your lender before you make an offer.
• Condos: check the association's finances and any unpaid assessments on the unit; the seller must provide association documents under Illinois law.
• Short sales need patience: the seller's lender must approve your offer, which can take weeks or months.

Ask me for current bank-owned and short sale listings in the neighborhoods you are considering.

How I help

I have handled foreclosures and short sales for owners and buyers in Chicagoland for more than 20 years, with nearly 40 foreclosure and short sale transactions closed on the MLS. For owners, I price the home, prepare and follow up on the lender package, negotiate with the lender and work with your attorney. For buyers, I find bank-owned and short sale listings, help you judge condition and price, and write offers that meet the bank's requirements. I work in English and Romanian.

Sources

• 12 CFR 1024.41 (federal loss-mitigation and 120-day rule), eCFR
• 735 ILCS 5/15-1603, Illinois redemption period
• Illinois Legal Aid Online: detailed mortgage foreclosure process (reinstatement)
• HUD: find a housing counselor