3 Hidden Costs of Buying Foreclosures

I had an interesting question yesterday from a new buyer about the costs of buying a foreclosure. She asked who was responsible for compensating the Realtors when it’s a bank selling the property. Compensation works the same way regardless of who the seller is. If the foreclosure is listed with a broker, the bank pays the listing broker when the sale closes. The listing broker pays part of their commission to the brokerage representing the buyer (the co-op commission).

However, there are often additional costs when buying a foreclosure that aren’t obvious. Banks typically refuse to pay for a plat of survey when selling a house. A plat of survey showing the lot boundaries and where improvements are located is required when a house is sold in Illinois and typically paid for by the seller. Costs vary, but I would budget $450.

Banks often insist on prorating property taxes at 100% instead of the 105% which is typical in the Chicago area. Since property taxes typically go up each year, buyers end up paying more for their part of the taxes for the year they buy in.

Foreclosure inspections can also end up costing more. When I represented a woman who bought a foreclosure last year, the bank refused to pay to have the house dewinterized (unwinterized?) so the plumbing could be tested. She had to pay which cost her around $100. I wrote an offer on a foreclosure a couple of weeks ago and suggested to my buyers that they include a requirement for the bank to have house dewinterized prior to inspection. They did and the bank was agreeable, so not all banks behave the same way.

ABOUT THE AUTHOR

Fran Bailey shows, previews and tracks downtown Chicago homes for sale giving her the insights needed to help her clients negotiate the best price and terms. Fran has been quoted in numerous Chicago and national publications. To schedule showings of listings regardless of broker or to contact Fran email her at fran.bailey@bairdwarner.com or call 773.793.4516. Learn More