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The use of real estate auctions by condo developers in Chicago, banks and in some instances even financially distressed home owners as an exit strategy will most likely continue to be a growing trend in 2009. Third quarter 2008 sales of ction Chicago condos were down 82% from the same period in 2007. There was a 56% drop in sales for November 2008 alone compared to sales in November 2007, according to data from the Chicago MLS. With tightening credit, loans coming due and traditional marketing falling short, developers needing to liquidate inventory fast and raise cash are opting for the quick solution of auctioning off their units.

Adding to increasing number of real estate auctions is the rising number of foreclosures. The national foreclosure rate slowed during the last few weeks of 2008, mostly due to the temporary reprieve that both Fanny Mae and Freddie Mac gave their delinquent mortgage holders. Many states also lengthened the legal time for the entire foreclosure process. But RealtyTrac predicts the number of foreclosures will start to rise again in January 2009 as those temporary reprieves are up for troubled homeowners. The estimated number of houses and condos that will fall into foreclosure in 2009 is 2.25 million, according to the Federal Reserve. That's double the normal amount and many of those homes will be put up for auction.

The combination of excess inventory for developers and banks eager to unload foreclosed properties can add up to some pretty good deals for buyers. It's also beneficial for the developer or lender as they can at least recoup some of their money and move on. Many developers are willing to sell the final few units in a building at a much lower price in order to close the book on the project. To that end, some units are often sold "absolute," meaning that they will be sold at that auction no matter how low the highest bid ends up being. Still other banks and developers will put a reserve or minimum amount that they will accept on a condo. In that case they have the right to refuse the highest bid if that bid doesn't meet the minimum reserve price set before the auction.

There are a few things you need to know before going to a real estate auction though. It isn't as simple as showing up and waving your hand as soon as the bidding starts. Generally the process is the same at most auctions. You have to arrive in time to register with the proper photo ID and you usually have to have a cashier's check with you for a pre-determined amount of money. This can vary from one or two thousand to several thousand dollars, depending on the starting bid and the expected selling price. If you are fortunate enough to win an auction, that cashier's check will then go into escrow and you have to produce at least a 10% down payment in typically 10 days from the auction. Proof of financing for the rest of the amount will be required in 30 to 45 days, so it's beneficial to already be approved for a loan before you bid.

As for foreclosure or bank auctions, the time frame is generally shorter than at a developer auction. With these types of sales, a buyer usually must come armed with cash for the down payment or be pre-approved for a loan. A bank-owned or REO sale is when the property owner and mortgage lender agree for the lender to assume control of the condo and sell it. This sometimes happens when a property doesn't sell at a foreclosure auction. REO sales at auctions can net some great deals for buyers but this type of auction occurs less often.

If you are interested in a condo that is coming up for auction, take the time to do some research on the property. The seller or auction company will normally hold an open house before the auction date and also print fact sheets and property descriptions with the necessary legal disclaimers listed. If you want to go the extra mile, you can talk to current residents of a multi-unit building or high-rise or even consult with a real estate broker or contractor about the property coming up for auction. Most auctions are listed well enough in advance to do this.

Sheldon Good & Company Auction July 26th
1 PM at the Hyatt on 3003 Corporate West Drive in Lisle.
Registration begins at noon.

40 Units at the Seven Bridges Condominium Residences in Woodridge.
40 one to three bedroom condos with 1,200 to 1,760 square feet and 7 floor plans.
22 units will be sold with buyers able to chose custom finishes.
Suggested opening bids at 70% off previous prices.
13 condos to be auctioned at a minimum bids of $130,000.
Remainder previously priced up to $510,000 with opening bids of $170,000.

Unit Finishes:
Stainless Steel Appliances
Granite Counter Tops
36" Maple Cabinets
Soaker Tub in Master Bath
Cable Television Hook-Up

Building Amenities:
24 Hour Doorman
Sun Deck
Outdoor Pool with His &Her Changing Rooms
Bike Storage
Indoor Parking

Open houses are scheduled for July 11th, 12th, 18th, 19th and 25th from 1 pm to 4 pm.

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