2025 New Law Roundup Part 1: Foreclosure Auctions Moving Online
This Article is the first in a series about new real estate related laws in Illinois, effective in 2025.
I have a fair number of clients who buy distressed properties at foreclosure auctions. Occasionally my client buys a home to live in at a judicial sale, but more often than not, it’s investment property. If you are in the business of purchasing foreclosed property from judicial sales and/or auctions, or if this is something you are looking to get into, then you should be aware of Public Act 103-930 S.B., 2919, which was recently signed into law and is effective as of January 1, 2025.
Through the end of last year, foreclosure auctions were entirely in person. If you found a foreclosed property you were interested in, you had to physically attend the auction. In this day and age of Zoom, Teams, and Google Meets, this might seem unusual, but this is how it was done. Indeed, it is how it is done even today. For example, if you found a property you were interested in that was in Cook County, you would make your way bright and early through traffic on a weekday morning to head downtown to place your bid. After you got through the never-ending construction, paid an arm and a leg for parking, then found your way to the auction site, you placed your bid. Whether or not you won the property at auction, you then went back down the elevator, to the parking lot, and probably managed to find more traffic on your way home.
The new law would eliminate this wasted time. By allowing the sheriff to conduct judicial sales online, you can bid from home. You would, of course, need to register and qualify in advance, but if you did, you could place bids online on a computer, laptop, tablet or phone. While the sheriff if not required to allow bidding online, if the sheriff’s office does choose to go this route, they can recoup costs by charging additional fees. They must hire reputable online auction companies, keep detailed records, and vet potential buyers. The auction company is free to market the property widely.
What are the benefits of this new law?
- It makes it easier for existing players to place bids. They don’t have to trek anywhere to place bids. They can place bids even if they are traveling.
- It makes it easier for new bidders to get involved. Travel is no longer a deterrent. The new buyer could be anywhere. They don’t have to be local.
- By opening up to a larger pool of buyers, the bidding process may become more competitive. Therefore, the lienholders may recoup more of their money.
- If the lienholder is miraculously paid in full and there is a surplus, the property owner may get to take some money home.
- If you are in the online auction business, you have a whole host of potential new customers now — Illinois sheriff offices conducting judicial sales.
- Properties at foreclosure auctions will get a lot more eyeballs if the auction companies are marketing them. The way it is now, most people are not even aware of foreclosure auctions.
On the flipside, there are some cons to the new process:
- The sheriff is not required to use online auctions. So things may change, but things may also stay the same.
- Unfortunately some auction companies engage in practices that are not entirely aboveboard. The sheriff will have to be diligent in picking the right auction company.
- If you regularly buy investment property at judicial sales auctions, online auctions could make it much harder for you to conduct your business, because you may have a lot more competition now. Anyone with an internet connection can bid.
- Down payment collection and contract signing will likely occur after the auction and be entirely remote. In regular (non-foreclosure) online auctions, some deals fall apart at this stage. Online bidders seem more likely to get cold feet. This is not a fact by any means, just my own observation from my own and my clients’ experiences.
Personally, if I was bidding (and I have on occasion attended in person auctions downtown), I would much prefer to bid from my office or from home!