If you are looking to buy a home, you might have friends and family members suggesting that you should look into buying a foreclosure property. A foreclosure property is a piece of real estate that has been put up for sale by the bank after the original owner of the property failed to keep up with the mortgage payments.

Because a foreclosure sale is typically an auction, you could potentially get a great deal. But, what happens to homes that are foreclosed on and put up for sale at an auction but do not get sold? These properties revert back to the lender and become what are known as real estate-owned, or REO, properties.

Failed Foreclosure Auctions

When a lender seizes a home in foreclosure and puts it up for sale initially, the sale is usually conducted as a public auction. This means that the home will go to the highest bidder. In many cases, however, bidders do not get the chance to see or inspect the property before the auction. Additionally, the high bidder will normally be expected to pay for the property on the spot with cash or a certified check. Financing is available in certain situations, but most auctions sales are completed without it.

The idea of buying a new home is exciting to many people, but it can also be very intimidating. The fun parts include reviewing listings, thinking about the amenities you want in a new home, and possibly even kicking around ideas for interior decorating. Of course, the financial part of the equation is often where the challenges arise, and it can be confusing to deal with all of the legalese and real estate jargon that you might be hearing. For reasons such as these, it is important to work closely with a knowledgeable real estate attorney who can help you avoid some of the most common home-buying mistakes.

Mistake #1: Moving Before You Are Ready

Many would-be homebuyers get so excited about the possibility of owning a home that they overlook the importance of being truly ready to settle down. While most people prefer the idea of building equity in a home instead of paying rent, many experts recommend renting for a while when moving to a new city or state. Once you sign on to buy a home, you could be stuck in it, even if you decide you do not like the area. Get settled and comfortable in the new town first, then you can begin looking for that place of your own.

Mistake #2: Too Much House, Too Little Money

You and your spouse, if applicable, should work with your attorney and your real estate agent to determine what your realistic budget should be. Once you have decided on a budget, you need to stick to it. You might be tempted to exceed your budget so that you can have a few more “nice things,” but going over your budget is dangerous. Could you still afford the extra money each month if you were suddenly unable to work or if something happened to one of your children? One way to make sure you stay under budget is to seek pre-approval for your mortgage loan.

If you are looking to buy your first home, you are probably excited about taking a big step toward achieving the so-called “American Dream.” Whether or not you buy into such an idea, the reality is that your home will likely be the largest investment you have ever made. There is a good chance that the same is true if you are a current homeowner looking to buy your next home.

Many homebuyers—including some who have been through the process before—often do not realize how many steps are involved and just how complicated each step can be. Along the way, you will need to account for many different variables and be wary of potential pitfalls.

A Real Estate Agent Is Often Not Enough

As you started the process of looking for a home, you may have enlisted the help of a real estate agent or broker. You might have contacted a particular agent based on a specific listing, or maybe you chose the agent first to help you find a suitable property. It is important to keep in mind that your agent, while certainly helpful, is just one piece of a larger puzzle. You should also consider working closely with an experienced real estate attorney for several reasons:

Purchasing a new home is an exciting endeavor that represents the beginning of a new chapter in the lives of both the buyer and seller. However, in any major transaction, there are dangers present. Sometimes, the seller of a home is not entirely forthcoming regarding the defects present in the home. At other times, the buyer of a home might wrongfully claim that the house sold to them was defective. The risk of fraud or meritless claims is often a significant reason why some families avoid entering the home buying or selling process at all. Thankfully, Illinois state laws and court rulings provide clear guidelines on how to resolve these situations.

The Illinois Real Estate Disclosure Act

Under the Illinois Real Estate Disclosure Act (765 ILCS 77), the seller of residential property has to fill out the Residential Real Property Disclosure form and provide it to any potential buyer. On this form, the seller is required to list any material defects with the property. This is to encourage honesty during price negotiations and ensures that the house is sold at an appropriate price. If the seller knowingly fails to list any defect with the house, this is considered fraud. Section 55 of the statute specifies that if fraud occurs, the seller “shall be liable in the amount of actual damages and court costs, and the court may award reasonable attorney fees incurred by the prevailing party.”

Court Rulings

As with most statutes, court rulings have provided additional clarifications on these matters. To protect sellers from meritless claims, the courts have set a very high standard for proving fraud. In a 2014 ruling, an appellate court found that the plaintiff has to bring “clear and convincing” evidence to prove fraud. The court also noted that the statute does not specify that the attorney fees may be awarded only to the plaintiff. However, if the claim made by the plaintiff is determined to be meritless, then the defendant can be awarded attorney fees as compensation.

When you purchased your home a few years ago, life was great. Your job was secure, your children were happy and healthy and your marriage was stable, of course with the common marital ups and downs but still reasonably stable.

Then it all came crashing down.

One of your children was diagnosed with a chronic disorder causing medical bills to soar, you became a victim of employment downsizing, and your spouse decided it was all too much and filed for divorce. You are now in danger of losing the family home to foreclosure.