The after photo of a bank-owned home bought by Right Residential, a Hoffman Estates company that finds homes in need of updating and renovates and resells them. (HANDOUT)

It’s hard to look at the rock-bottom prices for foreclosures and short sales in the Chicago area and not feel you could get a great deal.

You buy a short sale or foreclosure as is. No warranties. That can be a problem, said Steve Hovany, a housing analyst and president of Strategy Planning Associates in Schaumburg.

Foreclosed properties often are handyman’s specials. Many of them have been vacant for months or years and require major repairs. Not only that, but some previous owners may not have been nice to the house that ruined their life.

Sara Benson of Chicago-based Benson Stanley Realty, added: Some angry owners with foreclosed homes put concrete down drains. The house may be literally destroyed. The buyer may get just a shell and the land.

On the bright side, some buyers are fortunate enough to get a good deal and are satisfied with their purchase.

Kelly and Kathleen Housman were clueless about foreclosures and weren’t planning to move from their home in Plainfield.

While searching online, Kelly saw a government foreclosure listed for $180,000. The 6-year-old house in Channahon had sold for $319,000 in 2009. It would mean the Housmans could move from 1,500 to 2,700 square feet of living space.

The paperwork was challenging, but we made an offer, and it was accepted, he said.

The two-story home needed work. Copper pipes had been removed, and the basement had water damage when power had been turned off. So far, the Housmans have invested $2,500 in repairs.

Bargain prices

A foreclosure is a vacant property taken back by the bank. In a short sale, the homeowners still live there. They need to sell it for less than they owe on the mortgage. The bank must agree to the lower price, which might take as long as 10 months for the bank to decide.

When you buy a foreclosure, you move into someone’s lost dream, said homebuyer Josh Burke.

Even so, he said the three-flat he bought in Chicago’s West Town neighborhood was a terrific investment, though the process presented numerous challenges.

The property was valued at $1.1 million in 2008. But in 2010, he negotiated with the bank and bought it for $575,000.

Apprehensive about foreclosures, Colette Netwig bought a short-sale house in Chicago’s Albany Park neighborhood, but only after checking out 40 other properties.

It’s like buying something on sale in a store, she said.

She recently closed on the 1920s Chicago bungalow, paying $180,000. Its estimated value was $400,000 in 2007 and $305,000 to $325,000 in 2008.

Some people are afraid of short sales because of how long they can take, but I closed in four months, Netwig said.

Netwig plans to flip the house after making some repairs and cosmetic changes. She has a renovation budget of $20,000 to $30,000 to update the house with help from her father, a home builder and remodeler.

Short sales have made it possible for some buyers to move up or own for the first time.

Yesenia Nunez, a single mother with an 11-year-old daughter, started bargain hunting online in October. After one deal fell through, she found a two-bedroom town house in Plainfield in December. It took five months to close, but the savings were worth the wait. She paid $84,000 for the home, which had been listed at $135,000.

I’ve always wanted a home. This makes my dream come true, she said.

Nunez noted that the 7-year-old town home was in good condition, though it did need painting and appliances.

The housing market is heating up now because of bargains in short sales and foreclosures, said Kathy Dames, owner of ReMax Ultimate Professionals in Shorewood. She estimated that 50 percent of recent closings in Will County are short sales and 30 percent are foreclosures.

Buyer beware

Despite the benefits, cashing in on today’s bargains in distressed properties can entail many pitfalls.

To navigate the tricky waters of troubled properties, buyers recommend working with real estate agents and lawyers who specialize in those transactions.

Home inspectors are invaluable in analyzing a property’s problems.

The majority of our business today involves foreclosures and short sales, said Brian Piper, vice president of Piper Inspections in Mundelein.

Every house has deficiencies. About 20 percent to 30 percent of houses we see are ugly and have a lot of defects. In older homes, we find that a lot of people have done their own repairs that are not up to code, Piper said. After an inspection, potential buyers can walk into the deal with their eyes wide open. But some of them decide to walk away from buying.

For those who don’t have the time or expertise to transform a foreclosure into a livable home, some companies will do it for you at a price.

One of them is Hoffman Estates-based Right Residential, which buys 120 bank-owned properties a year. These houses get the full treatment: landscaping, roofs, exterior and interior painting, new electrical, mechanical and plumbing systems.

The process is almost like building a new home, costs about $50,000, takes five months and includes solving legal hurdles, said Chris Shaxted, executive vice president of Right Residential.

Jim McClelland agrees that renovating foreclosures can be extremely challenging. When a house gets to foreclosure, it can be in very rough shape.

McClelland should know. He is chief executive of Mack Cos. a Tinley Park company that has been giving foreclosures new life for 15 years.

His advice: If you plan to do it yourself, don’t buy a wreck. Pay more for the foreclosure and you’ll end up paying less for repairs.