As a Denver real estate investor, your goal is to buy quality homes with potential, at the lowest cost possible. The current mortgage crisis can be an opportunity in disguise. There are a number of homes in the foreclosure process which are in excellent condition in and around the Denver area, and they represent a tremendous opportunity to buy at below-market rates. You can typically expect to purchase a property from a lender under these conditions at somewhere between 82 to 90 percent of market value.
While the home is in pre-foreclosure, a homeowner may, if the lender chooses to cooperate, attempt to sell the home to avoid having to go through the foreclosure process and suffer the consequences of a blemish on their credit report. If the homeowner has equity in the home, and the resale value is greater than the amount due, then selling is easy and the homeowner can avoid foreclosure and walk away with a profit. But what happens when the homeowner is “upside down?” In a soft market, or when a homeowner purchased a home with very little down, it is very possible for the amount due to exceed the current selling price of the home. In this case, the homeowner seeks out the “short sale” option, which offers the home for sale at an amount less than what is due the lender.
Buying a short sale Denver home differs from the conventional process, and there are several additional steps involved. With your offer, you must include a “short sale addendum.” More than any other type of real estate investment, short sale investing requires a great deal of patience. Expect that the process could take several months.
Ask us for a short sale package. We can advise you on the process, whether you are looking to buy on short sale terms, or if you are a property owner looking to sell on short sale terms. Give us a call at 720-284-4411 or email at email@example.com, and we can get the ball rolling today.
If the lender offers a foreclosed home at auction and nobody buys it, then the lender retains possession of the property and it goes into their REO (real estate owned) portfolio. Denver REO homes are typically vacant, and once they have been in the REO portfolio for several months, the condition may begin to deteriorate. Nonetheless, they represent good value—although they may need a bit of renovation before they become productive for you.
At the auction, the lender more than likely wanted to take bids that would cover at least the amount owed—but once the property is an REO, the lender may consider taking less. It is common to find homes for sale at 82 to 90 percent of market value. This is because the lender now actually owns the property and is responsible for taxes and maintenance and lawyers fees, and depending on the municipality, may even face fines if the property falls into disrepair. This costs the lender money, and they’re eager to sell—and you are likely to get a response within two or three days (unlike with a short sale, when you could be waiting for several months). As a result, you will have more negotiating power with the lender when seeking to purchase an REO property.
The US Department of Housing and Urban Development (HUD) has a large, constant inventory of repossessed homes for sale. These can represent a good value at below market rates, but don’t be deceived by claims of “pennies on the dollar.” Look for HUD homes that are offered from between 10 to 25 percent below market. More often than not these are going to need some work.
As a Denver investor however, HUD homes may not be available to you. HUD’s mission is to increase the number of homeowners in America, and they will give priority to owner-occupants over investors. If no owner-occupants place a bid within the first ten days of listing, then investors will have an opportunity to place bids. You will have an opportunity to inspect the home, but it is offered “as is” and you are not able to negotiate repairs into your offer. We are HUD certified. Come into our office and let’s have a look at Denver HUD homes on the market!
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