Intermediate Investors

Buying REO, Short Sale and Foreclosure Properties

Buying Below Market is Money in your Pocket

REO/Bank Owned, Short Sales, and Foreclosures: Quality Denver Investments at Below Market Prices

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.

Denver Foreclosures/bank owned properties/short sales

When a Denver homeowner falls behind on mortgage payments, the lender may take steps to protect their interest in the property. The lender will file a “Notice of Election and Demand,” which formalizes the foreclosure process—but that doesn’t mean the home is lost right away. The homeowner will have between 110 and 125 days to resolve the situation. The foreclosure process is a lengthy one, but there are opportunities to buy from the time of first filing, to the day of the sheriff’s auction and beyond.

Any type of foreclosure, bank owned property or short sale is typically sold on an “as is” basis. Although you can inspect them, the bank will not normally negotiate any of those inspection items. It does happen however, that for certain big-ticket inspection items a lender has offered to grant some concessions.
Notice of Election & Demand

Owner Cure  >  110-125 Days (No Ownder Redemption after sale)

SALE   >  Certificate of Purchase Issured

Lender Option  >  8 days to Rescind the Sale

Redemption Lien Holders Only  >  1st Lien Holder 5 days--Next 5 days--Next 5 days

Public Trustee's Deed Issued

You may see foreclosure lists for sale on the Internet, and these often include homes that are in “pre-foreclosure,” which means that the lender has filed, but the period of redemption has not yet expired and there is still an opportunity for the homeowner to resolve the foreclosure and keep the home.

Keep in mind too, that for a bank-owned property, you will typically get an answer from the bank on your offer fairly quickly, within a few days. With that answer, you will get an “addendum to contract,” and this needs to be signed by you. This will state several different items, including the “as is” clause, deadlines, and other pertinent information. This addendum will always override the original contract. But while banks will respond quickly when dealing with REOs and bank-owned properties, short sales are a different matter entirely, and it may take months to get an answer from the lender.

Let us help you find the right foreclosure investment. Give us a call and look through our list of foreclosure and pre-foreclosure Denver properties.  Use our own “Home Search” function to set up Auto-searches that update to your emial with your own custom parameters!

Denver Short Sales

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, and we can get the ball rolling today.

Denver REO Homes/ bank owned

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.

HUD Homes in Denver

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!

Need assistance remembering some of the commonly used terms in Denver real estate investing? Checkout the Real Estate Investor Glossary now.


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