Everybody wants to buy a foreclosure. After all, a foreclosure is such a great deal. You can get a house for pennies on the dollar, right?
Well, maybe not quite.
Foreclosure properties in the Metro Denver area tend to sell for 5% to 10% less than their non-foreclosed neighbors. That's still a pretty good deal. (10% of a $200,000 property is $20,000 -- not exactly chump change!) But it's not the half price bargain that some people have come to expect.
And it comes at a price. The hassle factor on a foreclosure is HUGE.
I have a buyer under contract with a foreclosure. It's scheduled to close in two days. And the obstacles just keep coming. The loan officer and I are batting them out of the park one by one. But our swinging arms are getting tired.
Because of the foreclosure mess, lenders are making themselves look better by "cracking down" on foreclosure loans. And, like most "cracking down" programs, I don't really see any changes that are particularly useful or effective. They're just making a lot more busy work for the rest of the world.
Case in point -- three days before closing, the loan underwriter decides that an extremely minor issue found in the inspection simply HAS to be repaired before the loan will be funded. Of course, we argue that we can't make repairs to the property, what with the fact that the buyer doesn't own it yet and all. It's all worked out now, since we convinced the underwriter that it would be okay to escrow the money at closing to pay the electrician to make the minor repair.
The good news is that foreclosures in Colorado are discounted less -- in other words, sell for more -- than foreclosures in other markets. Why is this good news, you ask? Simple. The reason lenders don't discount their foreclosed properties as much here is because they believe this market is poised for a rebound, so they're not as desperate to unload them as they would be in, say, Alabama, where foreclosures are generally priced around 40% under market value.