Colorado Springs Vintage Homes Blog » Foreclosures and Short Sales

Cash continues to drive the REO Market

Kathy Torline — Wed, 25 Jan 2012 13:10:08 +0000

Cash is still King

There was an interesting article in DS News about how cash investors are pushing down prices. According to a quote in this article “In December 2011, data collected for the HousingPulse Survey shows that the overall proportion of cash buyers in the housing market surged to a record 33.2 percent, up from 29.6 percent a year earlier.” There is also a Press Release put out by Campbell, that essentially was repeated by DS News.

I did a quick calculation of Colorado Springs home transactions for 2011 and came up with the following information on what type of financing was used for home purchases in the area;

Cash 19%

Conventional Financing 31%

FHA Financing 19%

VA Financing 31%

One of the reasons that the numbers are different from the national average in the Colorado Springs Housing market, could be because of the strong military presence in the area which is shown by the 30% of home buyers that use VA financing.

This article has several key points on why they think cash buyers were bringing down prices

More cash buyers are the winning bidders on REO properties, and REO banks prefer transactions that can close within 30 days
Even though investors may not be the first offer accepted, they often end of getting the property because other buyers can be eliminated because of lengthy mortgage approval timelines. Since cash sales can typically close in 20 to 30 days and financed offers, especially VA and FHA can take closer to 45 – 60 days, REO banks have a strong preference for cash.

In my opinion, investors are important in this market. They often buy homes that are distressed and can’t be financed because of the condition of the property. If the house is in disrepair, most lenders don’t want to lend on them. As an example, the roof may be in bad shape, plumbing may not work, the house may have been stripped of all of the appliances and cabinets by the foreclosed home owner. Seems to me it’s much better to get the house sold, and fixed up, vs. letting it sit empty. (Although I have to admit that I’m biased, as I’m also a real estate investor).

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Kathy (719-287-1049) KTorline@msn.com

Are Colorado Springs short sale disclosed?

Kathy Torline — Wed, 11 Jan 2012 15:40:06 +0000

Colorado Spring Short Sales are now disclosed

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Every MLS around the US, and in Colorado, has their own policy about short sale and how these are disclosed in the local Multiple Listing Service. The MLS that serves the Colorado Springs area, (PPAR) recently made a change in their rules to reflect a change in their policy regarding short sales. In the past, it was an optional disclosure in the Pikes Peak area. As of January 1, PPAR now requires that Listing Agents disclose if a property is a short sale and if the seller has signed the Short Sale Addendum, which is required by Colorado Real Estate Law.

The following policy was adopted by the RSC Board of Directors on November 17, 2011: “The listing broker shall, on each listing filed with the PPMLS, disclose to other Participants whether a Colorado Real Estate Commission Short Sale Addendum has been signed by the seller. Such disclosure shall be made upon submission of the listing to the PPMLS. If a Short Sale Addendum is signed after the listing is submitted to the PPMLS then disclosure must be made within 72 hours of the time the seller has signed the Short Sale Addendum and for the purposes of enforcement this disclosure shall also be treated as a status change pursuant to Section 1.6 of the RSC Rules and Regulations.”

Since this change has been made, there is now a new field that is required in the PPAR database when listings are being entered, “ShortSale Addendum Signed by Seller. This is a sortable field, both by Realtors and the public. As I’ve written before, short sales are not the right fit for every buyer, for many buyers and investors, they may be the perfect option.

One important thing to note: One of the many challenges about Listing Properties, is that if the property is priced at a certain price it is not a short sale. But if an offer comes in on the property that is 10% less than the original Listing price, this could change the status of the property from a “Normal Listing” to a Short Sale. Hence, in this case mentioned above, a property wouldn’t be listed as a Short Sale, since when it was listed at the current price, it was not a short sale. Sound confusing? It is!

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Kathy (719-287-1049) KTorline@msn.com

HUD homes are always, always sold “as-is”

Kathy Torline — Fri, 21 Oct 2011 13:00:02 +0000

HUD properties are sold “as-is”

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It’s important for any homeowner or Colorado Springs Real Estate Investor to realize that all HUD properties are always, always sold “as-is”. In case you wonder exactly what that means, here’s a quick summary:

The property is owned by HUD (SECRETARY OF HOUSING & URBAN DEV), and the seller will not fix any flaws before the sale.
You can still do an inspection, but don’t except any items to be repaired or fixed
If you are getting a loan on the property, discuss the property’s condition with your loan officer. Regardless of what the lender wants the condition of the property to be, HUD will not do any repairs.
If the property incurs damage to it between the time you put in an accepted offer on it and close on the property, HUD will not fix it. A window broken, a mirror removed, pipes that are missing, all of these things won’t be fixed.
Remember, you are purchasing this HUD home in it’s present physical condition. The seller is selling you the house without any warranties or guarantees of its condition whatsoever.
If you do an inspection and decide you no longer want the HUD home, you may or may not get your Earnest Money back.
HUD homes typically have a property Condition Report that is listed in the addendum section on HUDhomestore. It’s important to throughly review this information before you put in an offer on a HUD property.

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Kathy (719-287-1049) KTorline@msn.com

Are foreclosures down?

Kathy Torline — Tue, 18 Oct 2011 14:35:58 +0000

Have foreclosures decreased in Colorado?

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Here’s some of the facts about Colorado Springs Foreclosures, according to a recent article by RealtyTrac:

One out of every 168 households in Colorado were in some stage of foreclosure (The national average of one out of every 213 homes in some stage of foreclosures)
Boulder showed the lowest foreclosure rate of major cities in Colorado, with one out of every 342 households in some stage of foreclosure
In the Denver-Aurora metropolitan statistical areas, one out of every 156 households were in some stage of foreclosure
Nevada posted the nation’s highest state foreclosure rate — one in every 44 housing units with a foreclosure filing in the third quarter
Colorado Springs has one out of every 171 households in some stage of foreclosure, a decrease of 24% from last year

According to the reports on the El Paso Public Trustee’s Web Site; there are 334 NEW foreclosure starts in August 2011 (year-to-date) vs. 427 for the same month in 2010. There have been a total of 2315 NEW foreclosures in 2011 vs. 3200 for the same period number last year. The statistics show that the numbers are definitely down.

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Kathy (719-287-1049) KTorline@msn.com

BPO’s can kill a short sale

Kathy Torline — Mon, 03 Oct 2011 13:15:53 +0000

Killer for Colorado Springs Short Sales

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One of the fastest way to “kill” a short sale you are trying to purchase, is for the lender to receive an inflated BPO.

Let’s start with the basics

What is a BPO? The initials stand for Broker’s Price Opinion; and most lenders will order at least one, maybe two or three BPO’s , which is how they come up with a value on a property.

Who does the BPO?

BPO calculations are not an exact science, they are based on an opinion. Most lenders will hire Realtors to put together a BPO on a property, and in turn pay a Realtor a fee for the BPO. The fees can range from $25.00 to $125.00; and in my opinion the lenders get what they pay for. As an example, a typical BPO order requires the Realtor to drive by the property, take pictures, upload the pictures, find 3 active properties and 3 sold properties; and put all of the information together in some of format that the lender requires. A BPO can take from 3 hours to 7 hours to complete. If the lender is paying $25.00 that equates to $8.00 an hour; not much pay for how much work they are asking to have completed. At 7 hours it equates to less than $4.00 an hour. Most Realtors will try to complete the BPO as quick as possible.

Many lenders don’t have many requirements for a realtor to be qualified to do a BPO; hence a brand new agent who doesn’t have any experience actually selling properties can qualify.

It’s important to know that BPO’s are not an exact science. As an example, if I was hired to do a BPO for a house selling in a Stratton Meadows, a subdivision in Southwest Colorado Springs, near Fort Carson, I could choose from 40 houses that have sold in 2011. If I narrow the list down farther to houses less than 1000 square feet there are 27 houses that sold. The sold prices have ranged from $45,000 to $105,000. Hence if I pick the higher-end houses for the BPO, my final value for the BPO will come out higher. If I choose the lower end houses for the BPO, my valuation will come out lower.

The lender will typically take the BPO price and come up with a decision from this document on what to accept on a short sale offer. In this particular Stratton Meadows subdivision, my BPO can be as low as $50,000 or as high as $90,000. The high BPO valuation could definitely kill a deal, as a qualified buyer may only want to pay $60,000 to $70,000; but the bank may say that they’ll only accept a minimum of $70,000 based on the recent BPO they received.

Seems to me the process is flawed. Maybe a lender should always get 2 to 3 BPO’s and average them out? Every realtor who has ever been involved in short sales has a story about a transaction that didn’t go through because the BPO was too high, hence the transaction never went through.

Seems like there should be a better way.

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Kathy (719-287-1049) KTorline@msn.com

144 Potential amazing deals

Kathy Torline — Mon, 01 Aug 2011 16:24:47 +0000

You can Buy a home under $100,000 in Colorado Springs

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There are (174) active listings of single family detached homes available for sale in the Colorado Springs area that are priced under $100,000! Even though 34 of these are short sales, that still leaves 140 homes on the market that are less than $100,000. I don’t have exact numbers, but several years ago, there were very few livable homes on the market that were priced under $100,000.

These homes range in price from $27,000 to $100,000, and from 480 square feet to 2600 total square feet. Most have 2 to 3 bedrooms, and some also include garages.

Some of these active listings do qualify for FHA & VA financing, and some only offer Cash or Conventional financing. Here are some of the areas where there are homes under $100,000:

33 Homes in Central Colorado Springs
12 Homes in Southwest Colorado Springs
4 Homes in East Colorado Springs
22 Homes in Southeast Colorado Springs
19 Homes in Fountain Valley (close to Fort Carson)
9 Homes in Powers area (close to Peterson Air Force Base)
9 Homes in Old Colorado City area of Colorado Springs
12 Homes in Southwest Colorado Springs (close to Fort Carson)

Whether you are buying your first home, or your first investment property, some of these homes are amazing deals.

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Kathy (719-287-1049) KTorline@msn.com

Highest and best offers are becoming more common

Kathy Torline — Mon, 06 Jun 2011 14:05:29 +0000

Highest and Best offer on Colorado Springs REO Properties

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If you are interested in buying a Colorado Springs Foreclosure, get prepared for the “highest and best” discussion. Many lenders are pricing their properties very attractively, hence they often attract multiple offers on the same property.

As soon as multiple offers come in, most banks will have the Buyer’s Agent talk to their Buyer; and have the Buyer submit their highest and best offer. Essentially the lender wants the best price they can get for the property. (just like any seller).

Here’s some tips when you get the phone call about submitting your highest and best offer.

(1) Don’t be surprised about the highest and best conversation,

(2) Keep the emotion out of decision; and don’t get offended that the bank is asking you for your highest and best offer.

(3) If you want to change your original offer; don’t get caught up in a bidding war. Think of it logically. What do you want to pay for the property? It’s important to know that some bank-owned properties are actually being sold for more than the asking price.

(4) Many banks will have you sign a document saying that you were notified about submitting your highest and best offer.

(5) Highest and Best offers don’t always mean changing the price. It can also mean making the offer a quicker close, changing to a cash buyer with no financing, no other contigencies, changing the amount of Earnest Money.

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Kathy (719-287-1049) KTorline@msn.com

It’s important to understand the deeds on foreclosed homes

Kathy Torline — Mon, 16 May 2011 13:41:50 +0000

Buying a Colorado Springs Foreclosure? Make sure you understand general warranty deeds vs. special warranty deed.

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With a general warranty deed, the seller warrants that the title being transferred to the buyer is valid and free of any title defects back to the beginning of time.

A special warranty deed warrants title only for the time period in which the seller owned the real property. It gives no warranty for problems prior to that point

As an example, if there was a title defect before the bank acquired the home at the foreclosure trustee sale, the bank would not have liability to the buyer under a special warranty deed. But they have liability to the buyer under a general warranty deed.

Hence, in order to limit their liability a bank that acquires a home at a foreclosure sale only provides a special warranty deed to the buyer.

If only a special warranty deed is furnished, it’s important for the new purchaser to have title insurance to cover any defect in title. If there is a problem, the buyer should be able to recover damages from the title insurance company for most defects in title, including those defects in title that occurred prior to the seller acquiring the real property.

Title insurance insures the buyer against past ownership problems, old liens, boundary issues, and so on. There may be exceptions in the title insurance policy, and potential buyers should know what their exceptions are. But unless there’s a specific exception, any other past title problems are covered.

The Colorado Contract to Buy and Sell Real Estate, has a specific section relating to deeds:

13. TRANSFER OF TITLE. Subject to tender or payment at Closing as required herein and compliance by Buyer with the other terms and provisions hereof, Seller shall execute and deliver a good and sufficient ______________________________ deed

If you have more questions about a general warranty deed vs. a special warranty deed, and what is covered by title insurance, you may want to contact an attorney who specializes in real estate law.

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Kathy (719-287-1049) KTorline@msn.com

The 2nd can blow the deal

Kathy Torline — Fri, 13 May 2011 12:57:34 +0000

Do you want to buy a Colorado Springs Short Sale?

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Short sales can be difficult to negotiate, but they aren’t impossible. When I’m representing a buyer in a short sale; I always do my homework on the property. I typically have the Title Company pull an O & E (Owners and Encumbrances report) so I can see what type of liens are on the property and how many liens are on it. I know from past experience the odds are much better for approval if the home only has a first loan; vs. a first and a second loan.

It’s important to know that each lien holder needs to agree to the short sale. Even if the first and the second are with the same lender; they all need to agree to a “short sale payoff”.

Some Realtors have the misconception that if both the first and second are with the same lender, you’ll only have to work with one negotiator to get approval. In my experience, this isn’t true with most lenders; although I’ve heard that some banks are starting to change this. Most of the time, the seller and the Realtor have to submit a short sale package to each lien holder. Both lenders have to agree to accept the short sale. There are many times the first mortgage holder agrees to the short sale; but the second doesn’t agree. Or if they do agree, the second wants more money.

The second lien lender may be holding a note that’s worthless in a foreclosure. If the first lien holder forecloses, the second lien holder typically gets nothings. But second lien holder who has the second mortgage is in a pivotal position; they have the legal power to block the short sale by refusing to agree to the deal.

It’s very difficult to find exact statistics on this; but my guess is that 75 % of short sales with only a first mortgage reach final approval and close; but the percentage drops to closer to 25% when a property has a first and a second mortgage involved.

There are currently 383 homes that are listed as short sales in the Pikes Peak MLS. I wonder how many will actually get the short sale negotiated and sold to a buyer before being foreclosed on.

If you want to buy a Colorado Springs Short Sale; make sure you know the facts before you submit your offer. If you’ve just found your dream home that is listed as a short sale; you need to be realistic about the odds of getting it accepted; especially if it has a first and a second mortgage on it.

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Kathy (719-287-1049) KTorline@msn.com

HUD Homes are almost perfect for Investors

Kathy Torline — Tue, 19 Apr 2011 11:46:58 +0000

Colorado Springs HUD homes and investors

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In my opinion, some of the best properties currently available for sale for Colorado Springs Real Estate Investors, are Colorado Springs HUD Homes. They are listed two different places, both in the Local MLS and in the HUD web site, www.hudhomestore.com. There are many reasons to buy HUD properties, including that they require low down payments.

Earnest Money Policy

BUT, it’s very important for real estate investors to know that once your bid gets accepted and you don’t close on the property, there is a very good chance you are going to loose your Earnest Money. On most home purchases, investors as well as homeowners, assume they can inspect a property and if the property has additional inspection items that the buyer didn’t except, they can cancel the contract and get their Earnest Money back. Not so, on HUD properties. According to the Forfeiture and Extension Policy for Investors, unless you have a special circumstance, you will forfeit your Earnest Money. Special circumstances includes death, loss of a job, serious illness. Essentially the policy says nothing about inspections.

The form also goes onto say that if acceptable documentation is not provided, or provided in a timely manner, 100% of your Earnest Money will be forfeited.

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