Foreclosure, foreclosure prevention, and short pay sales are hot topics these days in our business in general, and in Colorado Springs in particular. Here are a few things that seemed useful to pass along from a class today held by RE/MAX Properties.
1. According to RealtyTrac, Colorado now has the 2nd highest rate of foreclosure for the number households we have, following only Nevada for the dubious distinction of #1, but joining California, Michigan and Florida in the top 5.
2. Allegedly, we have 6,079 homes in some level of the foreclosure process in Colorado. Locally, about 40% of those never go to foreclosure sale.
3. Colorado law will change quite a bit as of January 1, 2008, eliminating the redemption period, but extending the cure period. This will make it somewhat easier to buy foreclosure properties, since the borrower will no longer be able to come back in and redeem after the sale.
4. Most foreclosure auctions do not result in competitive bidding, because the 1st position lender who is foreclosing is usually owed too high a percentage of the fair market value of the property. Investors who bid at auction are typically looking for a 25 - 35% spread between what is owed and what the fair market value is, and that is not common, since usually the seller is highly motivated to try and sell it before it gets that far if there is that much equity.
5. Short pay negotiations are usually not effective unless:
a. The seller is not worth pursuing for collection (ie no other assets and little income)
b. The loan is already in default
c. A contract for sale has already been reached that is contingent on the lender accepting the short pay
d. The buyer has patience and can afford to wait around for answers from the lender
e. The seller has someplace to go
6. It is extremely important for sellers in foreclosure who believe they can either cure or redeem their property to timely file the appropriate Notice of Intent to Cure or Redeem by the deadlines, or they can lose very important rights, and possibly their home.
Obviously this is a big topic and warranted a whole class even for us, but these seemed like some useful things for others to know, so I thought I'd share!