1464 S Benton St - FlatGrass Realty

We have had multiple offers at, above and below the list price from investors willing to pay cash. Why? Because investors work from what it could be worth to them rather than the list price. Most of the offers (not all) we received from traditional buyers tended to net a value under the list price. If the traditional buyer did their homework, they would know that the home is worth much more than the list price. The list price was just a tool to attract attention or to get a cash buyer involved. The same home down the block sold earlier this year for around $170,000 and that wasn’t even a full remodel. This home could fetch $175,00-$180,000 with a good remodel.

This home’s value is being held down by a handful of local foreclosures that though comparable on paper, sold in days to investors. Some of which have already been flipped. I’m guessing most agents didn’t take the time to look at what it could be worth, the ‘adjusted retail value’ of the property.
This is just one example, if you want to see lot’s of examples, take a look at the HUD bid statistics that come out each week. You’ll be able to see all the bids. You’ll notice that the vast majority of buyers make a ’shot in the dark’ approach to their bid rather than considering the actual value of the home. That’s frustrating for me to watch. Whereas I’m working to attract an investor offer, HUD prioritizes owner occupants over investors. This can be a great opportunity for the average buyer to put themselves into a home with a great equity position. If only they (or their agent) would do the math.

New Federal law effective from August until December 31, 2012 says they can stay through their previous lease as long as they continue to honor the terms of the lease. Alternatively, a 90 day notice is given for the renters to vacate.

You can see more of it here.

Here’s and example of the Green Valley Subdivision in Denver, Colorado

Notice that once current home values cross the value of what was paid on the 1st position loan, there is a spike in foreclosures.

Foreclosure rates in Green Valley Ranch

just to add some more perspective…

An example of a highly localized collapse of home prices common in many cities.

It’s something to think about. It’s not just a matter of a few bad loans, lost jobs and problems paying health expenses, for many neighborhoods that may be close to a similar tipping point. Because of the substantial amount of money invested into Green Valley Ranch, I would expect that they’ll recover from the collapse within 5 years as the foreclosure sales work through the system. For other neighborhoods in Denver, I’m a lot less optimistic.

If you know me, you know that this is what I do.  I want to know why and how, so, I did a little checking in the MLS and public records.

  The unit I saw had previously sold for $204k but was now listed at $60,000 in a building that every unit had previously sold for over $150k.  A few even sold for up to $250k.   What makes it suspicious is that there were no real upgrades to justify 204k.  In fact, the value today is probably about $80,000 if it was cleaned out.   No electrical or plumbing upgrades to the building.  Some newer windows and a few new light fixtures in the hallway.  That’s it.    Now it is possible to get $160,000 for this type of unit if it’s done right.

 Some developers who do a killer job on the conversions do make top dollar.  They add roof top decks, change the curb appeal, improve all the common elements and put about $30,000-$60,000 into each unit upgrading the kitchen, bathrooms and finishes.  The units I saw at this place weren’t like that.   For this building though, the appraiser would have to be blind not to notice that the doors were missing handles and nothing that was described in the MLS was actually completed. (business center, fitness room, etc..) 

It’s painful to see because you really don’t get a redo on a condo conversion.  It’s to late.  The building is still a dump.  Can you imagine trying to coordinate an overhaul of the building with 24 different owners.  It’s going to be a blight to the neighborhood for a long time.

They bought the property for $2.9 mill and sold the units for a total of $4.8.   15 days after they closed on the property, they were already selling them.  6 at a time.  Many of the buyers bought multiple units.   They were 80% sold out in 2 months.  In the middle of winter during 2005-2006.  That was not a great time for selling condos,  even nice ones.

It seems like if you wanted to make 1.8 million fast the dirty way, you could get people who were going to file bankruptcy purchase these properties using stated 80/20 loans.  The paper values would support the apparent protection of the 1st lender and the 2nd would be carried back by the seller.  It’s all just funny money right?  Seller kicks back some money to the buyers for the ’service’.  The buyers then try to rent the properties out and never make a payment.  When it all goes south, they just walk and let the properties foreclose.   Now, I’m not saying that is what happened here, but I do think it happens.

I know there are people who believe that the only one they’re hurting when they do this is the lender.  That frustrates me.  It gives the entire industry a bad name.  Especially when a lot of people need to work together to decieve the lender.  It’s no wonder that the agent that listed the property had his license just long enough to do this deal then leave the business by going inactive.  The building had been listed as having an agent owner so he must have been involved.  I wonder what his employing broker was thinking.  Probably wasn’t.  I wonder if the buyers weren’t actually in on it and had their credit ruined by an investor who made a lot of promises he didn’t deliver on.

I’d love to give you the address and name the players…but that seems to get people in trouble.  No, I can’t flat out say that there is some fraud involved but it makes you wonder doesn’t it.