foreclosures

The cause of all your real estate problems…

March 25, 2010 by Spencer Barron

It was me.

My deepest apologies for bringing down the neighborhood with this preforeclosure listing but the truth is, I got the job done for my clients in a difficult market. Not to mention my sales in the neighborhood remain the highest priced non-builder resales. But it begs the question, How much responsibility does an agent bear when it comes to home values? Can real estate brokers actually drive prices up or down or do we simply enable the transaction allowing the buyer to pay what the seller will accept?

Some people believe that the agents are bringing down the neighborhoods. Thus, this anonymous phone call.

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

P.S. In case you were wondering. There is no such thing as an anonymous anything anymore. A Google search of the telephone number, his work number, gave me his employer. An insurance company. Insurance sales people are licensed in Colorado. A half hour cross-referencing names between the licensing database and neighborhood homeowners gave me his name and address. The FSBO around the corner that had been on the market for almost 2 years.

Filed Under: Denver Real Estate, Featured, foreclosures, FSBO, housing bubble, Personal, Selling a home

Stop looking at the list price! It doesn't really matter.

September 3, 2009 by Spencer Barron

Why is it that your typical buyer will always be locked in on the list price. They certainly don’t want to pay more than that, after all, it’s still a buyer’s market right? But the list price has nothing to do with what it is worth. Take the house I listed about a week ago, 1464 S Benton St in Lakewood, CO. It’s not lender owned or a short sale, just a great deal.

1464 S Benton St - FlatGrass Realty

The property is listed at $119,900. A price designed to attract attention from investors because it has a certain relationship to what it could be worth.

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.

Filed Under: Buying a home, Denver Real Estate, Flipping, foreclosures

Update on Renter's rights when rental is foreclosed

September 2, 2009 by Spencer Barron

This isn’t new but you may not have heard about it. It’s especially important if you’re interested in purchasing properties in foreclosure down at the public trustee’s auction. It’s also an update on this post where unknowing renters were being evicted from the property even though they had a lease in place with the owner.

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.

Filed Under: Denver Real Estate, Flipping, foreclosures

The main cause of Foreclosures in Denver….

October 21, 2008 by Spencer Barron

The cause of many of the current foreclosures may be simply that there is no longer any incentive to make payments. There is no equity because there was no money involved for the home owners. There was none created by paying down principal, and there is no longer any more appreciation. It’s an important thought because most people want to believe that those in foreclosure have problems that are far removed from them. Regardless of what you believe to be the cause, it is evident that foreclosures aren’t just a result of an economic downturn. Neighborhoods with a lot of foreclosures reach a tipping point where even those that normally would have made the payments, don’t. A homeowner doesn’t feel like struggling with a payment when he can walk away and rent for cheaper. There is just no reason left after a 20% (or more) reduction in values. Why struggle with the payments any more? At least that’s my understanding as I try to wrap my head around this report that came out last year that fingers the price devaluation rather than just the typical woes of a down economy. It’s a page turner.

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.

Filed Under: Buying a home, Denver Real Estate, Flipping, foreclosures, Fraud, housing bubble, pricing, statistics Tagged With: Denver Real Estate, Green Valley Ranch

Wondering what to expect next in the financial markets? Take your pick a BailOut, More Pain or Worse.

October 1, 2008 by Spencer Barron

I’ll just have to get this doom and gloom post out of the way before I post another market update. Don’t worry, at least nothing new has changed in the real estate market. Slow has become business as usual for most. Now the rest of the world is starting to realize that this wasn’t just our problem. As I see it, it seems like the majority of people are just beginning to understand that there is even a problem with the financial markets. More and more people are figuring it out. Thiis new insight is not because people have educated themselves as to what’s at stake. It is starting to show up closer to home. I suspect that most people about a month from now might begin to think that $700 billion could of been a pretty good deal.

“If you don’t like this offer, you won’t like the next.”

Often times, foresight and taking action are more useful than waiting for the perfect approach. There is a lost time cost that needs to be considered.

Confidence is at the core of the problem. Perhaps we shouldn’t call it confidence, as at this point, that term is almost laughable. We’ll call it “faith”. Faith that you’ll have a job and you will continue to make a living is central to being a good little consumer. Faith in businesses is at the core of how a business may raise money to cover their operating expenses. Faithful businesses lend money as they hold the belief that the vast majority of people and other businesses they lend to are good for it (What if they’re wrong?). Faithful consumers, spend money between paychecks using credit cards because they can count on that check (What if they lose their jobs?). What happens as the once faithful businesses begin to doubt that they’ll be paid back (What if we don’t get paid for that last invoice?). What happens when the once faithful consumers can’t get credit or know that soon they could be out of a job. When minor liquidity problems turn into a financial ‘ice age’, what then?

One only wonders how Bernanke and Paulson could keep people in the ‘pews’ and involved in the day to day business of being a good consumer if those people lose their faith in the system entirely. If those people begin to feel that they could be out of a job next week what effect does that have. How much will that cost the economy. What happens when they feel that everything they’ve worked for, their house and their savings, could be lost. Heaven forbid they even take a look at their 401k plan. Pretty soon people would be (some already are) stuffing their mattresses with money and buying gold bars.

Think of Washington Mutual, people lacked faith that it was safe. They felt it was not safe enough to hold their money and not safe enough to be lent money even short term. People start pulling money out of the bank. Their credit rating gets cut down to that they can no longer raise money. Soon enough their $310 Billion in illiquid (frozen) assets are taken from them and sold to JPMorgan for $1.9 Billion where the ‘thawed out’ assets are instantly worth much more.

The concept that the value of a business, an asset, or your dollar is determined by market forces presupposes that there is a market. What happens when there is no market? That being said, bail away. Take action to establish that there is a market. Draw a line in the sand or something.

Filed Under: Denver Real Estate, Economy, foreclosures, Stock Market

Renters rights when being forced out by a foreclosure

March 26, 2008 by Spencer Barron

A recent news story on 9news.com brought to light a problem many renters are facing. The landlord stops paying the mortgage but still demands the rent. A real estate attorney, Joseph Davies, is quoted as saying,

the “deal with the owner is independent of the owners deal with the bank.” … “Generally speaking, the rights of the lender are greater than the rights of the tenant.”

Seems reasonable enough but I can’t help but wonder about the fairness of that.

What about a tenants right to quiet enjoyment?

I wonder if the tenant shouldn’t contact an attorney. Wouldn’t the tenant have a claim of non-performance?

Regardless, if you or someone you know in Colorado are facing problems with foreclosure, you should definitely contact an attorney if you have any questions about your rights.

You should also take advantage of the Colorado Foreclosure Hotline at 1-877-601-HOPE (4673).

Filed Under: Denver Real Estate, foreclosures, Renting

Identifying a Meth Lab

February 19, 2008 by Spencer Barron

The City and County of Boulder (Colorado) has a great website resource for identifying a meth lab.

With the rise in foreclosures and more agents being the first people to enter recently vacant homes after and possibly during a foreclosure, a little education can go along way for your own safety and the safety of your clients. Going into homes before they’re ‘trashed out’ can mean just about anything these days.

Filed Under: Denver Real Estate, foreclosures, General Interest

Condo Conversions and the Dark Underbelly of the Subprime Mess

February 19, 2008 by Spencer Barron

I just walked out of the second recent condo conversion in a month that I saw back on the market way at about 30% of what it had sold for. It had been ‘flipped’ in 2006 by some investors. In my humble opinion, it seems suspicious to me when large numbers of foreclosures show up all at once in the same building. There were eight or nine lock boxes on the door. Postings in the windows. hmm…

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.

Filed Under: Denver Real Estate, Flipping, foreclosures, Fraud, General Interest, housing bubble Tagged With: Denver Real Estate, Mortgage fraud

Who would actually pay price the builders are asking?

December 17, 2007 by Spencer Barron

I noticed that many builders have inflated their abstract pricing on their inventory in order to offer better incentives and offer ‘dramatic’ price cuts so that buyers feel like their getting great deals when they buy a new home.

I recently sold a home in the Village at Centennial near the Denver Tech Center where the builder was offering the same home at $505,000 even though they hadn’t sold a home like it for more than $450,000. In fact, the majority of the similar home sales were around $425-$440k. This method has helped the builders maintain their net in the face of foreclosures appearing on the market. In fact, it actually helps keep the lenders from pricing their homes to low. The BPO (Broker Price Opinions) usually include price of homes that are currently for sale. So even though the foreclosed homes are trashed out, they are priced just under what the builder will accept new. And of course, the buyers leave like they’re getting a great deal.

I talked to the sales rep in the office about their current inventory and he admitted that he had the ability to move as much as 15% off of the list price depending on the ‘read’ he got off of the customer. That’s the sort of thing that doesn’t bode well for the current homeowners that may have paid too much. Especially when they get in a need to sell situation like a job change. It also tells me that most unrepresented buyers are like deer in headlights when they walk into the sales office.

Funny part is, most buyers still fall for the ‘base price’ system where they hook you with a lower price while showing you a better product in the model. They then either raise the price or act like their giving you a deal by offering you incentives in upgrades.

When a builder is offering $50,000 in upgrades, it makes you wonder, how did they arrive at that number?

Filed Under: Denver Real Estate, foreclosures, housing bubble, Marketing, Negotiations, pricing

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

Categories