Buy a House in Colorado – The Special Fun of Foreclosures and Short Sales

If you’re thinking, “I want to buy a foreclosure,” or “I want to buy a short sale“, and you contact me, I’ll want to chat about what your goals are exactly. Almost always, after a little conversation with people who start out that way, I discover that what they really want is the ‘best deal’, and someone has told them ‘foreclosures are the best deal’, ‘HUD homes are the best deal’, or ‘short sales are the best deal’.

The problem is, quite often *someone* is wrong. They may be passing on bad information they got from someone else, or they may not know all the facts. It’s really sad when you paid *someone* for their bad information.

I have helped people buy short sales, HUD homes, and foreclosures. And it’s not all about the bottom line. But let’s talk about the bottom line first.

I’ve done some pretty extensive research on the local market, and the facts show that the bottom line is lowest on short sales. That makes sense, because the hassle is greatest for short sales, so buyers want something in return.

Many people don’t realize that a HUD home is a foreclosure. If you say you want a HUD home, you’re actually limiting yourself to only a portion of the available foreclosed homes. But the process for bidding and closing on a HUD home is different than for other foreclosures.

First of all, only a broker can submit the bid for you. A HUD house is listed, then there’s a ten-day period where only people who promise they’re going to live in the house as their primary residence can bid on it. Once that time frame is up, the bid with the best bottom line is chosen. They don’t care how much you want the house, or how nice a person you are.

If no one bids in that ten days, or if none of the bids are high enough, the house remains on the market and anyone can submit a bid at any time.

If your bid wins, there are a number of deadlines that must be met, and paperwork that must be completed. It wouldn’t be a good idea to submit an offer on a HUD house then go on vacation! You can (and should) have the house inspected, but there will be no repairs made. The only point of an inspection is so you know whether or not you want to buy the house, knowing the facts that weren’t evident when you just walked through.  Once you win the bid, to successfully close on a HUD house, you must be working with an agent who is quite pro-active about getting things done, and who can take care of details.

The issue of repairs is quite annoying on any short sale or foreclosure. Short sales usually are in better condition to begin with, because the owners are usually earlier in the process of losing their home. By the time a foreclosure has been completed, a year may have gone by that the owners lived in the house but did absolutely no maintenance on it. Many people do vandalize homes that have been foreclosed on. But even with short sales it’s still a long, drawn-out process involving discouraged, depressed, or angry homeowners.

The greatest annoyance with short sales is the length of time it takes to get an answer from a bank. So you wait weeks or months, only to hear their answer is ‘no’, or they want more money. So far, I’ve got a 100% success rate on my short sales, both buyer and seller side. But it’s always about what the buyer wants – as long as you want to wait it out, I’ll stick with you.

Buying short sales and foreclosures can be extremely annoying, and HUD homes are extremely competitive. The thing is, if you were an investor just looking for a good deal, you wouldn’t have any emotional investment. But when you’re buying a home – and you only do that once every few years – the emotion is a part of it. So when you find out the electrical panel needs to be replaced, and you know that with a ‘regular’ sale you might be able to negotiate some sort of resolution to that issue but you can’t with your short sale or foreclosure, is it still a great deal?

If you’re just getting started down the road to home ownership and you think the most important thing is the bottom line, you’ll find out as you start looking around that other factors are just as important. And there may not be a dollar value attached to what’s most important to you. One person wants to ride their bicycle to work so they need good safe paths from the house to the office, another wants to be able to walk to the grocery store and restaurants, while another wants to never hear the sound of heavy traffic, so they can’t be anywhere near a busy street. Are you sure you wouldn’t be willing to pay more for a house that had one of these very important intangible features?

My advice to home buyers: Find an agent who listens, and who works hard for their client. Tell them everything on your mind, what’s most important to you, what you’ve heard but you’re not sure of, your fears and concerns, your hopes and your values. Then, let them do their job. Don’t limit your search to foreclosures and short sales because you never know what you’ll find.

This is the tenth post in a series for people wanting to buy a house in Colorado. I’ve already covered Getting the Loan, Finding the House, Offer/Counter Offer, Inspection and Negotiation, appraisal, closing and moving. Read the first post, and find links to the rest of the series here.

I write posts on real estate issues and local events in the Denver metro area, especially those *communities between Denver and Boulder, as a public service. My hope is to give people an idea of the ‘flavor’ of our community, in case they’re new or moving to the Denver area.

I am a residential real estate agent, happily helping folks buy a house or sell a house in the beautiful and friendly *suburbs northwest of Denver.

*Arvada, Broomfield, Westminster, Thornton, Golden, Wheat Ridge, Northglen, Lakewood
Read more about Arvada Colorado.

Check out my website.

Find all the homes available in Arvada, Westminster, Broomfield, Superior, Lakewood, Thornton Wheat Ridge and Golden.