Testimonials
I have helped hundreds of nice people buy and sell real estate in and around Boulder County. Here are a few of their comments about me. ‘Professional, knowledgeable, personalized care – We couldn’t have imagined a better realtor than Neil for helping us...Buying Foreclosures in Boulder County
The best way to make money in real estate is to buy a property for the right price in the first place. No matter what you do to the property later, getting a good deal up-front makes all the difference. One of the best ways to get a good deal is to buy a foreclosure.
I bought my first place back in 1992 and it was a HUD foreclosure. I made a blind bid and won the 
auction by $500. I think the price was $65,000 and it was purchased with a minimum down FHA loan with my parents as co-signers. After living in it for 2 years, one with roommates and one with my newlywed bride, we turned it into a rental. After 8 years as a rental we sold it for $182,000 and bought two rental properties with the profit. Foreclosures combined with good market timing can provide a great springboard.
Over the last few years foreclosures have become a large part of the market in some areas. Historically, 5% of all outstanding mortgages are in some stages of delinquency. Currently that has doubled to 10%. Clearly, the combination of low equity loans, the abundance of secondary financing (HELOC’s), falling home prices (in some areas) and the recession have stirred up the perfect foreclosure storm.
They are out there, so how to buy them and profit from them? First off, buying a foreclosure is not for the faint of heart. In most cases these properties have been vacant for awhile and in many cases they were at best lived in very hard and at worst vandalized and stripped before the distressed owners left. You will not get a move-in ready house unless you are very lucky.
In my area, Boulder County and the surrounding suburbs, there has been a steady stream of foreclosures, but the vast majority have been in Longmont Colorado a town roughly 17 miles NE of Boulder. Longmont and Boulder have very different real estate markets. Boulder’s median price is somewhere near $550,000 and Longmonts is at $220,000.
If you are looking for a Longmont type deal within the city limits of Boulder, think again. There are very few foreclosures within Boulder and those that are out there sell at a discount when compared to the rest of the neighborhood, but finding a super screaming deal is very rare.
So how do you find a foreclosure? There are three types of foreclosures I will quickly highlight upon. First let’s look at the homes that are auctioned at the Boulder County Trustee’s Sale.
The homes at the trustees sale are fresh foreclosures. The owner’s have been given a chance to bring their loan up-to-date and keep their home but have not. The homes are then sold by a live auction process with the minimum bid provided by the current lender in advance of the sale. Bids must be a minimum of $1.00 over the lender’s bid. The successful bidder must provide certified funds for the exact amount of the winning bid by 1 pm the day of the sale. If you buy a home at the public trustees auction there is no inspection period or financing period. Have your cash ready. After the auction, the current lien holders have an opportunity to redeem the property and try to recover some of their losses. If no redemption attempts are made the sales is complete and the deed is issued 15 days after the sale. If a redemption is made the successful bidder will receive their funds back with interest. For more information about this type of sale in Boulder County and a list of properties for the upcoming auction go to Boulder Trustee Website.
In most cases banks end up owning the home after the public trustee auction. The homes then go through their REO (real estate owned) department and then re-sold through local Realtors. This process can take awhile but with patience they end up for sale on the MLS. These properties are identifiable as foreclosures by the ownership type and I can search for just REO homes. A buyer then negotiates with a representative at the bank. The properties can be financed and inspected, but all houses are transferred in as-is condition.
When a home with an FHA loan is foreclosed upon the U.S. Department of HUD takes the property and re-sells it via an online auction. These properties can be viewed in advance by contacting a HUD authorized broker (I have this certification). Bids are accepted online and you just have one chance to bid. The nice thing about HUD homes is that a buyer can get good FHA financing on the property with a minimum amount of down payment. Local information about HUD homes can be found at McBreo.com. If you would like help with a HUD home give me a call.
Now is a great time to buy. The interest rates are low (for now anyway), jobs are becoming more stable and there are some good deals out there. I’d love to help you make a good investment.
Condition at Closing and Why the Final Walkthrough Is Important
One of the greatest sources of letdown and conflict in a real estate transaction is the condition of the house after the Sellers 
No matter what you try to plan for it is an issue. Sometimes it becomes an outlet for buyer frustration after a particularly tough set of negotiations. Sometimes it is a seller with good intentions but not enough time. Sometimes it is a professional hired who does a less than professional job. All I know is that I have hired cleaners, pitched in with the sellers as we did a last minute shine or have cleaned cupboards and closets myself. Small important details in making the closing day go smoothly and making my clients happy.
So some parting advice:
To Sellers:
- Plan in advance. Closing and moving is a very hectic time and it is not always easy to complete all of those little last minute tasks.
- Bring in help. Hire a cleaning company or better yet family. It is always very hard to go back to the old house to clean while all of your stuff is at the new house.
To Buyers:
- Get it in writing. If you are worried about the condition of the house, set forth your expectations in writing.
- Be realistic. Maybe you have to tidy up a bit when you move in to bring it up to “your” standards. Don’t let it ruin your day.
The Home Buying Process – Part 2 – Contract to Close
In Part 1 of this article I outlined the initial steps a buyer needs to take in the home buying process. In this post I will explain what happens once a buyer finds “the” right home.
The Offer
After viewing a few homes or many homes, eventually you will narrow your choices down to one “best” house. It’s time to make an offer. Your Realtor’s expertise will now be most helpful. Together you will evaluate not only the other homes on the market (the relative value of the other choices), you will research the value of the home in question. A seller can ask anything they want from a home so it is important that your offer is based in reality, not a seller’s fantasy. After checking the comparable sales it is a good idea to evaluate the position of the seller. How much do they owe? How long has the house been on the market? Have they reduced the price? What other clues do we know about motivation? With all of this knowledge you can with your Realtor formulate an offer strategy.
Once the strategy is in place your Realtor will then prepare a written offer. In Colorado we use a standardized form approved by the real estate commission. Most of the contract is pre-written and we have just to fill in some blanks. Your Realtor will advise you on reasonable contingency dates, contingencies, inclusions, financing and any additional provisions that are unique to this particular property. Once the offer is written, the buyers sign and date the agreement. The offer is then delivered to the listing agent and/or the sellers for review.
Earnest Money
So you will not be placed in an uncomfortable position when you purchase a property, an understanding of the earnest money deposit is important. At the time a written offer is initiated, you will be required to include a personal check or cashiers check as a good faith deposit. The check is deposited into the listing broker’s escrow account upon contract acceptance and will remain in escrow until the time of closing. This amount is credited towards your closing costs and down payment at closing. If the offer is not accepted, the deposit is returned to you. The amount depends upon the sales price of the property. The amount is negotiable, but a good rule of thumb is 1% or more of the offer price. You can only loose your earnest money if you change your mind or if you do not perform to the dates or the provisions of the contract. Your deposit will be returned to you if your loan is disapproved or an inspection resolution cannot be reached. So long as these are done in a timely manner.
The Contract Gets Accepted – Now What?
After the buyer and seller reach agreement on the details of the contract and both have signed either the original offer or a subsequent counterproposal, the focus turns to fulfilling the various contingencies set forth in the contract. The major contingencies are loan approval, inspection and title documentation.
The first order of business is to alert your lender and provide to them a copy of the contract. At this point you will have the opportunity to lock-in an interest rate and firm-up the details of the loan program in which you will pursue. As the lender prepares your file for submission to their underwriters you will be asked to provide documentation of assets, income and anything else they feel that they will need. They will also be asking for money to pay for your credit report and appraisal.
Inspection
The inspection of your home is most important and setting up a general home inspection should be done as soon as possible after contract acceptance. During the typical 10 day inspection period a buyer has the right to inspect the house, check on crime reports, check with the city regarding future development and any other inspections that any particular house may need. After the inspections are complete the buyer has three options: terminate the contract, move forward with the house in as-is condition or provide the seller a list of unsatisfactory conditions. The most common is the later. Once a list is provided a negotiation ensues between seller and buyer to find an acceptable solution. If an agreement is not met the buyer has two options: to let the contract expire or to waive all inspection objections and move forward as-is. To learn more about the inspection process click here.
In Colorado the seller is required to provide to the buyer title insurance which insures clean and merchantable title. Basically, the house must be transferred without any title disputes. The title company will do a title search and disclose to the buyer any recorded documentation that will transfer with the house. Common examples of the exceptions to title insurance are homeowners association covenants, development documentation and utility easements.
Appraisal
Your lender will order an appraisal on the property. Having a third party asses the value, helps the mortgage company evaluate their risk in their investment. If the appraisal comes in less than the purchase price (this is happening quite a bit), the buyer has three options: re-negotiate with the seller, put additional money down to keep the loan-to-value ratios in line, or to terminate the contract.
Final Walk-Through
Just before closing it is a contractual right for the buyer to do a final walk-through. This is the time to check that all inspection items have been completed as well as check on the overall condition of the house. If something were to happen to the house between inspection and closing the seller is obligated to fix it.
Closing
Once all of the contingencies have been met you are ready for closing. The closing day is set forth in the original offer but the closing time is usually worked out by the Realtors about two weeks in advance. The closing takes place at the title company and it usually takes a little more than an hour. A day or so before closing the title company will provide to the buyer a settlement statement that will show exactly how much the buyer will need to bring to closing in the form of good funds. Good funds can be a cashiers check or a bank to bank wire. At the closing the title officer will guide the parties through the various documents which need to be signed. After all of the signing is complete and all of the money is accounted for the place is yours! It’s time to move in.
Neil Kearney MBA
Broker/Owner
Kearney Realty Co.
303.818.4055