In 2012, by the end of June, there had been 1,732 foreclosure proceedings started in El Paso County, where Colorado Springs is located. This year? 39.4% less, with only 1,049. In the month of June, it was less than half. At this pace, we may end up with fewer foreclosures than 2006, when the recent recession began to first appear. Why are foreclosures disappearing?
- Fewer home owners are in economic distress. As the jobs reappear, the foreclosures disappear.
- Home sales (and prices) have been increasing steadily in Colorado Springs for 1 1/2 years now, making it possible to get the homes sold and still pay off the mortgage before foreclosure becomes and issue.
- Workout programs, short sales and other foreclosure prevention devices are having some impact, though it is hard to completely gauge it. When the recent crisis began, there were not a lot of options for home owners who got behind. It still isn’t pretty, but there is a concerted effort to keep these home owners from being part of the foreclosure statistics.
So does this mean that there are no more foreclosures or bargains to be had in the Colorado Springs real estate market? Well, not exactly. There are still people going the short sale route, although this is not an easy road. There are still some homes that end up at foreclosure sale and get put back on the market as bank owned or investor owned ‘specials’. Approximately 75% of foreclosure ‘sales’ are actually bought by the lender. Investors will jump in if they believe they can outbid what the lender is owed by either fixing and ‘flipping’ the property, fixing and holding the property as a rental, or simply reselling it ‘as is’. This type of investing is not for the faint of heart. A lot of work can go into investigation, and after the the property is acquired, a lot more into the actual renovation. And investors have to pay cash at the auction. But it can be worth it sometimes.
While preference is given to owner occupied buyers in the case of HUD, VA and FNMA foreclosures, the reality is that most owner occupied buyers are not in the best position to do the renovation with their own funds, and the terms of the renovation loan programs such as HomePath and the FHA 203k are not always as attractive as the ‘turn key’ loans that many 1st time home buyers get pre-approved for. Moreover, the purchase process itself is often not conducive to success. Recently I had a an HUD home purchase that we could not get past the buyers lender, because the home was missing a kitchen sink. HUD would not allow one to be installed, even at the buyers expense, and as a conventional loan, the lender would not allow for escrowing for the repair. The buyer did not want to pay a lifetime of mortgage insurance by switching to an FHA loan product, and so the deal eventually died. This sort of logic keeps foreclosure properties on the market longer than they need to be, and keeps many first time home buyers from being able to take advantage of foreclosure opportunities.
Want to know more about foreclosures in Colorado Springs? Visit the El Paso County Public Trustee’s office .
© 2013, Rick Van Wieren Real Estate, Inc. All Rights Reserved. On republishing this post you must provide link to original post.