Even in the Boulder area, we are still seeing a lot of bank owned homes and sellers in distress. While we do not have the same numbers of distressed homes as Florida, Arizona, Las Vegas and other really hard hit areas, there are short sale homes and bank owned homes in our area.
First, lets break the distressed properties into two groups — bank owned and owners in distress.
The bank owned properties are pretty straight forward — the bank now owns the house either through a foreclosure process or the owner has “given” the house back to the bank through a “cash for keys” program or a deed in lieu of foreclosure. Bank owned homes are generally in “as-is” condition and may have had the utilities turned off. The banks generally do not have any information on the condition of the home or the systems in the home (plumbing, electrical, heating, etc) so there will be no disclosures. Buyers can inspect the home but may incur costs for turning on the utilities and getting them turned back off. The inspection may disclose big issues with the property and the bank MAY reduce the price but will generally not fix anything.
The price a bank will take can really vary — the longer it sits on the market the lower the price may get but we have not seen banks selling a huge discounts below market value. Generally, the discounts have been indicative of the condition of the home compared to comparable properties. The good news is that banks generally act on offers pretty quickly and the process after that is usually smooth on the bank’s side.
Distressed owners fall into two categories — those that owe less than the market value but are having trouble making payments and those that owe more than the house is worth (this is a short sale). If the owner is facing a short sale, the process can take several months and involves the owner’s lender approving the sale (there can be multiple lenders and that can extend the timeframe). If it’s a short sale, the property will generally be “as-is”. The lender (or lenders) will obtain an estimate of the market value of the home (sometimes called a BPO) as part of the process — they will use this estimate of market value to insure that the home is being sold for a fair price (not too much of a bargain).
If the owner can payoff their loans, the process can be fast but the owner may not be in a position to make any repairs should any major defects be found.
The basic rule in buying distressed property is buyer beware — the sellers of distressed properties will generally be “as-is” and may have a number of defects and deferred maintenance issues. If the price reasonable reflects the condition, there may be an opportunity for some “sweat equity” but the days of “fix and flips” are over and they don’t seem to be on the horizon — yet.
If you have questions about bank owned homes or short sales, give me a call at 303-402-6000 or visit our website at www.bernardirealestate.com.