Friday, February 1, 2008
Investors find opportunities in homes lost to foreclosure
Denver Business Journal - by Paula Moore Denver Business Journal
This may be the best time in recent years for Denver-area investors buying foreclosed homes, with the lowering of interest rates and the perception that Colorado's housing market finally has hit bottom.
Buyers of such properties, also called bank-owned homes, range from multimillion-dollar companies paying cash, to individuals taking advantage of the current buyer's market to purchase a newer home and become landlords by renting out their existing one.
"We're seeing a larger and larger percentage of first-time landlords," said Michael Clarkson, broker at Re/Max Alliance in Westminster. "They're renting out their first home, and buying a foreclosure for themselves to build equity in."
Most investors are local, but some are from out of state and outside the country. One metro-area broker is working with Canadians wanting to buy second homes in the United States.
"This year will be the best for investors," said Bill Bronchick, president and co-founder of the Aurora-based Colorado Association of Real Estate Investors. "By 2009, things will start getting better again [and prices will go up]. ... Baron Rothschild said the time to buy is when there's blood in the street. This is it -- the blood's in the street."
The bank-owned market has picked up just since December because of lower interest rates, said Dave Nelson, broker associate at Metrowest Real Estate Solutions of Westminster, a listing broker that sells 80 to 100 bank-owned houses a year. Some of Metrowest's clients are banks selling foreclosed houses, and most buyers the company sees pay cash.
On Jan. 30, the U.S. Federal Reserve lowered the federal funds rate by half of one percentage point to 3 percent. The federal funds rate is a key interest rate that determines the direction of other U.S. interest rates because it's set daily.
Colorado had the nation's fifth-highest foreclosure rate in 2007, with 71,149 filings on 39,403 properties, according to RealtyTrac Inc. data released Jan. 29. That was a 30 percent jump from 2006, when Colorado had the highest foreclosure rate nationwide.
State officials dispute RealtyTrac's data, since Colorado filings are double- or triple-counted because of the way the state reports foreclosures. RealtyTrac maintains that its method of compiling data is fair.
Areas of metro Denver hit hardest by foreclosures include Adams County cities such as Thornton, Commerce City and Brighton, according to real estate brokers. In some neighborhoods, 30 percent to 50 percent of houses are in foreclosure.
The upside of foreclosures, though, is the opportunity they present to investors with cash and strong credit.
"The bank-owned market started to surface about a year ago," said Marilyn Van Steenberg, broker/owner at Buyer's Best Choice Inc. in Centennial. "It's gotten increasingly better, but I suspect it won't last another 12 months. We're beginning to see things creep up; we've hit bottom."
But investors wanting to acquire bank-owned homes face challenges.
Buyers can find good, even discounted deals with bank-owned homes, but those who think they'll automatically get a great deal should think again. Banks selling properties, usually through third-party real estate companies, are trying to get as much as they can for a house, according to brokers. They even recently have started paying for needed improvements to houses to boost the price.
Competition for foreclosures also is getting tougher, prompting bidding wars.
"If a property is discounted, especially if it's in a better part of town as far as property value goes, you're going to have bidding wars, so you need to be prepared for that," said Brian Petrelli, a broker at Keller Williams Executives Realty in Highlands Ranch who specializes in bank-owned properties.
All contents of this site © American City Business Journals Inc. All rights reserved.
Posts
No comments:
Post a Comment