Pete's Blog

APRIL 2008

“I Want a Smokin’ Deal!”

How many times do real estate agents hear that from prospective buyers?  I hear it from everybody looking for homes or investments.  And why not try to get “smokin’ deals”?  You would think that with all the foreclosures on the metro Denver real estate market the banks would be frothing at the mouth to unload all these properties!  As a real estate agent my goal is to get the best deal for my clients – and they’re out there!  You just have to have realistic expectations in evaluating the properties you’re interested in.

Despite what you normally hear on the news the Denver real estate market is pretty stable (see my market statistics)   Investors and first-time home buyers are taking advantage of all the foreclosures and short sales.  I’ve been putting in many offers for clients on these properties only to find that we’re competing with multiple offers, either at list price or close to.

Deal or No Deal?

What does this mean if you’re looking for that huge windfall?  It means that you may have to either be very patient and put out 15 offers to get one accepted,  know someone who can supply these properties before they hit the MLS, re-think how you evaluate the properties or all of the above.  Many buyers automatically assume that the banks will do anything to shed themselves of their foreclosures but that is typically not the case.

When the banks release these foreclosures for the market, they have normally taken into account the condition of the property in comparison to the comparables in the area.  If you’re trying to shave big dollars off the list price for new carpet, new paint and holes in the wall, all of that has normally been taken into account in the pricing.

The discounts come in when you look at the market value of the home if it were in comparable shape to those in the rest of the neighborhood.  The property may already be listed 10% - 20% below that market value.

Then what is a realistic offer for these foreclosures if you hope to get one under contract?  As an example, if you look at the sales of lender-owned homes in south Aurora below $175K since the beginning of the year the sold prices average at 92.4% of the original listed price, the deepest discount being at 81% of list price.  There are properties that sold at 106% of list price!

In comparison, you can get a slightly better deal on short sales, provided you have the patience (some of these deals can take up to 6 months to close).  Short sales in south Aurora along the same guidelines as above are closing at an average of 87.3% of list price.  Short sales are normally in better condition than foreclosures because in many cases the homeowner lives there until the sale.

How does this compare in general to overall sales in south Aurora?  Solds average 86.7% of list price with the deepest discount at 54.6% (a rarity) of list and the highest at 106% of list. 

What does this all mean?  If you’re looking at list price don’t expect to get huge discounts – be realistic and look at the market values and do your budgeting from there (I provide these market values for my clients).  Are there smokin’ deals out there?  Absolutely!  When I come across one they go right to my best clients before they even hit the open market.

January 2008

THIS JUST IN...

Report offers hope in housing, an article from The Rocky Mountain News, reports that according to the PMI Mortgage Insurance Group's Winter 2008 Risk Index report, the Denver-area housing market is looking strong compared with many other places in the country.  Only a dozen cities across the country were ranked higher than the Denver-Aurora area.  David Berson, chief economist for PMI said, "Denver, actually, is looking reasonably good.  That doesn't mean prices will not fall, but it means there is a very low probability prices will be lower than they are today in two years. That is pretty good news."  LaVaughn Henry, director of U.S. economic analysis, said the model used by PMI judges each metropolitan area by five metrics: housing price movement, affordability, changes in local labor markets, housing supply and foreclosures.
http://www.rockymountainnews.com/news/2008/jan/16/metro-area-home-values-likely-hold/

Also heard on Channel 9 News this morning quoted from Dr Lawrence Yun of NAR, "Denver will be the leader in the recovery of the housing market.....the local economy is much much better than that of the rest of the nation."

DO DENVER REAL ESTATE FORECLOSURE RATES HAVE TO BE SO HIGH?

It was recently reported in the media that Denver real estate foreclosures were up over 40% in 2007 to over 26,000 foreclosures.  This was equated as the equivalent of the homes in Littleton and Louisville combined!  A staggering amount to say the least and the forecast does not look much brighter for 2008.

This is of real concern not just here but on a national level and there are many efforts in government to help ease this rate of foreclosure.  When homeowners are facing the threat of foreclosure there is a lot of fear and denial that keep them from seeking the proper remedies available to them.  The first step is to always to contact the lenders and inform them of the circumstances and ask what their options are.  It is not in anyone’s best interest to foreclose on a home – least of all the lender.  There are many options available to Avoid Foreclosure and in many cases the lender will try these options to negotiate something reasonable for both parties.

In cases of severe hardship the lenders can agree to a Short Sale where they will accept less for the sale of the home than what is owed.  There are many investors and first time homebuyers in the Denver real estate market that are looking for homes for below market value prices.

There are buyers out there!  In a recent article in the Denver Post (http://www.denverpost.com/business/ci_7917416) it was reported that the number of home sales that closed in 2007 was down less than 1 percent compared with 2006.  People will always need to buy a home and are out there looking for deals.

So don’t run away from your lenders!  Try to negotiate a win-win solution to keep your home.  As a last resort contact a real estate agent who specializes in short sales to avoid the difficulties of foreclosure.

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December 2007

IS IT A GOOD TIME TO BUY DENVER REAL ESTATE?

The media keeps talking about the doom and gloom in the Denver real estate market and it’s true that there are those that are suffering from the skyrocketing ARM’s and just can’t keep up.  There are those that want to move but are afraid to put their homes on the market because they think their neighborhood values are declining. The lenders have tightened their guidelines so it’s harder to get a loan these days.

 But for many, this is a time of opportunity!  When is the best time to pick up an investment?  When prices are down – that’s when!  Will the prices go lower?  Who knows, but we do know that there are plenty of great deals in the Denver real estate  market right now and interest rates are way down once again (you can get a 30yr fixed for 5 ¾%).  The Denver real estate market has a glut of foreclosures, bank owned homes, pre-foreclosures (short sales) and HUD homes.  These are being snatched up by eager real estate investors and first time home buyers for fix ‘n flips, rentals and personal homes.

 The best strategy for real estate out there today is for the long term investor or homeowner.  As has been proven time and again, Denver real estate appreciates more in the long term than the majority of other investments and is one of the few that you can use leverage.  The serious buyers out there today are looking to take advantage of the real estate market so they are looking for ‘smoking deals’.  So making a killing on fix ‘n flip’s is getting harder today.  The smartest investment in today’s Denver real estate market is ‘fix ‘n rent’ or ‘fix ‘n live there for a while’.  If you can cash flow the new rental or put some sweat equity in your new home and have the patience to hang in there for the long term, you are bound to prosper from the appreciation of the home over time.  This is especially a huge opportunity for first time home buyers with good credit, to get a good deal on a home with low interest rates.

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October 2007

The market continues to be geographically segmented. As you can see from the two charts below, Douglas county real estate has typically outperformed the metro Denver market. However, there are pockets within Denver that are outperforming everything else in the state.

Denver County Sold Prices

Douglas County Sold Prices

Strategies for the Current Market

Certainly, there are opportunities to purchase houses in the metro area at prices below their recent market highs. However, careful analysis still must be done to determine what the current value really is for a particular property.

When selling a home, extra efforts are necessary to create the curb appeal and wow factor to set your house above the currently crowded market. As a skilled Realtor I can help you get the best possible price for your home.