Foreclosure Lingo, Process and Montrose Colorado Foreclosure Update
We hear a lot about “foreclosures” and buyers and investors looking for “foreclosures” and real estate agents advertising “foreclosures.” In fact, what most of these people are referring to are REO (real estate owned ) properties, that is, real estate owned by the bank. These are properties that have actually gone through the legal foreclosure process, been offered for sale at a public auction, and when no one exceeds the bank’s minimum bid, it goes to the highest bidder, i.e., the bank.
Once the bank gets the property back, it then lists it with a local real estate broker, usually after getting 2-3 BPO’s (broker price opinions) and possibly a formal appraisal. This means that when the property is initially listed, it is listed at a price the owner/seller/bank believes is market value. If it doesn’t sell right away, the bank will generally lower the price, and keep lowering the price in regular intervals, typically after 30 days. This is, of course, just a general rule, and not all banks readily lower their price or do so within any given period of time.
That is one benefit of foreclosures (i.e., REO’s, bank-owned properties). If you’re patient, and not emotionally tied to a particular property, you can keep an eye on it and wait till the price hits your “sweet point.” The flip side, of course, is that someone else my swoop in and buy it first. The pitfalls and problems of buying a foreclosure are the subject of another post. But in today’s economic climate, foreclosures do spell “bargain” for a lot of people.
If you’re searching for foreclosures on the internet, a good indication that a property is an REO (if the listing doesn’t flat out tell you) is that it will indicate that it is sold “as is, where is” and that the seller makes no warranties, etc. This doesn’t mean you are totally at risk. If you go under contract on a foreclosure, you still generally have all the rights of any buyer to do your due diligence with respect to inspections, title review, review and approval of covenants and HOA governing documentation, and getting your financing if the contract is conditional on that.
In a recent presentation by the Montrose County Public Trustee, Rosemary Murphy, last month, she revealed that at that time, there were already about 120 pending foreclosures. She said she was expecting about a total of 400 to be filed by year’s end. This compares with about a total of 160 filed in 2009. For more information on the pre-foreclosure process and public auctions, visit the Montrose County Treasureer/Public Trustee Site. There you can also get a list of properties currently in foreclosure and of the pending pre-foreclosure sales and outcome of such sales. I just checked, and there are 26 pages of pending foreclosures.
As Public Trustee Murphy told us, the vast majority of these properties will not sell to a private buyer at the public auction. Consequently, we can expect many, if not most, of these to become bank-owned/REO properties, aka “foreclosures,” that will soon come on the market as an MLS listing with a local real estate broker. I just checked the local Internet for REO/bank-owned residential properties in Montrose County. Click here for a list of these 62 listings.
Foreclosures are a sad and continuing fall-out of the economic disaster we have been experiencing the last 3 years. But foreclosures also represent a golden opportunity for those who can take advantage of them, whether as a first-time homebuyer or an investor. To find out if buying a foreclosure is right for you, consult your local foreclosure real estate expert.
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