As we’ve looked at before, Colorado is currently experiencing an increase in foreclosure filings. 2009 is on track to outpace 2008 and 2007 in terms of the number of foreclosure filings, and even completed foreclosure rates are rising at a steady pace. Colorado foreclosure rates are not the highest in the nation, but Colorado ranks 8
th in the list according to RealtyTrac, Inc.
These high foreclosure statistics have created a unique environment in home prices. Over the past few years, home prices have dramatically dropped, in part due to the influx of foreclosed homes onto the market. Prices nationwide have dropped around 26% since their peak in 2006.
Around half of home sales in the last quarter of 2008 were distressed homes – either foreclosures or short sales. As these foreclosures hit the market, traditional home sellers have been forced to cut their prices in order to stay competitive.
What this means is that it’s still a home buyer’s market in Colorado. To really take advantage of these market factors, there are some things you need to keep in mind:
- First, you can use low home prices on foreclosed and short sale homes to add pressure to the price negotiations for your new home. Traditional sellers know full well that they need to be competitive. While you can’t expect to pay the same for a traditional home as you would for a foreclosed home, you can leverage those prices to help negotiate.
- You also need to study your local market. Explore the options available to you. Know how much distressed homes are selling for. If you want to make an offer to a traditional seller, it’s amazingly helpful to have that data. It also opens up the possibility of buying a home that’s been foreclosed.
- Be willing to consider a distressed home, too. There are some limitations in buying a foreclosure, to be sure. The process of purchasing a distressed home can be very different from buying a new home or one that’s not distressed. Spend some time learning about how to buy a foreclosed home, and talk to your real estate agent about the options.
- Understand that, if you buy a bank-owned home, the property is sold “as-is.” You’re not able to negotiate the home price based on certain conditions. You can, of course, create a purchase contract that will be contingent on an inspection, but this doesn’t help you at all with the price negotiation process. It just gives you a way out of the purchase, if the inspection turns out badly.
- There’s no way to know how much longer these foreclosure rates will continue. Most experts agree that we are somewhere near the end of the economic downturn, so if you’re going to take advantage of low home prices that have come about because of foreclosures, you probably need to act sooner rather than later.
