How to go about Buying a Luxury Foreclosure in Denver
In the current economic climate, foreclosed luxury homes, even million dollar homes, have become popular with people looking to enter the luxury real estate market. If you are unfamiliar with this sector and do not know how to by a luxury foreclosure, Kenna Real Estate is able to advise you and guide you through the process.
Two Types of Luxury Foreclosures
Denver luxury foreclosures fall into two categories: first, those subject to enforced sale because the owner, i.e. the occupier, cannot keep up the mortgage repayments; and second, bank owned or lender owned properties, which have found no buyer at auction and have reverted to ownership by the mortgage lender. Typically, when an occupier is selling at auction he will set a price that at least covers the outstanding debt. Where the property value has decreased in the current market and it remains unsold, the lender who has repossessed it may hold it as a non-performing asset until the market recovers, or sell it at whatever price can be obtained.
Denver and the surrounding areas.
Foreclosed Dream Homes
This opens up the possibility of buying a foreclosed dream home that you may not otherwise have been able to afford. You can buy a property during the pre-foreclosure stage, or when the occupier has defaulted but the foreclosure process has not yet begun. This involves approaching the occupier before the property has been listed for sale. The occupier will usually be looking for a cash buyer and to come out of the deal with no damage to his credit rating. Buying pre-foreclosure can yield a real bargain, but it involves finding properties by driving around a neighborhood, talking to neighbors, approaching a distressed homeowner and negotiating a price, which is not for everyone. You will also need to draw up a purchase agreement with the help of a real estate agent or attorney who specializes in foreclosures.
Luxury Foreclosures at Auction
Buying a foreclosed property at auction also has its pitfalls. Many are not well maintained, so the buyer will need extra funds to rehabilitate it. The process of purchase can also be difficult. Auctions can take place in the property itself, in convention centers, auction houses or even on the courthouse steps. It’s wise to attend a few auctions to understand the process and its theatrics before even considering making a bid. Watch the buyers, speak to the auctioneer and find out how much cash you need to bring with you. Be prepared to pay a deposit in cash or up to around $5,000 by certified check. Above all, do plenty of research to make sure you don’t overvalue the property at that it’s right for you and your pocket. You may have to pay off the full amount within 30 or 90 days, although around 60% of foreclosed homes bought in Denver are financed.
Other Luxury Foreclosure Must Do’s
One of the most important things to consider when buying a foreclosed home is whether there are any problems with ownership such as outstanding mortgage payments or taxes subject to a lien—a security interest put on the property that secures the payment of a debt. These and any other problems with title to the property become the problems of the new owner. A lien may cover the payment of a first mortgage on the property, but may include second or third mortgages. They can be discovered by doing a full title search before the auction as part of a thorough investigation into the property. You also need to check whether there are problems with sitting tenants, environmental or zoning issues.
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