From Dream To:

NIGHTMARE...IN 1 YEAR OR LESS!                                                                       

Everyone knows that many markets have been affected by the recent foreclosure statistics. Our local papers here in lovely Colorado Springs, CO. have said that we are "the foreclosure capital" of the US, (although I doubt seriously if we are QUITE that bad off).

Since my company, (Rocky Mountain Realty), has a deep rooted client base in the investment market, we get many inquiries from curious first time "fix and flippers" who want to get the deal of a century on a foreclosed home. (I know this happens everywhere, but several ou -of-staters are calling and saying "we know you have a great number of foreclosures in Colorado Springs, so we want a great deal!"). They are seeking to purchase at 50-60% of market value, but THIS IS JUST NOT THE MARKET FOR THAT.

Although it's true that we do have a high number of foreclosures in the Colorado Springs home market, that is largely to do with the fact that many people that would not have otherwise been considered fiscally responsible enough to become homeowners, managed to qualify for a combined 100% (80/20, 85/15, or 90/10), loan or even one 100% high interest loan, and get themselves into their  "dream house".  Which, more often than not, turned into their worst nightmare.       

I have mixed feelings about the propriety of those loans having been granted. On the one hand...I sell the benefit of homeownership and property investment for a living. I do profit when someone buys or sells property and hires me as their agent.

I feel that it is not up to me to decide what a family can afford, but, when working as an agent, I frequently give advise to clients so that they have more information with witch to make a sound decision. I always advise that they don't go over their heads whenever there is a question about weather or not they can afford the payment. I tell them I'd like to have their business for life.  In most cases, even though it may not have been the best idea, the buyer has opted to purchase in over their heads. Knowing that they would purchase a home from someone, I have sold homes to people that really couldn't afford them. Anyone else guilty? And after all, these are adults we are talking about. I'm not their mother, (although I sound that way sometimes).

In many cases, not surprisingly, these same people have made a few payments, gotten deeply into debt and went into foreclosure within a year or two. Some call me for help in getting out of the house and some are too ashamed.  Now we are reaping some of the madness caused by this sub-prime market. BUT WE ARE NOT SEEING HOUSES BEING DUMPED FOR PENNIES ON THE DOLLAR!

Many times, the same lending institution gave the first and the second and perhaps just one 100% loan, so there is no "junior" loan to speak of, which is usually the the component that the OLD FASHIONED FORECLOSURE market would have in play...the same component that made it possible for the second mortgage to "go away" by default and make it possible for foreclosure buyers to purchase at a great discount. Sometimes combining that great loan to value first with a short sale for even greater savings.

The builders are still building like hot cakes, even though they can't seem to sell their current inventory. People with new to three year old homes are at a loss if they have to sell, (however not uncommon), and there are lots of mid market houses stale on the market, yet no decline to speak of.

Don't get me wrong, we get some great deals on HUD or VA repos and occasionally on a bank REO, but the public is not comprehending how this has all happened and it's getting tedious explaining why the new investors can't use the "seminar" techniques to steal repos and flip at the table.

My business is still good and we are have the usual summer upswing for non-investment clients seeking first time or move up homes. I wanted to hear opinions from others who might be seeing this kind of market activity and when and how it will turn. Speculators?