Several times each month, I get phone calls from would-be homebuyers surfing the "Pre-Foreclosure" section of Zillow, and anxiously asking me about a house they found listed there. These calls always end the same way, when I have to explain that the homes in the "Pre-Forclosure" section of Zillow aren't actually available for immediate purchase (and they most likely won't be, anytime soon). I hate having to constantly break this bad news to potential home-buyers that are desperate to find affordable housing in Denver! They have most likely been given false hope, by some ill-informed friend or relative who's convinced them that they can still find an affordable house in Denver if they simply look for a foreclosure. Sure, that was great advice back in 2008, but it hasn't been valid in most markets now for at least 7 or 8 years.
The way Zillow determines which homes get displayed in its "Pre-Forclosure" section, is by pulling public record data from the various counties. Specifically, Zillow is displaying the addresses of any homeowner who has been served a "Notice of Election and Demand" by the bank holding their mortgage. A "Notice of Election and Demand" is the first notice sent to a homeowner who is more than 120 days behind on their mortgage payment. It is basically the document that formally notifies a homeowner, that their mortgage bank is initiating the foreclosure process. However, once it is mailed, the homeowner can still stop the foreclosure proceedings by filing a notice called "Intent to Cure" with the court, and catching up the late payments, or selling the property and paying off the bank. The homeowner can file this the "intent to cure" up to 15 days before the home is to be sold at the courthouse auction (usually about 30 days after the N.E.D. has been filed). *Read more details about the Colorado Foreclosure laws here.
In a "down" housing market, with values declining and homes not selling... these Pre-Foreclosure notices might actually mean something, to a potential home-buyer hoping to snap-up a house at a bargain price. This is because houses tend to stack-up in the bank's inventory of foreclosures when markets are slow. The longer the banks are stuck with these homes, the more it costs them to keep them, and the more neglected and distressed they become. Therefore in down markets, the banks are willing to sell them dirt-cheap, to get them off their books and stop any further losses.
Problem is, we're not currently in a "down housing market". Quite the contrary in fact... we're in a red-hot, rapidly appreciating housing market. In fact, most homeowners have been experiencing yearly equity gains of around 10%, since around 2012. That means that a typical Denver homeowner in a $400,000 house, gained about $40,000 in equity last year alone. Therefore, it goes to reason that even if a homeowner fell a few months behind on their mortgage... they probably still have a TON of equity in the house. As you can imagine, most will do whatever it takes to keep the bank from taking that equity. Most of them simply end up calling a Denver Realtor, and listing the house "to cash-in", before they lose all that equity to the bank.
This massive appreciation in the Denver housing market is why it is currently almost impossible to get a "good deal" on a foreclosed home here. Because the Denver housing market is in such a "boom period", the homes that do actually manage to get foreclosed on, are usually purchased at the court-house auctions by wealthy investors. These investors have much deeper pockets than the average home-buyer in search of a bargain house in Denver, and they snap-up most of the foreclosures before they ever make it to the open market. In the event that a foreclosed house does make it to market, its price simply gets bid up by competing offers, and it sells at a normal price just like any other house offered for sale by an individual. Therefore the concept of "getting a great deal on a foreclosure" hasn't really existed since about 2011, when the last of the excessive inventory (resulting from the 2008 banking collapse) dried up. Unfortunately, websites like Zillow, are now simply preying on the "false hopes" of those desperate for an affordable house, when they attract people by displaying lists of "pre-foreclosures". Almost 100% of those homes displayed there will either be snatched-up by cash investors at auction, saved by their owners, or sold at normal market prices. Unfortunately for many desperate young home-buyers, foreclosures haven't equated to good deals in Denver, for almost a decade now.
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