Tuesday, March 27, 2007

Money, Labor And Risk In Colorado

The Gazette reports from Colorado. "The recent epidemic of residential foreclosures along the Front Range has, as usual, generated interest in investing in foreclosed properties. But, while there might be money to be made in this enterprise, there is also labor involved, and risk."

"As with any other purchase of real estate, you will need to know what the property is worth, what condition it is in, and what liens will still be present after your purchase. You will also need to know the details of foreclosure law and how the public trustee’s office, where foreclosures are conducted, does business."

"You will need to have liquid funds available to make your purchase; cover repairs and updates; and pay taxes, insurance, assessments and utilities while you’re trying to resell, or rent, the property. Although determining market value might not be hard in a tract house neighborhood, finding out the condition of a property in foreclosure can be problematic."

"Unless you’re dealing directly with the owner in pursuit of a bailout transaction, you may not have a chance to see the crayon artwork on the walls, experience the essence of cat that permeates the house, or investigate why water is dripping onto the kitchen floor from the upstairs bathroom."

"As for liens against the property, you can find out about delinquent taxes from the county treasurer, and a title insurance company can tell you what shows up as recorded documents, but there can still be surprises."

"For example, if work was recently done on the property, a mechanics lien could be filed after your purchase but with a priority that dates back to before your purchase."

"And then there is a multitude of purchase strategies to consider, each with advantages and disadvantages. You can, for example, buy the foreclosing lender’s position and complete the foreclosure yourself. You can make a deal with the owner being foreclosed on to buy the property. You can bid at the foreclosure sale itself."

"You can make the foreclosing lender an offer immediately after the foreclosure process ends, knowing that the lender is now stuck with a property it doesn’t want and needs to sell. You can buy the position of someone having a small junior lien on the property and exercise a redemption right at the end of the foreclosure process."

"If you still think there’s a wealthwithout-work opportunity here, start by reading carefully article 38 of title 38 of the Colorado Revised Statutes. (The law is changing July 1, so be sure you have an up-to-date copy.)"

"Next, sit in on a few public trustee sales. And, before you take your first plunge, have a title insurance company and a lawyer standing by to help you try to avoid unpleasant surprises."


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