Brian L. A. Wess

Hi Susie :o)

You want to handle this in pretty much the same manner that you would normally handle purchasing any residential property offered for resale. Your Realtor Professional should perform a very tight market valuation of the property through a Comparative Market Analysis (CMA) so that you, with your Buyer Agents assistance, can determine what you feel is a reasonable price for the property. Because of this it is very important that you choose a Realtor Professional to work with who has the verifiable experience, continuing real estate education, and knowledge to properly guide you.

Many of the properties in OCC are Victorian Era and Painted Lady's, and many are known to have structural issues that vary from minor to severe, so having a Realtor familiar with that area and a team of experts they can refer you to for professional advice is also very important.

It's all about educated negotiation. When boiled down to the simplest terms...a piece of property is only wrth what a buyer is willing to pay a willing seller.

If you haven't already chosen a Realtor Professional to work with I would be happy to offer my asistance in your relocation. My website is http://BrianWess.com

Best regards
Brian L. A. Wess
CRS, GRI, ABR, ASR, e-PRO
Realtor®, Broker Associate
Residential & Investment Specialist
Colorado Springs, CO
Direct: 719-528-6672
E-mail: Brian@Brianwess.com
Web: BrianWess.com
COLORADO REAL ESTATE...DONE RIGHT!™ - Tue Jul 22 2008, 11:39

Hi Mandy :o)

I am very sorry to hear about your situation and I know such uncertainty creates a lot of stress, but you should know that you are not alone. The current market correction is making it very difficult for sellers who have purchased their homes in the last 3 or so years to sell now because, in most instances, they have 97% to 100% financing and any appreciation they would have experienced has been eaten up by the downward market pressure on prices.

However, you need to remember that existing properties are often more attractive to buyers because they already have many items that the builder either didn't include or offer as an incentive. These can include, Additional Finished Areas, Decks, Landscaping, Sprinkler systems, A/C, window coverings and other interior or exterior amenities...so all is not lost.

If you absolutely have no other option than to sell now as you indicated, you have a few options available to you:

1. There may be a possibility, albeit small from what you said about the builders prices, that your property might be able to sell on the market for at or near what you paid. You first need to consult with a Realtor professional, who has experience and education in property valuation or a licensed appraiser to give you a very tight analysis of what the approximate current market value of your property is. A Comparative Market Analysis (CMA) form a Realtor and/or an appraisal are in reality just educated snapshot in time guesses of what your property should be worth, so it's very important that you use an experienced Licensed Appraiser or a Realtor with extensive continuing education that has included how to properly perform a tight CMA.

If your property is indeed worth less in the current market than it would take to pay off your loan and you do not have the financial wherewithal to make up the difference, you can:

1. Ask the Realtor you choose to work with how much the going rental rates are in the area of the property to see if it's possible for you to rent it out at a rate that will allow you to make the loan payment each month. If you can verify for a lender that you are receiving a steady income from a property that you have converted to an investment rental, it is still possible for you to qualify for a loan on another property to use as your primary residence wherever you relocate to. A word of caution, you should go over your loan agreement with your current lender to make sure that there is no language in the agreement that would prevent you from renting the property out to others. You should also have a Realtor professional perform and investment analysis of your property to ensure that you can at least break even by renting the property out. While it is possible to do, I don't recommend to any investor placing yourself in a negative cash flow position with regard to the debt service on an investment property, unless they have a strong income stream from other sources and can afford to use any loss on a particular property as a write off or carry over on their taxes. If this is the case for you, then I highly recommend that you consult a Tax and/or a Financial Advisor to make certain that you have the proper advice and counsel. I would also recommend that if you are relocating out of town or the state that you use a professional property manager to manage your rental property. It's very worth the usually minimal 10% of the monthly rent in order to make sure the property is protected and well maintained by the tenants and that any maintenance, code enforcement, law enforcement or other issues can be addressed in a timely manner.

2. You can attempt to negotiate a short sale with the lender or lenders who hold your home loan(s). A Short Sale is generally described as a negotiated settlement with a loan holder for less than the amount due on the loan. This is usually more common if the loan is delinquent, in foreclosure, or less commonly, if you have been attempting to sell the property on the market for a long period of time and the offer you receive will not cover the full amount of the loan. Negotiating short sales is a very complex and time consuming process, so if this is an option you wish to explore I would highly recommend you have professional assistance from a Realtor with a good deal of verifiable experience successfully working short sales and a strong short sale negotiator on his team. I happen to have one of the best.

There are definitely some options open to you and some things you may be able to do to get out of this situation, so don't give up hope and make sure you talk to someone with the proven experience and education to properly counsel you. If you like I will be happy to sit down and discuss your options further.

Best Regards
Brian L. A. Wess
CRS, GRI, ABR, ASR, e-PRO
Realtor®, Broker Associate
Residential & Investment Specialist
Direct: 719-528-6672
E-mail: Brian@Brianwess.com - Mon Jul 21 2008, 23:52

Hi Lisa :o)

Most of the experienced investors I work with are also taking advantage of the current market correction to expand their rental portfolios, so you should be congratulated on being very savvy.

Rental Rates in the Manitou Springs and Green Mountain Falls areas are slightly higher than the Colorado Springs area because they are considered campy and unique, and because they are small towns that have limited availability. I would advise you to be wary about attempting to rent any home in those areas as a vacation rental however as these areas do not fit the traditional vacation rental profile.

With the infusion of troops that are beginning to be moved to Ft. Carson, a standard rental home with convenient access to Fort Carson & Peterson AFB would be the safest investment. It is also very important that you do a detailed investment analysis of the property and area it is located. By crunching the numbers properly you can reduce your risk and be more assured of being able to rent the property for a comparatively reasonable rate in that area as well as ensuring that the property will cash flow above your debt service. You should also be careful to consider rehabilitation costs, if necessary and the type of financing you plan to use. If you need to have the property financed, most lenders charge somewhat higher interest rates for non owner occupied and/or 2nd homes, but you can help to mitigate this and some other costs if you have funds to use as a down payment that will lower the Loan to Value ratio to 80% or less. - Mon Jul 21 2008, 13:45

Hi Helena :o)

Pricing a property correctly for the market, along with how aggressively it is marketed by the Realtor Professional, is critical in getting it to sell for the best price and in the shortest amount of time. Many sellers often opt to go with whoever tells them the highest selling price for their home, but it does the seller no good…nor the agent selling the property…if the property is over priced and ends up sitting on the market through numerous price reductions. This only gives buyers a bad impression of the property.

Pricing solely by square foot, unless you are speaking of commercial property, has pretty much gone the way of the Do Do. It is vital that when you are being advised how to price your property that recently sold properties of comparable style and build be of first consideration as well as the properties that are currently for sale that you will be competing against. Remodeling, done correctly, can increase a homes value and according recent national surveys of cost vs. value returns on remodeling Kitchen and Bath remodels have the highest percentage of return, but NONE return above 80 to 85% of what you paid into them.

You must have a solid strategy in place before you "go to market". With over 6500 properties on the market in the Colorado Springs/Pikes Peak Region and days on the market in most areas averaging around 4 months, we are solidly in a buyers market. Additionally, the average sales price and median sales price of homes sold in the area has dropped over $10,000 in the last year or so. This means that more expensive properties are not selling as much or as quickly as lesser expensive properties.

Some sellers believe that they should price their property above what they want to get for the property in a buyers market because they buyers will always want to negotiate down. This is a good idea in theory, but in practice it is devastating to getting a property sold and in almost every instance will end up costing the seller more money that if the property had been priced right to begin with.

When a property is priced above it's competition, many buyers may skip it because they assume it's priced too high unless an excellent argument is made through marketing (numerous pictures and descriptions and a virtual tour) that it deserves to be priced as such. Remember...the property still has to appraise. Often in cases where properties are over priced, the longer it remains on the market, the more buyers assume that there is something wrong with it. This can, and in my experience usually does, include the assumption that it is over priced. The seller usually ends up having to accept a lower price just to get the property sold because of how long it languishes on the market.
If your parents don't have to sell now then they should wait. If they have to sell now, then it is of utmost importance that the property be priced right for the market.

Brian L. A. Wess
Brian@BrianWess.com - Sun Jul 20 2008, 13:58

Hi Sue :o)

You are correct that normally banks do not accept a contingency that requires the buye rbe able to sell their current property first. This is even more true in the current market with the banks having so many foreclosed and repo properties to deal with and with times on the market to sell properties being longer.

In your situation, if you are really intent on purchasing the bank owned property, you may want to explore using a bridge loan. You can read about them here: http://www.brianwess.com/NeedaBridgeLoan

If you would like I can also refer you to some professional local lenders who can discuss bridge loans, how the work and their requirements with you. - Sun Jul 20 2008, 13:20