Most people who shop for Denver luxury homes never even consider the idea of looking around for properties in foreclosure. After all, someone who can afford a multi-million-dollar home would never find him or herself in such troubling financial times, right? Wrong. Banks are not choosy, and if people get behind on their payments, they will foreclose – even if the home is worth millions.
How Rare Are High-End Foreclosures?
There is absolutely no denying that it is much rarer to find a luxury home in foreclosure than a typical family home. The richest of the rich purchase luxury homes in Denver and other areas, and some buy up front in cash rather than taking out a mortgage. However, from time to time, people can and will get in over their heads in terms of executive homes. They buy more than they can afford, and the next thing they know, the bank wants to foreclose. If you are in the market for a luxury home in the Denver area, checking for foreclosures may actually pay off.
Discounted Prices for Foreclosed Properties
One of the main reasons why people hunt for foreclosed properties is for the discounts. Banks will sell properties for well under the market value just to make sure they do not end up in the hole at the end. As long as they cover what the borrower owes them, they have it made. The average discount on a foreclosed home in the United States is 29%, and the discount on luxury real estate is even higher. For example, La Reve, a famed estate in Atlanta, Georgia, sold for a staggering 75% off of the original asking price, which was $45 million. Imagine getting a $45 million estate for just 25% of its value.
Since the beginning of time, the real estate market endures what seems like a natural ebb and flow. Sometimes, it seems as if everyone is buying property at bargain prices with outstanding mortgage payments. It is during times like these when people jump on Denver luxury real estate. Prices are low; mortgage payments seem reasonable enough. Later, a business fails or an unexpected illness strikes, and the property ends up in foreclosure. It is happening more and more often, and this might actually be good news for buyers.
Another reason why it seems that there are more and more luxury homes in foreclosure these days has to do with poor decision-making. People offer much more than what an actual home is worth because they love the property or the view. Then, they end up underwater (which means that the loans attached to the homes are worth more than the homes themselves) which often leads to foreclosure. In fact, as of 2012, 11 million homeowners were underwater in their mortgages and well over one and a half million bank-owned homes loomed in the shadows, not yet on the market.
Buyers who are interested in luxury homes may have some luck asking their banks and real estate agents about local foreclosures, and Denver is certainly no different. However, because of the rarity, no buyer should wait until a property is in foreclosure to strike.