Last weekend I was working with a local young couple looking to purchase their first home here in Pagosa Springs. They both graduated from high school here and returned after pursuing their educations along the Front Range. They are both employed locally and have a new baby daughter. They are conservative with their finances and plan to only take on an amount of mortgage debt they feel totally comfortable with. The loan limit they have set for themselves is significantly below the amount the bank approved. We set out to look at several homes that fit within their guidelines. All of the homes are bank-owned or “foreclosure homes”. We found one that interested them the most and reviewed the details listed in the MLS. On Monday I visited the courthouse to obtain the recorded history of ownership and lending activity on the property.

The home was listed for sale in the $150,000 range. It had been on the market with the current listing agent for about 150 days, first listed with the agent at an asking price of $176,000. Previously, it had been listed by another agent at a price of $255,000. When I checked the ownership history of the property I found that when it had been foreclosed by the lender, the loan balance was over $230,000. I also determined that it had last sold in July of 2007 for $230,000. Based on the current asking price of roughly $150,000, the sales history would indicate the property had declined nearly 35% in just over two years! If my customers are successful in purchasing this property, they will not likely find themselves in the type of trap a few years out that many overly optimistic borrowers are now in. They are approaching homeownership in a sensible manner, with their eyes wide open and some intelligent boundaries in place. Because of this, I have no doubt, they will make a good investment that will help them grow a good nest egg for their young family.

A second example of a bank-owned home on the market with an interesting sales history. Presently the home is priced $114,000. It last sold in January of 2007 for $200,000, indicating a decline in value of 43% over the last three years.

A third property I looked into is currently offered for sale at $250,000, having last sold for $329,900 in September of 2006. The loan balance when the bank took it back was just over $273,000. Interestingly, there was an additional home equity line recorded in the amount of $90,000, indicating total debt of $363,000 against the property. Does this seem like extremely imprudent lending practices by out of area lenders, or is it just me?

In looking at these three examples, one can see that yes, there are some bright spots within our real estate market; especially for the first time home buyers. In addition to some very good prices, some of these lender-owners are offering incentives such as contributions towards the buyers closing costs and two year homeowner warranties. In some cases, the smarter lenders are even offering bonuses to the real estate agents.