Colorado Real Estate News

HOW TO BUY A FORECLOSURE

Many buyers are understandably nervous about buying a foreclosed home, also known as a distressed sale. There are horror stories galore about people purchasing a foreclosure and regretting it, but buying a foreclosure isn’t necessarily the nightmare that some people portray it to be.

However, there are some things you need to understand about foreclosures before you think about purchasing one as either a primary residence or an investment property. Learn what to expect and prepare yourself before you consider spending large amounts of money on a distressed property.

Understand what a foreclosure is

A foreclosed home is actually a specific term that refers to a certain stage in the distressed sale process. The different types of distressed homes are simply at different points along the continuum of distressed sales.

In a pre-foreclosure, the homeowner is in default on the home loan and the property is heading toward foreclosure, but the lender has not yet foreclosed on the home. Some aspects of pre-foreclosures make them comparable to distressed sales in the rest of the process, such as the typical inability of the homeowner to negotiate on things like repairs, or the fact that the owner might have been under financial strain for some time and there could be some significant issues with the home.

So what’s a foreclosure property? A foreclosure is a home that has been repossessed by the lender and is going to sell at an auction. These auctions are cash-only and sight-unseen — they’re a great way for investors with cash on hand to find new properties to buy and hold or fix and flip, but not necessarily the most realistic way for an average buyer to get their foot in the door on the property ladder.

Then there are REO (real-estate-owned) homes or bank-owned homes. These are houses at the far end of the continuum: the former owner has foreclosed and left the property, but it didn’t sell at auction; now it’s going to sit on the bank’s balance sheet for some time until someone buys it.

Tips for buying a distressed home

You don’t need to be an investor to consider purchasing a distressed home. There are some excellent deals available for the right buyer, but you need to know what you’re getting into before you dive too deep.

Cash is king

Many investors buy their properties with cash, which is a tough thing to compete with as a buyer who needs to get mortgage financing in order to be able to afford a home. You can get a mortgage loan to buy a distressed property — more on that later — but even so, you’ll need to make sure that you have plenty of cash on hand readily available if you want to buy a distressed property.

This is to cover the assorted hidden costs associated with buying a distressed property. That includes not just the normal costs of a home sale transaction, like closing costs, but also the cost of repairs that need to be made to the house, as you might not be able to get those financed. And if the house isn’t move-in-ready, you’ll also need to make sure you can afford to continue to pay for your current residence until it’s available for you to occupy, so don’t forget about the carrying costs of owning two residences.

Get preapproved

Preapproval is important for any buyer in any home sale process, but it’s especially critical for buyers looking at distressed properties. You won’t be able to add contingencies to the loan in many cases, and if you’ve ever bought or sold a home with another human, you already know that the home sale process can be tedious and drawn-out — now imagine if instead of a human on the other side of the deal, you were working with a bank.

The more red tape you can eliminate for yourself on the front end, the more successful you will be in your home shopping experience, so do yourself a favor and get preapproved before you start seriously looking at distressed homes.

Research, research, research

If we assume you’re getting financing for your home purchase, that means you’re either buying a home as a pre-foreclosure or an REO property (remember, auctions are cash only). This can be an advantage because you can’t do the same level of due diligence on an auction property as you can at the other stages of distressed property sales, and as you can imagine, due diligence is absolutely vital when buying a distressed home.

Before you make an offer on any distressed home, do your best to investigate as much as you can about the property. If it’s an REO home, find out how long it’s been unoccupied — homes left vacant often have compounding issues and will require more repair work than homes that have been consistently occupied.

Hire a home inspector and ask the inspector to include a repair estimate in the inspection. Then remember that repair estimates often stretch beyond their boundaries; use that information to decide whether to make an offer and how much to offer on the home. This is also no time to shirk on what are sometimes considered frivolities in home sales, like title insurance. A title search is typically included as part of a home sale, but in this case, it’s particularly critical because there might be liens on the house that you don’t know about and that you’ll have to get cleared up as the sale moves forward.

If it’s possible, visit the house. At least walk around outside and get a sense of what it will look like when everything is all spruced up — and just how bad any damage truly is. It will also help give you an idea of how long the previous homeowner might have been financially struggling before foreclosure (and therefore how many long-term problems might be lurking inside).

Watch the market

Buyers interested in distressed properties are competing against experienced investors in many cases, so just like those investors, it’s going to pay to watch the market and make sure you understand what’s going on. If foreclosures in your area are almost all selling at auction, then you know there’s a high demand for them, and you might want to bid higher for the pre-foreclosure that you’re discussing with a seller. If there are a lot of REO properties that aren’t really moving, you can probably take your time selecting a house and making an offer to a bank. But either way, you have to understand what’s going on in the real estate market around you and adapt your strategy accordingly.

Make an airtight offer

Remember that contingencies aren’t the norm, and banks also aren’t known for their ability to speed through, well, anything. The closer you can get your offer to “final” in the very first go-round, the better it will be for everybody. Talk to your real estate agent if you’re unclear about what should go in the offer and the contract. By now, you should have done plenty of investigation into the home and should feel pretty confident about your decision; if you don’t, you can always ask for another more specialized inspection.

Closing, repairs, and move-in

Very few distressed homes are going to be move-in-ready for their buyers. Depending on the level of work that needs to be done, some buyers might elect to work on the house while living elsewhere and move in only when it’s ready, and others might feel it’s doable to live in the house while working on it. That’s going to be up to you, your lifestyle and household, and the amount of repair that your newly acquired, formerly distressed home requires.

If you do the work on the front end, you’ll find that buying a foreclosure — or a distressed property — can be an option for owner-occupiers, too, not just investors. But make sure you’re not skimping on the due diligence. Learn everything you can about the home you’re going to buy and you’ll be much less likely to encounter an unpleasant surprise as a homeowner.

Colorado Real Estate News

AVOIDING BURNOUT AS A REAL ESTATE AGENT

Every industry contains a danger of job burnout. Although it’s not an actual medical disease, the Mayo Clinic defines burnout as “a special type of work-related stress — a state of physical or emotional exhaustion that also involves a sense of reduced accomplishment and loss of personal identity.” (https://www.mayoclinic.org/healthy-lifestyle/adult-health/in-depth/burnout/art-20046642)

It sounds like fun, right? No, not at all. Real estate agents can be especially prone to burnout because of the unique nature of their job. As independent contractors, agents can feel isolated even if they’re part of a thriving brokerage. Dealing with people, in general, is stressful and can lead to burnout; dealing with people who are in the middle of one of the biggest transactions of their lives is exponentially more stressful than dealing with people sitting down for a meal or buying a pair of jeans. And the sheer complexity of the transaction itself can be overwhelming for agents.

But burnout is far from a sure thing. There’s a lot you can do to protect yourself from feeling that state of physical and emotional exhaustion.

How do you know it’s burnout?

First, you have to be able to identify what you’re experiencing as burnout. It affects everyone a little bit differently, but there are some typical symptoms that people with burnout tend to have that can help you pinpoint if it’s happening to you.

Think about your recent sleep patterns. If you have burnout, you may also have insomnia; either you have trouble falling asleep at night, or you wake up way too early and can’t get back to sleep, or both. This could be paired with chronic fatigue: Because you aren’t getting enough rest at night, you might feel tired all the time at work, listless, with no energy.

Your food consumption can also alert you to burnout if you pay attention. Some people lose their appetite, while others overeat out of stress — so if the number on the scale has been creeping up or down from its normal spot, and you’re not intending to gain or lose any weight, that could be a sign that your job is starting to affect how and what you eat.

If you’ve been diagnosed before with anxiety or depression, or you know someone who has, then some of this may sound familiar. In fact, anxiety and depression often coexist with job burnout; job depression can incite anxiety and depression in people who have never had either before, and it can also make pre-existing conditions worse.

Another strong emotion that can be a warning sign of burnout is anger. Are you on a hair-trigger these days, finding your blood pressure soaring when you encounter certain situations at work? Do you notice yourself snapping at people much more than you ever did?

You may find that you’re forgetting things more often, or have serious trouble focusing or paying attention during your workday. And burnout can come with physical symptoms, too, including shortness of breath, heart palpitations, a propensity to get sick more often, and other body troubles that indicate all is not well in your world.

Does any or all of this sound familiar? It’s quite possible you have burnout. So what can you do to resolve it?

How do you fight burnout?

Burnout is quite common in real estate, but it’s far from inevitable! There is a lot you can do to improve your situation if you do think you have burnout, and prioritizing yourself will help you deal with your current burnout as well as prevent it from coming back in the future.

1. Set boundaries

The reason why burnout is so common in this industry is that it can feel like a 24/7 business. It’s a stressful time of life for your clients, who don’t buy or sell a house every day, and they are thinking about the obstacles to the closing table around the clock … but that truly does not mean that you have to do the same. The first thing you have to do to protect your psyche and manage your time more wisely is to set boundaries with your clients.

This can feel very uncomfortable for some agents, but with some practice, even the most bend-over-backward types will learn that the vast majority of clients are happy to respect your boundaries. So during your first meeting, tell them, “These are the hours during the day where I will be available via phone or text message to answer any questions you have. If you ask me a question before 6 p.m., I promise I will get back to you the same day. If you need something after 6, you can email me, leave me a voicemail, or text me, and I’ll reply as soon as I can the following day.”

If you’re working with sellers (who are more likely to have an after-hours emergency that might affect your business), it might behoove you to set up an answering service that can help connect your sellers with emergency plumbers, electricians, and contractors so that you don’t have to.

2. Take care of your body

One of the first things to go when we’re feeling stressed out is our self-care, which is absolutely the worst possible move to make, yet we do it all the time. You’ve heard it before and it’s nothing new, but taking care of your body through diet, exercise, and an appropriate amount of sleep will alleviate stress, give you more energy, and even extend your life. That’s why even in the peak of the busiest time of year for real estate agents, it’s critical that you’re planning your day so that you can eat nourishing, healthy food instead of pulling up in drive-through after drive-through.

It is quite common for agents to cut corners on sleep in particular as their business ramps up and they feel stretched thinner. This is one of the worst things you can do for your body. Sacrificing your sleep for work should be an absolute last resort and something you do extremely infrequently. Exercise can help if you have insomnia; spending 30 minutes sweating every day can wear you out enough to send you to bed when you’re supposed to go and keep you there all night.

3. Get some assistance

One of the best things about being a real estate agent is that the work that goes into your day is incredibly varied. You have to find and work with clients, market your listings and your business, negotiate deals, tie up loose ends, manage your own business finances, and generally be a person of all trades to the best of your ability.

That’s an amazing experience on its best days, but when things start going sideways, every agent will admit that there are some tasks they enjoy more than others. Some thrive on building social media following into the tens of thousands while others would rather file taxes than post to Instagram. Some are marketing-savvy while others enjoy the numbers and economic interplays in real estate.

Think about the things you have to do every day in your business, and then take some time to identify the tasks that you have grown to dislike — or maybe you just don’t enjoy them as much as you do everything else. Make a list and review it to determine what you can delegate. As soon as you can afford to, consider hiring an assistant or subscribing to a service that will handle that task for you.

You may find a little stigma in the real estate industry around not doing everything yourself. But so what? If you’re happy in your job and an assistant helps you achieve more work-life balance, it is a sign of the maturity and opportunities in your business that you have enough work to handoff. Savor it.

4. Give yourself something to anticipate

Maybe it’s a vacation planned to a destination you always wanted to visit but haven’t yet, or perhaps you can set up a standing Friday night date for you and your closest friends to bond over tapas and wine and commiserate about the past five days. Even though it seems counterintuitive, some agents fight burnout by working on next year’s business plan and strategy. It doesn’t matter what it is, but if you have something to look forward to, you can summon its presence whenever burnout rears its head and you feel like throwing your laptop at the wall.

Another way to build anticipation into your world is to give yourself a creative outlet that you indulge on a regular basis, whether daily or weekly. Channel all of those awful experiences into the novel you’re writing or the metal song you’re composing. If you can do this consistently, you might even catch yourself smiling when things get crazy at work because you know it’s all grist for the mill of your art.

5. Establish a support system

A mentor can be an immense help for new agents who are struggling to juggle all of the nuance and detail that goes into a real estate transaction. If you don’t already have someone you consider your mentor, think about making it a priority to find one.

You can also build a network of people who can be trusted to support you when you need it. That could be your mom, your partner, your neighbor, your best friend, your book group, a therapist — anybody you trust to help you handle some of the emotions and experiences that emerge when you’re working in real estate. Coworkers can be a huge source of help: They’ve been there before and they understand what it’s like. If you don’t feel like there’s anybody at your brokerage who can provide that support system for you, look online. There are a ton of social media groups for real estate agents to support each other, and one of them is probably a good fit for you.

6. Rearrange your day

How different would work feel if you remembered to take regular short breaks to refresh and revive yourself every day? Well, the great thing about being in real estate is that you are your own boss. Too often, that means that you drive yourself into the ground trying to impress yourself — but if you give your boss-self permission to be a nice, indulgent boss (on occasion) to your employee-self, you’ll probably discover that you begin to enjoy your workplace incrementally more.

Breaks are just one way to reorganize your working day to facilitate feelings of equilibrium and stability at work. Maybe you can do something with your workspace or car, adding personal touches that make you feel happy and soothed when you’re in that environment. A plant or candle on your desk (with a clean workspace) can do wonders for your mood, and if you have a home office, painting at least one wall your favorite color, or hanging an image you love where you can see it, can be a good way to spruce up your work area.

Surrounding yourself with things that make you happy can be supplemented by building small treats into your day. Do you love to sit on your porch with a cup of tea in the afternoon? Is stopping at home to eat lunch one of your favorite parts of your day when you can make it happen? Well, guess what: You got into real estate so you could have a lot of flexibility around your work. If tea time or a lunch break is something that rejuvenates you and helps you be more present during the rest of your day, you can be your own boss and add it to your schedule.

7. Shift your mindset

The best thing about anything shiny and new is its shiny newness. It is very common for humans to start something new, feel thrilled at the fact that they’re allowed to do what they’re doing … and then, gradually, become dulled and inured to the awesomeness of your life. Can you remember how exciting it was to start a new career in real estate? How much freedom you felt when you realized that the sky was the limit in terms of earning potential and that you could craft your business to suit your needs as an independent business owner?

When you’re feeling especially terrible, if you can, stop and try to think about the first time you felt really excited about being a real estate agent. Maybe it was the feeling you got when you passed the exam, or when the brokerage you wanted to work with most told you that you were also their top choice. Perhaps it was a time when a client heaped praise on you for the effort you put in on their behalf. Stash up as many of those memories as you can, and revisit them when things are feeling bleak to give you a little extra boost for the day.

Sometimes, this can be as simple (or as incredibly difficult, depending on your perspective) as changing how you talk about work in your head. When your phone rings, instead of thinking “What now?!,” maybe you can train yourself to think, “Someone needs my help!” or even “What kind of problem will I be solving?”

8. Avoid toxic clients

This is often easier said than done, and although we all have the best intentions about who we will and won’t work with professionally, it’s often difficult to stick to those convictions when you know you need to close another deal this month and the toxic client is your best option. But think about the repercussions for you personally. Working with toxic clients affects your health and your energy; it can literally drain years from your life, and contribute to issues you might already have at home — or generate new ones.

Make a pact with yourself to treat yourself as well as you would treat your clients — which means you don’t want you to work with people who don’t appreciate you! You know more than anyone else what you can (and truly can’t) put up with, so create a personal list of dealbreakers and then enforce it liberally when it comes to work. Life is too short to collaborate with people who make us miserable, and if doing that actually makes life shorter (it does!), then avoiding them entirely is a perfectly intelligent decision.