‘Magical Misery’ tour rolls in Northern Colo.

Northern Colorado real estate brokers are jumping on a marketing bandwagon that’s already rolling through communities across the country – foreclosure bus tours.

Not typically thought of as tourist attractions, foreclosed homes are an exploding facet of the real estate industry. Combined with the growing popularity of “house-flipping,” the increasingly low price tags on foreclosures are growing ever more attractive to homebuyers, be they first-time shoppers or more savvy investors.

There are thousands of bank-owned properties on the market for “tourists” to see in Northern Colorado.

“Foreclosures are a bigger part of the market now than they ever have been before,´ said Alan Jones, a broker with Coldwell Banker’s Loveland office. Jones and Eric Beres, a senior mortgage planner at Fort Collins-based Precision Lending have both started foreclosure tours in Northern Colorado communities.

The state is fifth on the list of highest foreclosure rates in the country for the first quarter of this year, according to figures from RealtyTrac, and Weld County recently reached second on the list of Colorado counties with 813 foreclosure filings in the first quarter, up from 647 in first quarter 2007. Foreclosure sales are also up in the county, to 442 this year from 425 for first quarter of last year.

Foreclosure sales in Larimer County were down 19.5 percent in the first quarter, to 228 from 271 in the first quarter of 2008, while foreclosure filings were up 27.5 percent to 487 from 382 at this time last year.

Foreclosures have always been viewed as a fantastic opportunity by seasoned real estate investors: Buy a home priced significantly under market from a bank that is eager to sell, turn it around and sell it, possibly still under market, for a big profit. Since foreclosures have become so prevalent, amateur investors and homebuyers have also begun to take notice, but have discovered that finding properties and choosing the best investment can be overwhelming to someone unaccustomed to real estate investing.

The need to introduce potential purchasers to the variety, if not the volume, of foreclosed homes available in Northern Colorado is keeping both Jones and Beres busy.

Customized approach

Beres focuses his tours on several communities in Northern Colorado. Since beginning his weekly tours in May, he has taken prospective buyers to Greeley, Windsor, Fort Collins and Loveland, and is considering expanding to Johnstown and Milliken. Although foreclosed homes are the big draw, he also includes short-sale properties, and Precision Lending agents keep an eye out for homes that have recently seen a significant price drop of $10,000 or more as well.

Beres’ tours are small, with only a couple of participants, who must be pre-qualified for a loan by Beres before they get on board. However, if an individual is not yet in a position to buy a home, Beres says he can get them ready to buy within three to six months through preparation and education about the buying process. He also requires that his tourists not be working with a real estate agent prior to going on the tour, and are serious about purchasing a property.

“We want to avoid a conflict of interest,” Beres explained. “Since these sellers are really serious about selling, we want to bring in people who are serious about buying.” Precision Lending also offers in-house financing to those who end up buying a foreclosed home in an effort to create a “one-stop-shop” for their customers.

Beres said that the small size of the tours allows him to focus each tour on the needs of that weekend’s customers regarding budget – tours can focus on homes for under $250,000, between $250,000 and $500,000, or over $500,000 – preferred community, and condition of the property. Tours go inside the property so tourists can “get a good feeling for the home,” Beres said.

In case a property is in particularly bad shape, Precision Lending has partnered with several other companies to help buyers make repairs or remodel. M&E Painting, Cal Spas and landscaping and carpet cleaning companies offer promotions to Beres’ tourists, in addition to Dingo Vans providing transportation and Daz Bog Coffee providing a meeting place in their parking lot and free coffee to tourists.

Beres said that as he learns what works on the tours, he is considering offering them less frequently.

Get on the bus

Jones’ monthly tours are much bigger – the first one on June 7 filled a rented bus with 40 prospective investors – and focus entirely on Loveland. Home values on the first tour ranged from $87,900 to over a million dollars.

Jones’ tourists must be pre-qualified for a loan or prove that they have sufficient cash to purchase a home and must not be working with a real estate agent prior to going on the tour. Jones said the purpose of the tour is mainly to distribute information to potential homebuyers.

Previously, he said, savvy investors got the best deals, and he wanted to let newer investors in on the opportunities presented by properties in the possession of the bank, known by the acronym REO for real estate owned.

Jones added that the need for information about foreclosures has grown as well. People on his tour see all that the Loveland foreclosure market has to offer, from fixer-uppers to lakeside mansions, and in the process, learn something about how to invest in REO properties.

Jones said that a couple of homes are under contract as a result of the first tour. The buyers are borrowing to pay for the properties. He plans to conduct another tour in the second half of July.

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