Past owners owed money
Thousands of dollars are going unclaimed after houses sell.
County foreclosure auctions have become the hottest investment opportunity in town, reaping tens of thousands of dollars in profits for the most unlikely people: the homeowner who lost the house.
Yet getting them to collect the money isn’t always easy, the public trustees who track them down say.
The money comes from people who buy auctioned houses for more than what a homeowner owes the bank or lender who foreclosed. Once lawyers and any property liens are paid off, the homeowner who lost the house gets what’s left. It’s usually a few thousand dollars.
Lately, though, it has been as much as $100,000 or more.
“Some are more than willing to claim the money, but others are hesitant,” said Diana Springfield, chief deputy public trustee for Arapahoe County.
“One guy came in recently to ask about (the money), and now we can’t get him to come back to collect it.”
The amount waiting for him: $27,692.
“We’ve never had anything like this. It’s crazy,” said Adams County Public Trustee Susan Orecchio, noting that auction buyers are frequently paying more than what a bank is owed for a property.
There has been a drop of 45 percent in houses sold at the foreclosure auction this year, Orecchio said. But bidders have already paid more than $3 million more than the banks were owed — a 77 percent increase over last year.
And it’s happening all over Colorado.
“In the past decade, most people owed far more on their loan than what the property was worth, so the bank usually would simply get the property back at auction,” said Brandon Turner at BiggerPockets.com, a real estate investment and networking site.
There were a few investors who bought at foreclosure auctions back then, but even fewer bid much more than what the bank was owed, records show. But a tight real estate market — the number of houses for sale has been at historic lows — has made foreclosures more appealing.
“With the improving real estate market, investors are finding it more and more difficult to find properties that will produce a profit,” Turner said. “Many, therefore, are turning to foreclosure auctions to get deals.”
Denver developer Delwest is one of them. In June, for example, the company paid $285,000 for a Centennial home at the Arapahoe County foreclosure auction — $73,278 more than what the homeowner owed the bank, records show.
The company turned around and has the home under contract for sale at a $55,000 profit, according to its website.
“The prices in the metro area have increased so quickly in three or four years that you have to go as much as 70 percent higher for properties, and with the price-appreciation going up as well, you have to outbid the big firms,” said Joe Minnis, a partner in Delwest Capital Group, Delwest’s redevelopment business, adding that outof-state investors with capital assets of about $500 million are their main competitors.
“We can bid up the numbers since the margins don’t have to be that big; we’re about volume,” he said, noting Delwest buys about 60 foreclosure properties a year, rehabs them at a fraction of what others probably pay and resells them.
And buyers are trying to outdo one another at a frantic pace. In Adams County last week, two bidders ran at a single property, within moments driving the final price up by $60,000 over what the homeowner owed the bank.
Since June 1, the Arapahoe County public trustee has auctioned 84 properties, records show. Of them, 53 sold for amounts that ranged from $20,000 to more than $116,000 more than the remaining mortgage, records show. Only five have been resold since their auction.
In Douglas County, where the number of foreclosure homes auctioned has dropped by 30 percent this year, the majority have sold for more than what the bank was owed, Public Trustee Christine Duffy said.
Of 67 sales, she said, 42 brought in for more than what the homeowner still owed on them, three by more than $100,000.
Despite the cash, trustees say some of the former owners just won’t show up to collect money that is rightfully theirs.
“I can’t explain to you why they don’t come for the money,” Springfield said. “Some say the depression is simply too much to bear, having lost their home. But these are some pretty hefty checks.”
If no one claims the money after six months, the trustee sends it to the state treasurer’s Great Colorado Payback, which holds it until someone — owners or their heirs — claims it.
But sometimes there just isn’t anyone left to make the claim.
“We have one where both husband and wife died and there’s $44,000 in overbid,” Springfield said. “Their attorney said they have no relatives.”
That’s the case for Robert Gray, who lived in Westminster during the summers and wintered in Florida. He died in 2013, and his Colorado home was foreclosed and sold at auction in February 2014, records show.
Gray, a retired psychologist from Oregon, had no known relatives. The $121,999.97 that belongs to him will sit in the state treasury until someone makes a valid claim.