We got Burned by the Denver Housing Market

Burned by the #Denver #housing #realestate market. | Rose Colored Water #colorado #firsttimehomebuying

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I made no secret here that Mike and I were trying to buy a house using the VA loan. I think I first mentioned it back in September of 2016. In late December, we officially started the process, as our apartment lease would be ending at the beginning of March. We applied for the VA home loan and I was so happy that I already had all the documents we needed. Everything went really smoothly.

Burned by the #Denver #housing #realestate market. | Rose Colored Water #colorado #firsttimehomebuying

The Hunt for a Home

When we finally went on the hunt, we were discouraged by our options, even with a budget of $325,000. That’s a lot of money for a first home, and in Colorado, even old, shabby homes are priced between $270k-$300k. Those homes often go through bidding wars.

Needless to say, the first home we put an offer on was rejected, as numerous offers came in, beating our measly $5,000 above asking price bid. I was actually happy that we lost that home because I wasn’t in love with it and I felt we had made the decision hastily – due to us being on a very strict timeline.

The next day, we searched far and wide for homes, trying to be flexible on the things we wanted and felt like we needed. We really only had a couple of major wants. The home had to have at least 2 bathrooms, a fenced yard, and preferably a garage. However, the yard and bathrooms would beat out the garage if it came down to brass tax.

At the end of the Day 2, we found a quirky ranch home that had been remodeled. It had everything we wanted and more, despite some of its odd features and design points. It was set at $300,000 – down from $320,000 prior. We bid generously above the asking price at $315,000. The seller knew we were using a VA loan and asked our realtor if we would be willing to bring any cash to the table if the home didn’t appraise for $315,000. He had multiple offers, but for some reason, he went with us. Our realtor told him we had no money because we were first time home-buyers. All we had to our name was the $3000 in earnest money we had given them, which we had planned to use for closing costs.

The final deal we agreed upon was that if the home didn’t appraise for our offered amount, we would give the seller our earnest money to sweeten the deal. 

Fast forward 3 weeks.

We had made it through the inspection and everything seemed to be going as planned. I felt confident everything would work out. We were less than 3 weeks from our closing date and were waiting only on the appraisal to come through. We shared the news with our friends on Facebook and began prepping for the big move.

Last week, I get the call from our mortgage broker telling us that the appraisal had come in extremely low at $275,000. I won’t go into why it appraised so low, but it was fair and valued appropriately. Our realtor called and said things were not looking good and the seller wasn’t prepared for the appraisal to be that low. Even after much discussion, the seller said he would not take less than $300,000 for the property. Could we come up with the difference?

UM… NO. 

Before I go on… let me tell you a little bit about the Colorado housing market. Everyone thinks their piece of crap shack is worth $25k-$50k more than it is. It could be completely outdated and seller’s will still ask for your first born child to make the deal. There are also a lot of flippers going around right now and fixing up older homes. Unfortunately, those flippers, (like the seller we worked with) pay too much for the property and then try to sell it for more than the going market value of that neighborhood. This is fine if you have cash buyers willing to go underwater on a home, but it doesn’t work for people trying to use loans such as VA or FHA. They have no bargaining power. Do I sound bitter?

The best way I can think to describe it is… If you put a mansion in the middle of the ghetto, that mansion isn’t going to be worth as much as it would be if you put it in a neighborhood with other mansions.

So what happened? We lost the house.

In the end, we had to pull out of the deal because we obviously didn’t have the money to make up the difference that he wanted, and we wouldn’t have done it anyway because we didn’t want to be $25,000 underwater on a home. I mean, we’re ignorant as first-time homebuyers, but we’re not that dumb.

We are devastated, to say the least. We allowed ourselves to fall in love with the home and we lost it. There was literally nothing we could do. And because we were so far in the process, we are now out of time in searching for another home because our lease is up in less than a month. We already put in our notice, and if we decided to try for another home, we would have to find a place to store our stuff and find a place to stay in the meantime.

The truth is… in a market like this one, you simply cannot compete without cash. I also think you’d be a fool to place financial awareness on the back burner just because you love a home. Going underwater on a home is never a good idea. Think 2008.


The Risk of Doing Business

They call it the risk of doing business, but because we lost that house and decided to stop the loan process, etc., we also lost a lot of money. We weren’t willing to take that chance again on another home. A lot of first-time homebuyers don’t know this, but if your deal on a house falls through, you’re out the price of an inspection (anywhere from $300-$600) and the seller now knows everything that’s wrong with their house. You will also be out the price of an appraisal. A VA loan appraisal runs about $750 now. Sometimes your lender will eat the cost of the appraisal if you go for another home. We are not that case, as we are stopping our home-buying process and saying… NO MORE. Overall, we lost about $1500 on this little house-buying adventure. Still, we decided it was smarter to cut our losses and move on with our lives than worry about what we lost.

Where are we going to live?

Considering our dreams have been shredded and my hate for the great state of Colorado continues to grow, Mike and I will continue renting. We are not going to stay in our current apartment, as they’re still raising the rent $150/month and 55 miles from Mike’s job.

In the coming weeks, we’ll be looking for a condo/townhome/apartment to rent that is near a park for Mots. Maybe we can even find one with a garage. Overall, we would like to find something similarly priced and sized as our current place. We definitely need a second bedroom, and while one bathroom would work, we’d rather not compromise on that. Too many of our friends and family like visit to go without a second one.

I have no worries about finding a place to live. It just sucks that we have to lose out on all that deposit/fee money for another rental. That’s the bad thing about renting and moving around so much. It costs a lot of money, though I keep telling myself that it doesn’t cost $315,000.

Haha! So there you have it.

We’re done with home-buying for a while. I never liked Colorado all that much anyway. (That’s #truth) Has anything like this ever happened to you or someone you know? Are the feelings mutual? We’re completely jaded.

12 thoughts on “We got Burned by the Denver Housing Market

  1. That sounds awful. I hate seeing people go through such long and tedious processes, only to be told no or having to start over. You are so right though, renting may be expensive, but that’s better than 315k towards a home you may not stay at!

    1. It was definitely not something I was prepared for, and I wish we had just foregone the whole thing now, but at least we got some great learning experiences from it. That’s what I keep telling myself to ease the pain.

  2. That sucks! Andy and I have already decided we will not buy a house until he is done with the Army (so, in about 15 years!) because we don’t want the stress and headache of it all.

    1. It can be a headache, and ultimately, if you’re going to wait that long, I would recommend saving up the 20% it takes for a down payment. VA loans are awesome in their benefits, but they’re really for people trying to buy a home without a down payment. If a market is tough, like our area, you simply can’t compete with a VA loan. It’s unfortunate for a lot of us, but we just have to grit our teeth and bear it.

  3. Ugh, I’m so sorry. That’s such a heartbreak. I hope you find the perfect apartment to rent in the meantime!

    1. I’m sure everything will work out in the end. It was probably a blessing in disguise. At least we’ll know what to look out for in the future. :)

  4. Hello there! Just found your blog and love your writing!
    So sorry to hear about this! That really sucks. :(
    What has changed your mind about Colorado? I saw on a previous post that initially you really liked it.
    I am moving to Denver in a few months with wife and furry pets so am very interested to know what happened..

    1. Thanks for the compliments! I had liked Colorado in the beginning – or should I say… the Denver area, but after living here for a year, the people have tried my patience. There are very few natives left because they have all fled this area due to the influx of people who have come here in search of legal weed. The traffic is terrible because Denver’s infrastructure was not ready for such a population boom. Driving anywhere is a task – and for someone who was raised in a small town and lived only in cities like Kansas City and St. Louis – it is so irritating! Not to mention, the housing market is for seller’s right now, and the one we dealt with was a pompous old windbag, wasting our time and money. That put another damper on my feelings for Colorado.

      The people who have moved here are rude and hateful. There’s very little “hometown kindness” that I thought I saw in the beginning. Even my husband doesn’t like living here much anymore, and he’s much more forgiving than me. Overall, I think we’d rather be somewhere near the ocean and year-long warmth. I admit though, it is the Springs and Denver that have suffered the worst from the population boom. The smaller towns are better and not so busy. I think if we lived in one of those places, I might have a different view of it.

      If you’re from a large city such as Chicago or LA, you may not notice an issue with the busyness and traffic, but Denver was never meant to be a city like that, and has only grown so much in the past 5 years. The legalization of marijuana played a large part in it, and the locals hate it. The ones who haven’t fled the state will shout insults at people they know aren’t from Colorado. It’s funny, sometimes, but it gets old quickly. Both my husband and I have been dealt insults – even though we never chose to come here (thanks Air Force) haha!

      Anyways, that’s the story. I don’t think I’ll ever live in Colorado willingly.

  5. Argh I”m so sorry to hear that! House hunting is truly a soul destroying process. You can’t help but get your hopes up, and then get disappointed time and time again. I remember the exhaustion and tears. It absolutely sucks and I do wish sellers would get and provide inspection reports … but then again I suppose you wouldn’t feel like you could trust those. Here, the majority of houses are actually sold by auction, and you have to bid unconditionally on the day so you need to have done any inspections etc that you want to beforehand, before even bidding … I refused to look at any houses for sale by auction and luckily in my price range, there were enough for sale by negotiation to choose from and keep me busy.

    I was initially going to buy using our first home buyer scheme which allowed 10% deposit. I didn’t in the end which was a blessing in disguise, as you note, these kinds of schemes are a lot of trouble and actually put you at a disadvantage against other buyers.

    It’s good that you aren’t too stressed about finding a place to live – sounds like the rental market may at least be a bit more reasonable. All the fees and costs of moving around suck (as someone who’s moved basically every year of my adult life, I KNOW!) but definitely less $$ than buying. Do you have a get-out-of-Colorado plan?

    1. Wow! Sale by auction sounds more terrible than what we went through. I cannot imagine. Sounds like you got lucky finding a place that you could negotiate into.

      I definitely think we’re going to try to save up a down payment for when we try to buy our first home. We’ll probaby still go through the VA because of the benefits, but at least we’ll have cash to back us up if we need it. Fortunately, we did find a nice apartment, much like the one we have now, with more amenities and space for a lot less than the mortgage payment. We’re going to get back to focusing on our car and consumer debt, now that we’ve played the home-buying game and lost. It was a tough mistake to learn from, but I’m glad we did it now rather than later.

      My Get-Out-Of-Colorado plan isn’t too good right now. I’m at the mercy of my goals because I am trying to commission as an officer in the US Air Force, and in order for me to qualify to apply, I must be at my base for at least 2 years. I will hit one year in March, so I would say I’ll be here at least a couple more years. However, once it does all work out (if it does work out), I’ll be out of here and hopefully never coming back. Just gotta be patient and play the game for now.

      Thanks for the comments and insight!

  6. Same situation. Although it is just me, and substitute home for town home. The home came back at 227 and they are asking 239. Now understand they bought this place in 08 for 44K. Yes that is correct. and with maybe 5k worth of work put in, they will net about 181K on the place. But they refused to take the 9K loss. And so I am out about $1000 bucks. Sadly the rental market is just as bad. The average 1 bedroom 1 bath is about 1335. And that is for really bad apartments that you don’t want to live in. Not to talk bad about people that do, but really it’s sobering to have a bullet go through your wall, or your place being broken into twice in 5 months.

    Sad that I have friends who struggle and this is their experience. Here is what I can say about Denver having lived here for close to 15 years. It was a diamond in the rough about 10 years ago. All the charm that it once had has been changed due to people looking to cash in on cheap property. So where a neighborhood where everyone was middle class and real sense of togetherness has been replaced by yuppies from the Coasts who are looking to move to Colorado for a more laid back life. Or even more sadder are the properties that were bought by investors and then rented out to the highest bidder.

    Also goes for the burbs. Not a ton going on, you will need a car to go anywhere cool, unless you live in an old town neighborhood, which same rule applies to these places as well. What I feel Denver has lost is the sense of ownership it once had. You could feel happy to be from Denver or Colorado, but now it just feels like every other place, which in itself is sad.

    1. I’m so sorry you have had issues with the housing market. I was optimistic when I moved to Colorado, but that quickly died out with the overpopulation and inflated home prices. I can understand why so many natives are leaving in hordes. Thank you for adding your insight!

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