Colorado Foreclosures

Colorado holds many “firsts”; the World's First Rodeo was held on July 4th, 1869 in Deer Trail, the first hotel west of the Mississippi River was built in Golden in 1867 and in 1894 three women from Colorado became the first women ever elected to state legislature in the US. The Centennial State leads the nation in population growth, tech jobs, life expectancy and, unfortunately, foreclosure rates.



The foreclosures in Colorado were the highest among all 50 states for both the second and third quarters of 2006. The foreclosure rate was three times the national average as of October 30, 2006. Greeley, a farm community in Northern Colorado had the distinction of the highest foreclosures in the state. One in every 156 homes in Greeley is in foreclosure, one in every 300 homes in Colorado is in the same process.



Foreclosures in Colorado aren’t so great for those going through the process but the many investors have turned the lemons into lemonade. Most of Colorado has experienced a sellers market during the second and third quarters of 2006, meaning there are more people looking to buy real estate than those selling.



In Colorado, foreclosures are non-judicial. This means that a foreclosure can be completed without a court appearance by either the lender or the borrower.
Once a borrower has defaulted, the lender sends a notice of default to the borrower and trustee. A three-month reinstatement period is required to allow the borrower the opportunity to repay the debt. Upon expiration of the reinstatement period, a trustee’s sale is announced and takes place, usually as an auction. Fees and all costs associated with the principal on the mortgage and the foreclosure procedure is deducted from the winning bid. Any excess funds from the winning bid are returned to the borrower.



Foreclosure is often a great way to get a good deal on a piece of real estate, especially in Colorado. The housing values have maintained a steady 2% - 6% rise, depending on the town or community. At the same time, banks have an abundance of houses to foreclose on. Banks aren’t in the real estate business, they are more concerned with lending money to a new buyer.



The best case scenario for the seller, buyer and bank is when the house sells in pre-foreclosure. This avoids the costly, time-consuming foreclosure process for the bank, the bad credit marks for the seller and gives the buyer more power at the negotiation table – it may be worth it to the seller to give up all equity and possibly pay a little to avoid the stain on their credit report.



When that isn’t possible, foreclosure is the next step. Buyers should expect to research a suitable property and practice patience until it comes along. Buyers should then head to their bank and get pre-qualified for a loan. Bargain hunters should go to the table with pre-qualification (not pre-approval) letter in hand.



Research should include more than just the specifications of the house. If this will be a primary residence, it’s important to know long term plans for the community, nearby schools, area crime and comparable properties in the vicinity. Take the time to view the property inside and out.



The next step for the buyer is to attend the auction or contact the seller directly to make an offer. When considering the price to offer, considerations should be made to any outstanding liens or bankruptcies that may affect the record of the property. Banks rarely settle for less than 90% of the outstanding loan balance.



If you believe you may be foreclosed upon, you can do a few things to mitigate your position. Offer to sell your home for only the amount you owe on the loan. It’s better to walk away from a little profit than miss out on the opportunity to buy a home in the foreseeable future.



Once the foreclosure process has begun, you’ll need to re-establish your good credit. Letting time pass is the single best action you can take to improve your credit score. Make payments on time and don’t open new accounts for a while. Save 5% - 20% (the more the better) to use as a down payment on a future home. A foreclosure in Colorado does not condemn you to a life of rentals.