Understanding the foreclosure process in CO is an important part of navigating your own home foreclosure.
Before we dive in…
Understanding the Foreclosure Process in CO
What is foreclosure anyway?
Foreclosure is a legal process through which lenders can reclaim properties from borrowers who have defaulted on their loans. When a borrower fails to make payments, the lender can begin foreclosure proceedings to recoup some of their losses and take possession of the property. The process typically involves several stages, including notification of default, auctioning off the property, and eviction of any remaining occupants. Foreclosure can be an emotionally difficult experience for all parties involved, but understanding how it works may help you avoid or manage it more effectively if you ever find yourself facing it.
Foreclosure is no fun. But just know that it’s not the end of the world.
When you know how foreclosure in CO works… it arms you with the knowledge to make sure you navigate it well and come out the other end as well as possible.
The Basic Stages of A Foreclosure
There are a few stages that are important to any foreclosure process.
The basic stages of a foreclosure include notification of default, auctioning off the property, and eviction of any remaining occupants. In order for the lender to begin proceedings, they must first notify the borrower that they are in default with their loan payments. This can be done through letters or phone calls informing them about their missed payments and giving them an opportunity to make up for any arrears before further action is taken against them. If no payment is received, the lender will sell the property at public auction, where bidders can compete for ownership rights. Finally, once the court has accepted all bids, those occupying the home will be given notice to vacate so that new owners can take possession of it.
Foreclosure is a complex legal process that varies from state to state. The process begins when a borrower misses one or more mortgage payments. The lender will then file a notice of election and demand (NED) with the county clerk and recorder’s office. This document serves as notice of the impending foreclosure proceedings and is sent to the borrower via certified mail.
After the borrower receives the NED, they have 110 days to reinstate the loan by paying all overdue amounts, including interest and fees. If the borrower cannot pay the overdue amounts within this period, the lender will set a foreclosure sale date and publish notice of the sale in a local newspaper for at least five weeks prior to the sale.
On the day of the sale, the property is auctioned off to the highest bidder. The winning bidder must pay the full amount in cash or certified check at the time of the sale. If the winning bid is less than the total amount owed on the property, the borrower may be liable for the difference, known as a deficiency judgment.
After the sale, the borrower typically has eight days to vacate the property. If they do not, the new owner may seek to evict them through the court system.
It is worth noting that Colorado is a non-judicial foreclosure state, meaning that the foreclosure process is handled outside of the court system unless the borrower decides to contest the foreclosure in court. Additionally, Colorado law protects borrowers, including the right to cure the default and the right to redeem the property during the foreclosure process.
Foreclosure is a serious matter that can have lasting financial and emotional consequences. If you are facing foreclosure in Colorado, it is important to understand your rights and options, including the possibility of negotiating a loan modification or seeking legal representation.
Connect with us by calling 719-546-1002 or through our contact page to have us walk you through the specific foreclosure process here locally in Pueblo.
Foreclosure typically doesn’t go to court until 3-6 months of missed payments have elapsed. Usually (but not always), a lender will send out many notices that you are in arrears – overdue or behind in your payment.
Summary – Under Power of Sale (or Non-Judicial Foreclosure):
- The mortgage lender serves you with papers demanding payment, and the courts are not required – although the process may be subject to judicial review.
- After the established waiting period has elapsed, a deed of trust is drawn up and control of your property is transferred to a trustee.
- The trustee can then sell your property to the lender at a public auction (notice must be given).
Anyone who has an interest in the property must be notified during foreclosure.
For example, any contractors or banks with liens against a foreclosed property are entitled to collect from the proceedings of an auction.
What Happens After A Foreclosure Auction?
After a foreclosure auction in Colorado, the loan amount is paid off with the sale proceeds, and the winning bidder is awarded the property. However, the former owner may be entitled to a redemption period, during which they can still reclaim the property by paying off the outstanding debt.
If no redemption occurs, the new owner can take possession of the property. It’s important to note that Colorado is a “deed of trust” state, meaning that foreclosures typically occur outside of court through a trustee sale. Additionally, there may be other liens or judgments against the property that the new owner must address. It’s always advisable to conduct a thorough title search before purchasing a foreclosure property in Colorado.
Sometimes, if the sale of the property at auction isn’t enough to pay off the loan, a deficiency judgment can be issued against the borrower.
A deficiency judgment may occur if the sale of the foreclosed property does not yield enough money to cover the outstanding debt. In Colorado, it is possible for a lender to seek a deficiency judgment after a foreclosure sale, both for residential and commercial properties.
However, certain limitations and conditions apply. For example, in the case of residential properties, the lender can only seek a deficiency judgment if the foreclosure process was judicial, not if it was non-judicial, and the deficiency amount is limited to the difference between the outstanding debt and the fair market value of the property at the time of the sale.
Furthermore, the borrower has the right to contest the deficiency amount and request a fair valuation based on an independent appraisal. It is essential to note that a deficiency judgment can have severe financial consequences for the borrower, as it can result in wage garnishments, liens on other properties, and damage to credit scores. Therefore, seeking legal advice from a foreclosure attorney is highly recommended.
Here’s a great resource that lists the state by state deficiency judgment laws, since every state is different.
Generally, it’s best to avoid a foreclosure auction. Instead, call up the bank, or work with a reputable real estate firm like us at Aviano Properties to help you negotiate discounts off the amount owed to avoid having to carry out a foreclosure.
Experienced investors can help you by negotiating directly with banks to lower the amount you owe in a sale – or even eliminate it, even if your home is worth less than you owe.
If you need to sell a property near Pueblo, we can help you.
We buy houses in Pueblo CO like yours from people who need to sell fast.
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Another Foreclosure Resource For Pueblo CO HomeOwners: