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how to buy foreclosed homes in colorado

How To Buy Foreclosed Homes In Colorado (8 Steps)

real estate investing strategies real estate marketing real estate markets May 17, 2024

Exploring the potential of Colorado’s real estate market can be highly rewarding, especially when you learn how to buy foreclosed homes in Colorado. Known for significant price reductions, these properties offer a strategic advantage for those looking to invest wisely—buying low to eventually sell high.

According to recent reports from RealtyTrac, Colorado has around 1,900 properties in foreclosure, including 63 REO (real estate owned) properties and over 1,800 up for auction; this gives local real estate investors an abundance of opportunities to capitalize on.

Still, navigating the different stages of foreclosure requires a distinct approach tailored to the specific phase of each foreclosure. As a result, we’ve developed this guide to teach you how to buy foreclosed homes in Colorado. In doing so, we’ll cover everything there is to know, starting with the following:

Ready to transform your understanding into real gains? Join our free training at Real Estate Skills and master the art of buying foreclosed homes in Colorado. Dive deeper into Colorado’s foreclosure market and discover how to leverage today's opportunities to your advantage.

8 Steps To Buy Foreclosed Homes In CO

Whether you are learning how to wholesale real estate in Colorado or how to flip houses in Colorado, you'll need to know how to find and buy foreclosed properties in your local market. That said, you’re more likely to find the best deal by following these steps:

  1. Securing Financing
  2. Hire A Colorado Realtor Or Real Estate Agent
  3. Find A Foreclosed Home In Colorado
  4. Tour The Foreclosed Home
  5. Perform Due Diligence
  6. Get A Home Appraisal
  7. Submit Your Offer
  8. Close The Deal

how to buy a foreclosed home in co

1. Securing Financing

Although foreclosure homes abound in Colorado, you can only access them with proper financing. As a result, getting preapproved for a loan is the first step in buying foreclosure homes in Colorado. Here are some of the best sources you can turn to for financing:

  • Conventional Mortgages: Although you'll need a good credit score, a down payment deposit, and a foreclosure property in good condition, a traditional mortgage is a good financing option for foreclosure investment. You get longer repayment periods and flexible repayment schedules, which can help you stay liquid while awaiting returns from your foreclosure investment. However, despite their advantages, conventional mortgages are best reserved for owner-occupied homes. Investors, on the other hand, may have better luck securing financing from other sources that can offer faster access to cash.
  • Renovation Loans: Renovation loans provide financing for both mortgage and remodeling costs, making them particularly well-suited for foreclosure investing, especially if you intend to flip the house. Moreover, these loans are often geared toward preserving older or distressed properties, making them an even more favorable financing option than conventional loans.
  • Home Equity Lines Of Credit (HELOCs): Do you have some equity in your residential property? You can draw the funds you need to invest in foreclosure from it. These certified funds offer favorable interest rates and flexible repayment options, including interest-only payments, thus promoting cash flow flexibility. However, defaulting on a HELOC could lead to the loss of your property through foreclosures. So, if you choose this option, diligently manage the funds so you don't lose your primary home to the same investments you're trying to secure.
  • Private Money Loans: A private home loan from friends, family, or even other investors is also a superb financing option for foreclosure properties, especially if you've poor credit.

Now that you know your financing options, note that some lenders, particularly those offering conventional mortgage and renovation loans, may want to see the investment opportunity they're funding before finalizing the loan. Consequently, they may only prequalify you rather than preapprove you for a loan. Still, seeking them out for prequalification is a good step. It allows you to determine how much you can afford, thus allowing you to channel your time and efforts toward suitable investments rather than blindly pursuing properties beyond your financial reach.

2. Hire A Colorado Realtor Or Real Estate Agent

Once you're prequalified or pre-approved for a loan, the next step in buying a foreclosure home in Colorado is finding a local, investor-friendly Realtor or real estate agent. While you can buy foreclosed homes in Colorado without one, hiring an experienced Realtor or agent will make the process significantly easier. Of course, there’s always the option to learn how to become a real estate agent in Colorado. Becoming a Realtor will give you access to the Multiple Listing Service (MLS) and a nationwide network of like-minded individuals. That said, becoming a Realtor or agent requires a lot of time and commitment, but it is essential to realize that it’s an option.

Thanks to their extensive local market knowledge, these professionals will know where to turn for your ideal investment property, thus reducing the time you'd spend scouting the market for one. Add in that they're well-connected, and finding a foreclosure property that fits your investment portfolio becomes even easier. Moreover, they can negotiate a good deal for you, saving you money on the purchase and ultimately offsetting the commission you spend on them.

Read Also: How To Get MLS Access In 6 Ways (Even Without A License)

3. Find A Foreclosed Home In Colorado

Now it's time to find the foreclosure property you'll invest in. Here are some effective strategies that you and your chosen professional can enlist to streamline the process:

  • Connect With Local Investors: Is wholesaling real estate legal in Colorado? Yes, it is, which means there are plenty of local investors looking to move real properties or at least know of someone who is buying or selling. Regardless, local investors can offer you the support and guidance you need to make wise investing decisions. Furthermore, they know the market well and may even have access to off-market foreclosure deals. You may even invest jointly to spread risks if you find a lucrative foreclosure beyond your budget. So, be sure to connect with them for this part of buying foreclosure homes in Colorado.
  • Search Public Records: Unlike other distressed properties, foreclosure homes in most states are often listed publicly—check in with your county recorder's office for property title records. Also, review tax assessor records, bankruptcy filings, lis pendens, and foreclosure auction listings for pre-foreclosure, auctioned, and bank-owned properties.
  • Conduct An Online Search: Online listing websites often feature foreclosure properties. Conduct an online search when looking to buy foreclosure homes in Colorado.
  • Visit The Local Courthouse: Foreclosure auctions are usually held in public venues, primarily county courthouses. They are often held daily, especially when there is a high volume of foreclosure properties, as there is now in Colorado. Check your local courthouse for foreclosure investing opportunities, too.

4. Tour The Foreclosed Home

Conduct a thorough tour before you commit to the purchase. Even if it appears in good structural condition, touring allows you to verify the functionality of essential systems like plumbing and electrical setups. Furthermore, touring the property may allow you to uncover hidden issues that could impact its resale value, allowing you to negotiate a better price.

So take that tour, and if your budget allows, hire a professional contractor to accompany you. Their experience lets them notice issues you may otherwise overlook, empowering you to make an informed investment decision. Also, their presence will help identify a more accurate rehab budget with the best ROI home improvements.

5. Perform Due Diligence

Mind due diligence and perform a home and neighborhood analysis. Research factors like current and past property value trends, vacancy rates, the local job market, and crime rates. While the property might seem like a good investment, all these factors influence its after-repair value (ARV).

Ensure you practice diligence even when crafting the purchase and sale agreement. Include contingencies that'll help you mitigate risks should something come up at the last minute. For example, ensure you include the inspection contingency clause. It'll allow you to withdraw from the Colorado real estate contract without any legal consequences or impact on your earnest money deposit.

6. Get A Home Appraisal

Even if the property appears in good condition following your earlier tour, get a professional home appraisal. A professional appraisal assesses the property's market value, providing valuable insights into its investment potential.

Additionally, appraisers often generate a comprehensive report that you can use to enhance the credibility of your financing documents, thus improving your chances of loan approval. What's more, having a documented appraisal streamlines negotiations on your end, as you can use the appraisal findings to justify a lower offer.

7. Submit Your Offer

Once everything is in place, it's time to finalize the deal and submit the offer. To get a good deal, back your offer up with data. For instance, include your neighborhood analysis findings, contractor-provided repair cost estimates, and appraisal report in the offer.

Attaching reports to your offer proves your interest in the property and justifies your price point.

8. Close The Deal

If your offer is accepted, you're nearly finished buying a foreclosure in Colorado. You now only need to take the following steps to close the deal:

  • Open Escrow: Opening an escrow account, especially when buying foreclosure properties, proves your commitment to the transaction, making the seller less likely to consider other offers. Taking this step also protects both you and the seller; you can back out without losing your earnest deposit if the seller fails to do their part or if you discover any issues such as property liens.
  • Conduct A Title Search & Get Insurance: Engage a title officer to perform a title search; this will help you ensure you're dealing with the proper owner and confirm that there are no third-party claims to the property. In other words, a title search ensures no ownership-related issues will crop up later. While at it, get insurance to protect yourself from unseen liabilities.
  • Hire An Attorney: Although optional, hiring an attorney is advisable. They'll confirm that everything about the property, from the title to the purchase and contract terms, is okay, thus ensuring you make a legally sound investment.
  • Remove Contingencies: By the time you're closing the deal, most contingencies will have been met. So, ensure you remove them. Doing so acknowledges that you've completed due diligence, are satisfied with the property's condition, and are ready to proceed with the transaction. Removing contingencies typically involves submitting a signed contingency removal form to the seller or their representative in the case of auctions and REO properties.
  • Final Walkthrough: Although the tour and appraisal you did earlier confirm that the property is in good condition, unexpected damages may occur between offer submission and deal closing. In other instances, the issues you identified may not have been fixed. So, be sure to do one final tour of the property to confirm that it is as you left it and that the issues identified during the appraisal have been fixed.
  • Sign the papers: If all checks out, it's time to seal the deal. Carefully review the real estate contracts and related paperwork before you put that pen to paper so you don't commit to terms you weren't aware of.

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Colorado Stages Of Foreclosure

Lenders in Colorado cannot foreclose on a property because the borrower missed a few payments. Instead, they must adhere to protocol, which involves the property going through the foreclosure process before repossession. To efficiently capitalize on foreclosure investments, you must also learn what this process involves. It typically includes the following stages:

  • Pre-Foreclosure
  • Foreclosure Auction
  • Real Estate Owned Or Bank Owned

colorado foreclosure stages

Pre-Foreclosure

The pre-foreclosure phase occurs just before the bank formalizes the foreclosure process. It kicks in when the lender issues a notice of default to the defaulting homeowner in Denver or wherever they are in the state.

Pre-foreclosure is usually the most suitable stage to buy foreclosure properties in Colorado, as you still have the chance to negotiate with the homeowner directly.

And with foreclosure looming, homeowners in pre-foreclosure don't need much convincing, creating the potential for favorable deals. Moreover, pre-foreclosure properties are not publicly listed, reducing competition from other investors.

Foreclosure Auction

The lender can repossess their property if the homeowner doesn't come current with their mortgage payment during pre-foreclosure. However, since holding onto such properties only results in more costs, most lenders in Colorado will auction the property shortly after repossession.

These auctions happen locally, at venues like county courthouses and public meeting halls, and the property is sold to the highest bidder. Although competitive, participating could see you acquire a foreclosure property below market value. Nevertheless, it's essential to exercise caution since properties are often sold as is.

Real Estate Owned Or Bank Owned

REOs are properties that have reverted to the bank's ownership after failing to sell at local auctions. Note that these properties fail to sell not because they're flawed but because bids couldn't match the lender's minimum. They're often listed through real estate agents specializing in foreclosures.

To find them, search the bank's websites, search the MLS for tags like active short sales or bank-owned, or seek referrals from your Realtor.

How To Find Foreclosed Homes In Colorado

With the detailed eight-step process above, how to buy foreclosed homes in Colorado should be more accessible. But where do you find these homes? You can ask around, but if your goal is to generate multiple leads, consider using the following sources and strategies:

  • Multiple Listing Service: Hiring an agent, as we recommended in the how-to-buy foreclosures in Colorado section, offers numerous perks, one of which is that you can use their MLS to find foreclosures. However, note that foreclosure properties aren't usually directly listed as such on the MLS. Instead, they feature active short sales, REO, and bank-owned tags. Apply these filters to uncover them. Additionally, be sure to ask your agent for help with this step. Thanks to their extensive MLS experience, your agent may be familiar with additional filters or search criteria you can use to discover more foreclosures on the MLS.
  • Public Records: Review delinquency notices, bankruptcy filings, and even county records to discover and build foreclosure lead lists
  • Direct Mail Campaigns: While there are various strategies you can use to reach the leads you generate through strategies we've listed on how to find foreclosure homes in Colorado, direct mail is among the most indispensable. It offers an unmatched level of customization, allowing you to craft messages that best resonate with the lead. Add that no intermediary is involved, and you have direct lead access, significantly enhancing the likelihood of a response.
  • Driving For Dollars: Identifying areas with high foreclosure rates and then conducting targeted drives to these neighborhoods will greatly simplify the process of finding foreclosures. This strategy lets you directly engage the homeowners, increasing your likelihood of securing a good deal.
  • Local Auctions: Once properties are formally foreclosed, banks and mortgage lenders tend to auction them as soon as possible to recover their losses. These auctions are typically held at local courthouses, public meeting halls, and even the Sheriff's office in some Colorado jurisdictions. Make a point to attend these auctions to snag a foreclosure investment property.
  • Banks With REO Properties: When foreclosed properties fail to sell at local auctions, Colorado lenders will often hold onto them until suitable home buyers are found. These properties, known as real estate owned (REO), are typically listed on the lender's websites, so be sure to check them out. Additionally, most lenders will enlist agents to help them find home buyers for REOs. Also, consult your real estate realtor agent as they may have connections with agents regularly enlisted by these lenders (yet another instance where hiring these pros pays off).

Read Also: Best Foreclosure Websites: Top Free & Paid Sites

Pros Of Buying Foreclosed Homes In CO

Here are the benefits you'll enjoy when you master how to buy foreclosed homes in Colorado:

  • Discounted Purchase Prices: Foreclosure properties, whether in pre-foreclosure, auctions, or bank-owned, are typically sold below fair market value.
  • Diverse Investment Opportunities: Foreclosures come in nearly all forms, from condos and townhouses to unique offerings like mountain cabins. Therefore, they offer an opportunity to find investment properties that fit your portfolio and diversify your investments, consequently spreading risks and maximizing your ROI.
  • Potential For High Returns: Deeply discounted purchase prices bring significant profit margins and, ultimately, high returns on investments, especially if you diligently manage renovation costs.
  • Assistance to Distressed Homeowners: Investing in pre-foreclosures allows you to make a positive contribution to your community. Your investment provides the distressed homeowner with a reliable solution that will not only enable them to avoid foreclosure but also the negative impact it would have had on their credit and lifestyle. If their remaining mortgage debt isn't significant, they may even benefit from the property sale.
  • No Formal Education Required: There’s no need to attend one of the many Colorado real estate courses online to buy a foreclosed home. Instead, this guide can help you through every step of the process. Of course, once the home is acquired, investors will need a sound education to know what to do with it.

Read Also: How To Buy Foreclosed Homes With No Money (6 Steps)

Cons Of Buying Foreclosed Homes In CO

While buying foreclosed homes in CO offers amazing perks, these investments aren't picture-perfect. They come with drawbacks such as:

  • Property Condition Risks: Foreclosures, especially those sold at auctions, are usually sold in their exact condition. That means you risk investing in a property with significant repair needs, reducing your investment returns.
  • Limited Inspection Opportunities: Although you may get inspection opportunities when buying a property in pre-foreclosure, foreclosures sold at auctions and as REO are typically sold as-is.
  • Competitive Bidding Environment: Buying foreclosures at auctions comes with steep competition from other bidders.

How To Buy Foreclosed Homes In Colorado: Final Thoughts

Learning how to buy foreclosed homes in Colorado creates promising investment opportunities. However, success requires strategic planning, as each foreclosure phase presents distinct challenges. For instance, while often sold at a bargain, foreclosures at auctions are sold as-is, meaning you may invest in a property with significant repair needs. REOs, on the other hand, are often sold through agents and brokerages and, as such, may come with considerable junk fees.

Ready to elevate your real estate investment skills? Don’t miss this opportunity to join Real Estate Skills' free training program. Apply your newfound knowledge from our article on buying foreclosed homes in Colorado and capitalize on the vibrant opportunities within Colorado’s real estate market today. Act now and transform your understanding into action!


*Disclosure: Real Estate Skills is not a law firm, and the information contained here does not constitute legal advice. You should consult with an attorney before making any legal conclusions. The information presented here is educational in nature. All investments involve risks, and the past performance of an investment, industry, sector, and/or market does not guarantee future returns or results. Investors are responsible for any investment decision they make. Such decisions should be based on an evaluation of their financial situation, investment objectives, risk tolerance, and liquidity needs.


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