With the rebounding housing market and low interest rates, many people are considering the purchase of a home either as a primary residence or as an investment property. Although the market is rebounding, there are still a substantial amount of foreclosed properties which are coming available. However, there are some issues of which buyers should be aware of when purchasing a foreclosed property in Colorado at a Public Trustee sale.
In Colorado, the Public Trustee's Office is responsible for conducting foreclosure sales and each county's procedures may be different. However, there are general processes that should not differ from county to county. The foreclosing lender will submit a written bid at least two business days before the Public Trustee sale, generally in the amount owed. At the auction, the property will be sold to whoever overbids the foreclosing lender by at least one dollar; otherwise the property is sold to the foreclosing lender. The successful bidder must present certified funds (i.e. cash) in the amount of the bid the day of the sale. The successful bidder does not have immediate access to the property as there is a statutory redemption period for all junior lien holders; however, the public trustee will record a Certificate of Purchase in the successful bidder's name. Once all periods of redemption have expired and if no one redeems, the property will vest in the holder of the Certificate of Purchase and the Public Trustee will record a Confirmation Deed.
Condition of Property
There is no right to inspect a foreclosed property and they are sold in "as is" condition. Therefore, a home inspector cannot be hired to perform a home inspection of the property nor can a potential bidder go inside the home to inspect its condition. At a minimum, it is recommended that a bidder inspect the exterior of the home and (if the home is vacant) look through the windows to get a general idea of the property's condition. Generally, one should assume the home is not in good condition. In fact, sometimes the former owner will intentionally damage the property and even remove fixtures and appliances from the home. It is important to understand that a substantial amount of funds may be necessary to get the home into a livable condition and any bid should account for this factor.
It is the potential purchaser's responsibility to know the condition of the title of the property. The Public Trustee does not guarantee the deed being foreclosed upon is a first lien nor does it generally provide information concerning other outstanding liens or unpaid taxes on the property. Therefore, it is imperative potential purchasers do their research. A real estate attorney can run title searches and provide valuable information concerning a property's title.
The Protecting Tenants at Foreclosure Act of 2009 applies to any foreclosure of a federally related mortgage loan or any dwelling or residential property. This law has significant impacts for a potential purchaser when a tenant is living at the property pursuant to a "bona fide" lease in effect prior to the notice of Foreclosure. In certain situations, the lease will remain in effect and the tenant will not be required to vacate until the end of the lease term. Furthermore, if the tenant paid a security deposit to the former owner, the new owner may be liable for this amount at the termination of the lease. A real estate attorney can provide valuable advise concerning potential options when there is a tenant and, if necessary, representation in a forcible entry and detainer (eviction) action.
The above is not intended to be a comprehensive list, but instead to provide a general idea of the more common issues one faces when purchasing a foreclosed property in Colorado at a Public Trustee sale. It is important for potential buyers to undertake their own due diligence in such situations and/or contact a reputable real estate attorney.