Colorado Foreclosures- RE: laws

[Account Closed]

Hi, I am considering relo to Colorado. The laws about pre-forclosure "consultants-purchacers" are extensive! Co state has a huge "consumer awareness campaign".The seller can cancell a contract at any time. A public trustee handles the whole forclosure process. After foreclosure purchace, there is a 75 day redemption period! Then from there an eviction STARTS! So, minimum of 3.5 months, before clean up and or rehab could even start! So it seems that putting a house under contract would be shakey at best. Potential to burn out a lot of investors, if homeowners bail at the 11th hr. As far as foreclosure purchace, that redemption period is scary as well. I would imagine that HM lenders would not be real hip on lending in that state? As far as the waiting period, thats a big expense. So, would I have to adjust the risk factor and numbers in a deal to make it work? Sound like a big hassle compared to here in CAL.
James

[Jon Holdman]

Hi Flipper. Check out my post here:
http://forums.biggerpockets.com/viewtopic.php?t=10193
where I outlined doing a short sale in CO.

It is very possible to do a pre-foreclosure short sale here. Personally, I don't want to deal with this. But, there are people in our REIA who do and claim to do very well with it.

If you negotiate the pre-foreclosure sale, short or otherwise, there will be no foreclosure. So, the whole redeption period topic doesn't come into play. The redemption period (periods, actually) only apply after the sale. The law will change either 7/1/07 or 1/1/08, and the owner's redeption period will go away. I've not kept up on the details, so I'm not sure of the exact date. The other redeption periods are still in effect, and purchasing one of those leins can be a way to acquire the property after the sale but before it becomes a REO.

The new law, the "Colorado Foreclosure Protection Act" defines both preforeclosure consultants and equity purchasers. A preforeclosure consultant is someone who (theoretically) helps the owner out with the process, for a fee. They don't buy the property. With the new law, the owner can cancel the contract at any time and pay the consultant nothing. But, this isn't relevant if you want to buy the property. If you do, you're an equity purchaser. You can contract for the house, negotiate the (short) sale and buy the property, forestalling the foreclosure. The new law specifies a number of disclosures, but nothing unreasonable. The seller can cancel right up to closing. For that matter, they could even mail you the cancellation, do the closing, the force the deal to be unwound after closing. So, have a form at closing where they state they have not sent a cancellation. A little legal help on that form might be a good idea.

You would not put the house under contract, and then let it go through the sale. The contract would be meaningless, and whoever won the sale would now have the ability to buy the house. Actually, I think they get a "certificate of purchase" which gives them the ability to eventually buy the property. That COP can be sold, if desired. The redemption process is essentially a process where specific entities can buy the COP, each in their turn. Starts with the owner, then goes to the second mortage, third, any leins, etc. Any leinholder after the owner that passes on their chance to redeem the property is wiped out. I'm fuzzy on this part, but I think if (say) the second mortgage holder redeems for the sale price, then next guy would have to redeem for the sales price plus the amount owed the second mortgage holder.