Right Of Redemption (CO Specific)
I have started looking at buying some foreclosures in the Denver, CO area. The spreads are great and there are not a lot of people bidding at the auctions. The primary reason, I think, is that CO has a long right of redemption period (meaning that the foreclosed owner can buy their way out of foreclosure even after the auction, something like 90 days.)
I thought about buying out their right of redemption to shorten the time period, but then a thought occured to me - so here's my question.
If I buy out the Right of Redemption, is that the same as if the owner had executed their right of redemption? Meaning, would their seconds and other leins stay in-tact as if the trustee sale never happened???
If anyone is buying trustee sales in an area with RORs, and has tried this, let me know what is up!!! I'm sure it varies by state, but anything helps!
THanks!
Judicial Foreclosure
The judicial process of foreclosure, which involves filing a lawsuit to obtain a court order to foreclose, is used when no power of sale is present in the mortgage or deed of trust.
Generally, after the court declares a foreclosure, your property will be auctioned off to the highest bidder.
NonJudicial Foreclosure
The nonjudicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust.
A "power of sale" clause is the clause in a deed of trust or mortgage, in which the borrower preauthorizes the sale of property to pay off the balance on a loan in the event of the their default.
In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee.
Regulations for this type of foreclosure process are outlined below in the "Power of Sale Foreclosure Guidelines".
Power of Sale Foreclosure Guidelines
The foreclosure process in Colorado is quite a bit different than in other states because here, the governor appoints a "Public Trustee" for each county in the state.
The trustee must act as an impartial party when handling a power of sale foreclosure.
In Colorado, the nonjudicial power of sale foreclosure is carried out as follows:
The process begins when the attorney representing the lender files the required documents with the Office of the Public Trustee of the county where the property is located.
The Public Trustee then files a "Notice of Election and Demand" with the county clerk and recorder of the county.
Once recorded, the notice must be published in a newspaper of general circulation within the county where the property is located for a period of five (5) consecutive weeks.
The Public Trustee must also mail, within ten (10) days after the publication of the notice of election and demand for sale, a copy of the same and a notice of sale as published in the newspaper, to the borrower and any owner or claimant of record, at the address given in the recorded instrument.
The Public Trustee must also mail, at lease twenty-one (21) days before the foreclosure sale, a notice to the borrower describing how to redeem the property.
The owner of the property may stop the foreclosure proceedings by filing an "Intent to Cure" with the Public Trustee's office at least fifteen (15) days prior to the foreclosure sale and then paying the necessary amount to bring the loan current by noon the day before the foreclosure sale is scheduled.
The foreclosure sale must take place between forty-five (45) and sixty (60) days after the recording of the election and demand for sale with the county clerk and recorder.
The Public Trustee may hold the sale at any entrance to the courthouse, unless other provisions were made in the deed of trust.
The lender has the option to file a suit for deficiency in Colorado and the borrower has up to seventy five (75) days after the sale to redeem the property by paying the foreclosure sale amount, plus interest.
Since the borrower has up to 75 days to redeem this may not be your best direction of investing due to the short time frame.
When I purchase right of redemption's they are contingent upon me being the successful bidder at auction.
Keep in mind that as the holder of redemption rights you will have to pay the full price of the top bid along with any other cost that the city, county or state may allow.
[addsig]
Hi John,
Thanks for the CO specific overview. I am very familiar with the foreclosure process (50+ purchases this year), and I have spend several months researching the process in Colorado specifically.
You did a great job summarizing it for me, but the one bit of info I was looking for in addition was whether or not the 2nd+ position leins would remain in effect if I purchase the RORs from the foreclosed owners.
I assume that despite the trustee sale, if the owner redeems their ROR and reclaims their property within the 75 day period, they will still be responsible for other leins (2nd, 3rd mortgages, mechanics leins, etc). If I buy the ROR to shorten my time tying up my capital, will I be responsible for these leins?
In AZ, NV, TX they are wiped off (no RORs).
Thanks again,
-Joe