If owning a home is the American dream, then foreclosure is the American nightmare. Losing a home is an unpleasant process that nobody wants to experience. The saddest part of it is that most people can avoid foreclosure, even when they’re in a tough spot, by knowing more about how it works. Preforeclosure is the most important part of the process. It’s your best and last chance to resolve a problem before foreclosure upends your life.
The Colorado Foreclosure Process
In order to understand preforeclosure, it’s necessary to break down the entire foreclosure process. Each state has its own rules for foreclosure, so this is how it works in Colorado.
It starts with default. If a borrower falls behind in their payments, the bank (or other lender) will let them know. A notice of default has to be in writing in order to kick everything into gear. The notice of default is basically the bank telling you that there is a problem and that if things don’t change, you will lose your house.
A minimum of 30 days after issuing a notice of default, a bank can move on to a Notice of Election and Demand. This is when things escalate. The default is a warning that payments aren’t on schedule. The Notice of Election and Demand signals the intent to go forward with foreclosure.
In Colorado, the Notice of Election and Demand is issued at least 110 days before the property can be sold by the bank — or, more accurately, by a trust that will sell it on behalf of the bank. For the entirety of these 110 days, the borrower can still rectify the debt. Options include catching up on payments, renegotiating the mortgage, or selling the house to settle the debt. What it really means is that the borrower still owns the house right up until the end of this grace period.
When time is up, the bank can move forward with a Rule 120 motion. This is when the bank relinquishes control of the house to the trust. The trust will then sell the house and settle the debt. Before this sale completes, the defaulted homeowner typically will be evicted. It’s also important to note that a Rule 120 motion removes the homeowner’s ties to the house. If the house is sold in this way, the borrower gets none of the proceeds. Furthermore, they can be charged if the house doesn’t sell for enough to cover all that remains on the mortgage. This is the final stage of foreclosure.
What Is Preforeclosure?
In a typical Colorado foreclosure, there is no officially designated preforeclosure. Instead, it’s a loose term that can apply to any part of the process from the notice of default up until the Rule 120 motion. Basically, after a borrower defaults on a mortgage, there is a 140-day grace period that they can use to rectify the situation. This period is commonly called preforeclosure.
It’s worth noting that preforeclosure includes information that is public knowledge. When you get a notice of default, that record can be seen by third parties, and it is not uncommon to get offers from property investors, house flippers, or other groups for the house.
The simple truth is that selling your house is often the best way to settle a default. You get out clean and clear. It’s entirely possible that you can make money on the process. Your credit won’t be ruined. It’s absolutely worth considering. The challenge is that you only have a few months to get someone to buy your house. If you want a sure deal, We Buy Houses Colorado Springs is your best bet. You can get a cash offer guaranteed. Contact us now to set up your risk-free quote.