Can I buy a foreclosure or short sale in Colorado Springs, and how does the process work?

Yes, but expect it to take longer than a typical purchase. A short sale needs the seller's lender to approve the price, which can take a while. A foreclosure auction in El Paso County is run by the Public Trustee, typically requires certified funds rather than a loan, and gives you no chance to inspect inside. The winning bidder doesn't get title right away. Many buyers looking for a foreclosure end up buying a bank-owned home after the auction, through a regular listing. Each path carries different risks, so it's worth knowing which one you're looking at.

Three different ways to buy a distressed home

Short sales: a third party has to approve

In a short sale, the owner sells for less than they owe, so the lender has to approve the deal. What surprises buyers most is the length of time.

A short sale is a lot like a VA loan assumption in one way: a third party has to approve everything. The seller can accept your offer, but the lender still has to sign off on the price and terms, and that can take a while. If there's more than one loan on the home, each lender may need to agree. See how VA loan assumptions work for a similar third-party process.

A short sale fits a buyer who isn't on a tight timeline. If you're on PCS orders or need to move by a certain date, the wait can be a real problem.

Foreclosure auctions through the El Paso County Public Trustee

In Colorado, most home foreclosures go through the county's Public Trustee. In El Paso County, the Public Trustee's office handles the foreclosure of deeds of trust, and since 2023 it has operated within the County Treasurer's Office.

A few things are different from a normal purchase:

• No access to the home. The El Paso County Public Trustee doesn't have access to foreclosed properties, so you generally can't inspect inside before bidding.
• You don't get title at the sale. The winning bidder receives a Certificate of Purchase, which doesn't transfer ownership. A deed is issued only after all redemption periods have expired.
• Liens and redemption. For foreclosures started after January 1, 2008, the owner no longer has a right to redeem after the sale, but certain lienholders may. For information on liens recorded against a property, the Public Trustee points buyers to the El Paso County Clerk and Recorder.
• The sale can be stopped or undone. An owner with a right to cure can stop the sale by paying what's owed before the sale date, and a foreclosing lender that wins the bid can, in some cases, rescind the sale.

Auction buying suits experienced investors with cash and a tolerance for unknowns. For most buyers, it's not the right first step.

Bank-owned homes

If a home doesn't sell to a third party at the auction, the lender often ends up owning it and lists it for sale. These homes are usually sold as-is, and the bank adds its own forms to the contract, but you can usually inspect and use a loan. The home has often been vacant, so a thorough inspection matters. See what to look for in a home inspection and buying an older home.

A simple way to decide

• If you have time and flexibility, a short sale can work, but plan on waiting for lender approval.
• If you're on a deadline, such as PCS orders, a short sale or auction is usually a poor fit.
• If you want to inspect and use a loan, a bank-owned home or a regular listing is the more practical path.
• If you're considering an auction, it's worth talking with a real estate attorney and a title company first about liens and redemption.

What could change the answer

• How many short sales and foreclosures are available depends on the market. See the Colorado Springs housing market update.
• Lenders and loan types handle short sale approvals differently, and some move faster than others.
• Liens, HOA debts, or other recorded claims can affect what you're actually buying at an auction.
• Colorado's foreclosure laws are updated from time to time.

When to talk with a professional

For a short sale or bank-owned home, a real estate agent can manage the offer and the lender's or bank's paperwork. For a foreclosure auction, a real estate attorney and a title company can explain liens, redemption, and what the Certificate of Purchase does and doesn't give you. Your lender can tell you which properties your loan can be used for.

Sources

• El Paso County, Public Trustee
• El Paso County Public Trustee, Foreclosure information
• Boulder County Public Trustee, Foreclosure glossary (Colorado-wide terms: Certificate of Purchase, cure, redemption, rescission)