Colorado’s NEW Foreclosure Protection Act

You know them. They plant their little yellow signs. They check on the weekly election and demand lists religiously. They gather like vultures around any Seller that is or may be facing foreclosure. As a Realtor®, I can only educate the selling public so much about these predators before an “investor” promising “Quick Cash and Walk Away From Your Problems” becomes the “too good to pass up” answer to the Seller’s foreclosure problems.

Well, foreclosure vultures, watch your backs. The tables have turned. The Sellers that you have been making meals out of, can now make meals out of you. Ha. Ha. Colorado now has a new law, THE COLORADO FORECLOSURE PROTECTION ACT … effective NOW (Jan. 2007) that protects the very people that you prey upon.

This comes in good timing, as “A rising wave of home mortgage foreclosures crested in 2006, propelling Colorado to the top of a much-publicized ranking (#1) that no state wants to be on.” (according to Denver Business Journal article, Dec.29, 2006.) FYI: Nevada bumped it out of it’s #1 position in November, 2006.

And if you break this law … don’t plan on picking up soap anytime in the near future… and I hope you look good in orange. This is a “Go directly to jail. Go directly to jail. Do not pass GO. Do not collect $200.” offense. Yep.

And what do
say? … Thank Goodness!


 This Act was designed specifically for “investors” (I use the term loosely, as these “investors” usually have no skin in the game…) buying homes in some stage of foreclosure.

(Bolded items are pulled exactly from the Addendum.)
In BOLD, on the very TOP of this addendum, there is a “Note” that states:

This form is to be used only if (1) the Property is in foreclosure, (2) the Property is residential, (3) Buyer is not to reside in it for at least 1 year, and (4) ALL of the requirements in Section 3 (Terms) of this Addendum are satisfied. If these items are fulfilled, this Addendum may be prepared by a Broker for a buyer purchasing the Property as a rental or as a non-owner occupied. If ANY of the requirements are not satisfied, an attorney, NOT the Broker, should prepare the contract.

Now, this references a “Section 3 (Terms)” which I will now address. I find these Terms to be of particular interest. I will address some of the ramifications after each term. My input will be in non-bolded italic.

Terms: Buyer and Seller agree to all of the following 6 conditions:   (Note that it says ALL …)

a. There will not be any financial or legal obligations of Seller (related to Property) after closing, except income tax liability, if any. Basically, the Seller cannot be held liable, after close, for any written or unwritten obligations. This nips in the bud the “Yeah. We’ll close but after close you pay me XX a month clause” that has been used against Sellers.

b. There are no rental agreements or leases for the Property between Buyer and Seller. This prohibits the Lease Option/Lease Purchase that has hurt Sellers facing foreclosure in the past. We have heard plenty of stories where a Seller agrees to a Lease Option, where the “investor” buys their property (for a horrifically low price) and rents it back to them… but then the terms are so awful that the Seller winds up having to move or gets evicted.

c. Seller does not have an option or right to repurchase the property. The only way  that a Seller can re-purchase the property is going through the process than anyone else would go through to buy a home, and only if the Property goes up for sale.

d. A notice of cancellation is attached to this Addendum.  There is a Cancellation Notice that is detailed below.

e. Seller represents that English is the language principally spoken by Seller. No taking advantage of our English-as-a-Second-Language Community!! People come to America for the American Dream. Part of the American Dream is home ownership. How dare ANYONE screw them over- regardless of their foreclosure situation! I understand why this may be an issue, but I DO see a potential problem with this … Couldn’t this be seen as discrimination? I mean, if all other stipulations were met, would a non-English speaking person (facing foreclosure) have to spend money (that they probably do not have) to seek the counsel of an attorney before having an alternative to foreclosure available to them? I do not think that this particular term was very well thought out.

f. No consideration shall be paid to Seller prior to the expiration of the Seller’s right to cancel the Contract. This is the part that prohibits, “I will give you XX dollars and take over your payments.”  Nope. Not allowed anymore (unless drafted by an attorney). I have heard the horror stories of Sellers agreeing to this and finding out a few months later that the “investor” has not been making the mortgage payments.

If any of the above 6 conditions are changed, modified or amended at any time prior to or at Closing, the parties agree that the Contract to this Addendum shall be void and in no effect. If Buyer and Seller do not agree to one or more of the 6 conditions, then the Contract and this Addendum are void and in no effect.

In HUGE BOLD font it goes on to state that the Buyer, nor anyone working for the Buyer CANNOT ASK the Seller to “SIGN OR HAVE [THE SELLER] SIGN ANY DEED OR ANY OTHER DOCUMENT” before the agreed upon cancellation date.

What IS THE Seller’s Right to Cancel?

There is a separate form, approved by the Colorado Real Estate Commission, which gives the SELLER (yes! The SELLER!) the right to cancel- without ANY penalty or obligation, under the following circumstances, and “in addition to any right of rescission available under state or federal law“:

1.  The Seller has the right to cancel the contract with Buyer until 12 Midnight of the 3rd business day following the day on which the  Seller signs a contract that complies with the Act, or

2. Until 12 noon on the day before the foreclosure sale of the residence in foreclosure, whichever occurs first.

*Please note:
In Colorado, EVERY licensed real estate agent is a Broker.
This is the FIRST time, in a long time where attorney involvement in a contract is MANDATORY, under certain conditions.
• This Addendum is to be a part of ANY Contract to Buy and Sell Real Estate that involves a residential foreclosure, in the state of Colorado.
• This Addendum was created to conform to the new COLORADO FORECLOSURE PROTECTION ACT.

What I love about this new Act is that it really defines what is and is not acceptable when dealing with a Property and a Seller that is in Foreclosure. It protects the Selling public from going from a bad situation (foreclosure) to a worse one. It closes the loophole that so-called “investors” take advantage of when trying to get their slimy hands on more properties- or, yet, more money.

More Acts like these need to be initiated across the country, if they haven’t been already. Of course, the public needs to be educated (that’s OUR job, as Realtors® and lenders) but first and foremost, they need to be PROTECTED, which is what this Act is designed to do.

(I know. I know. There ARE earnest folks out there- folks that really, really want to help. All my ranting obviously does not apply to them.)

**Please Note: This act in no way affects the foreclosure process or the ability to “short sale” a property. This act was intended to protect distressed sellers from private investors- not lenders or banks- from offering shady and potentially detrimental alternatives to foreclosure, to the unknowing public.**

Posted By: Springs Realty Scoop – Colorado Springs Real Estate


About Mariana

I am a Mom, Wife, Real Estate Agent Trainer and Mortgage Lender. Find me at
This entry was posted in Buyer Info., Colorado Springs Real Estate, Investor Info., Real Estate Consumer Info., Real Estate Law, Seller Info.. Bookmark the permalink.

3 Responses to Colorado’s NEW Foreclosure Protection Act

  1. RealtyScoop says:

    “Colorado reclaimed the nation’s top spot for foreclosure rate in December, after briefly ceding the title to Nevada for one month, according to a report released today.”

    Hey Mike, Thanks for stopping by!
    You are right… I will make a note of this. What are we going to do about this? I do know that the B-Paper mortgage Market has really made some changes. A lot of companies are not offering as many B-Paper products… maybe that will help?

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