- A county trustee appointed by the governor is responsible for conducting foreclosure sales in the county he represents. The deed of trust that is used to purchase a home contains a "Notice of Sale" clause that permits the lender to sell the property at a foreclosure sale in the event that a borrower defaults on the loan.
- In Colorado, the lender has the option of pursuing a deficiency judgment from the borrower. The deficiency judgment amount is for the difference between the unpaid loan and the amount for which the property sold at the foreclosure sale. For example, if the unpaid mortgage is $100,000 and the house sells for $80,000, the lender has the option to seek a deficiency judgment of $20,000.
- If a lender successfully obtains a deficiency judgment, it will appear on the borrower's credit report. Like other adverse judgments, it can stay on the borrower's credit report for several years. Until it is paid, a deficiency judgment can prevent a borrower from purchasing another home.
- In Colorado, a borrower has some recourse to appeal a deficiency judgment. If the borrower can demonstrate that the lender bid an amount lower than a good faith estimate of the value of the property, the deficiency judgment can be dismissed. If you only have one mortgage on your property and know you will be unable to continue making payments, the lender may accept a deed in lieu of foreclosure. A deed in lieu permits you to give the property back to the lender without going through the foreclosure process and its related expense. In exchange for a deed in lieu, the lender can waive its right to a deficiency judgment.
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