NO, NO, NO! With the utmost respect to Perry, Cindy, and Judy, all three of you have it absolutely wrong. Foreclosures (especially in Colorado) offer great deals. What a buyer needs is a real estate broker that specializes in, and understands, such transactions intimately.
Consider this...in Colorado 90% of homes that are foreclosed have an 80% loan and a 20% loan. In the final stage of foreclosure (called "redemption") the 2nd lienholder (aka; the 20% lender) would have to pay the 1st lienholder all their money due. Since the 2nd lienholder is already out 20% on the home, does it make sense for the 2nd lienholder to pay out an additional 80% to the 1st lienholder just to have some security? Anwer: NO!
Besides, the 2nd lienholder hasn't even seen the property. They don't want to buy a "pig in a poke."
Here is what ALMOST ALWAYS happens (99.5% of the time). The 2nd lienholder always takes the hit. Remember, the 2nd lienholder is still owed the money from the borrower, but the 2nd lienholder has simply lost his secured interest in the foreclosed home. Now, the 1st lienholder invariably ends up owning the home.
Now pay close attention here...
The 1st lienholder is still owed "X" and would like to recoup as much of "X" as possible.
Let us assume that this bank is owed not the original 80%, but due to some paydown on principal and some appreciation of the home itself, we shall assume the bank is owed 75% of Market Value (ie, "X" = 75%)
Remember, "X" is usually somewhat slightly less than the original 80% loaned out based on the property's original market value, but the bank invariably puts the property on the market for 60% to 75% of "X". Why, you ask? Because this same bank has a backlog of REO's (bank-owned properties) here in Colorado.
To continue, I'll do the math for you.
Here in Colorado you can get a Foreclosed home for approximately 56.25% of true market value. This is equal to 75% of 75%,
Now, don't loose your head yet. You will have fix-up costs, closing costs, etc, to pay. But you will get a great deal.
How do I know all of this?...
I built a database that analyzes every property on the market instantly. I did this to find my investor clients these great bargains. I have seen hundreds of homes that are selling at only modest discounts (25% off retail) that are move-in ready, and situated in HIGHLY DESIRED areas (banks aren't totally stupid).
My investor clients pass up these modestly discounted homes because there is not enough profit for them. But the point is there are 50 new homes each week that hit the market that are perfect for homeowners.
I have analyzed foreclosures deeper than any other broker simply by using my database skills. I will admit that other states may not have a foreclosure problem like Colorado, but the concepts are the same.