Blog > Don't be TRICKED Into Buying a Foreclosure
Why Buying a Denver Foreclosure Isn't the Deal You Think
After 15 years flipping houses in Denver, I've never bought a foreclosure or helped a client buy one. Here's why bank-owned properties rarely deliver the deal buyers expect today.
How does the foreclosure buying process actually work?
There are 3 distinct stages of foreclosure plus a fourth bank-owned stage, and each requires a completely different buying approach.
Most buyers (and honestly most agents) don't know this. Stage one is pre-foreclosure, where the owner has missed payments but still owns the home. You have to get a list, send mailers, skip trace phone numbers, and cold-call sellers who don't want to be bothered. Stage two is active foreclosure after the Notice of Election and Demand has been filed. Same outreach grind, but now you're also using special contracts most agents have never touched. Stage three is the auction itself. You need cash on hand, you can't tour the property, and you're buying blind. If nothing sells at auction, it becomes a Real Estate Owned (REO) property and hits the MLS. That last category is what most people mean when they say "foreclosure," and it's the only stage where a normal buyer with financing has a realistic shot.
Are foreclosures actually selling below market value?
About 40% of bank-owned properties listed on the MLS sell above market value right now.
That stat surprises most buyers, but it makes sense once you look at inventory. There aren't many homes for sale in Denver, and there are even fewer foreclosures. Buyers assume any REO listing equals an automatic discount, so they pile on offers and bid the price up. The "foreclosure deal" reputation comes from 2008 when banks were drowning in inventory and had to dump homes at any price. That market doesn't exist in 2025. Today the bank already knows what comparable homes are selling for, prices accordingly, and lets demand do the rest. If you're chasing foreclosures expecting 30% off, you're shopping the wrong listings. The actual discounted homes in Denver right now are typically estate sales, tired traditional listings that have been sitting, or off-market fixer-uppers where the seller has flexibility a bank simply doesn't have.
Why is buying a foreclosure so complicated?
Foreclosure transactions can drag on for months and often require special contracts that traditional agents rarely use.
Each stage has its own rules. Pre-foreclosure is closest to a normal deal because the homeowner still has the title. Active foreclosure requires specific addendums and timing tied to the auction date. REO deals look simple on paper but get hung up constantly because you're negotiating with a bank's asset manager, not a person who lives in the house. Approval timelines can stretch weeks for what should be a 24-hour response. Title issues, unpaid HOA dues, unpermitted work, and missing disclosures all show up at the worst times. With a traditional seller, I can renegotiate after inspection. I find a bad sewer line, point to a $15,000 repair, and the seller usually meets me partway because they don't want to start over. With a bank, the answer is almost always no. It is what it is, as-is, take it or leave it.
Will the bank negotiate on a foreclosure price?
Banks have already lost $50,000 to $100,000 on most foreclosed properties before they hit the MLS.
That matters because the bank has no emotional motivation and very little financial flexibility to give you a deal on top of losses they've already absorbed. They follow an equation. List the property, wait a set number of days, drop the price by a set percentage, repeat until it sells. That's it. You can submit a lowball offer and it'll get rejected without a counter. Compare that to a traditional seller. I walked through a Denver listing recently that's been sitting for months, needs $150,000 to $400,000 in work depending on finish level, and the sellers have already dropped 25%. With those sellers (often heirs of an estate), I can have a real conversation about condition, timeline, and what number actually works. The bank doesn't care. They're running a spreadsheet, not a negotiation.
How long do foreclosures sit vacant before hitting the market?
The average foreclosure timeline in most states runs north of 2 years from first missed payment to bank repossession.
Two years is a long time for a house to be neglected. Owners stop maintaining the property the moment they know they're losing it. Some move out 6, 9, or 12 months before the auction. The heat gets shut off, pipes freeze, roofs leak, and nobody calls anyone. By the time the bank takes possession, the house has often deteriorated well beyond what shows up in the listing photos. That adds risk to your numbers. A property you thought needed $100,000 of cosmetic work might actually need a new sewer line, full mechanicals, mold remediation, and structural repairs. Banks rarely complete meaningful repairs before listing. They might paint and clean, but the bones are whatever they are. For a flipper running tight margins, that uncertainty alone makes foreclosures riskier than buying a tired but maintained home from a regular seller.
How many foreclosures are actually available in Denver right now?
The Denver metro area, home to roughly 4 million people, has about 25 REO listings on the MLS right now.
That's the number one reason buying a foreclosure isn't a strategy in 2025. There just aren't any. In 2008, the same metro had around 2,000 REO listings at any given moment, and you could legitimately build a flipping business off MLS bank-owned inventory. Today that pipeline is essentially dry. The foreclosure-deal advice you hear on social media is recycled from a market that no longer exists. If you want a real fixer-upper opportunity in Denver, you're better off targeting estate sales, expired listings, properties that have been sitting 60+ days with price drops, and direct-to-seller outreach in neighborhoods you want to own in. Foreclosures will come back eventually (they always do during the next downturn), but chasing them in this market is chasing a unicorn while ignoring the deer standing in the front yard.
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Full Video Transcript
Full transcript from this video, organized by chapter. Click any timestamp to jump to that moment in the video.
Foreclosures? Really?
[0:00] everyone talks about how buying a foreclosure is like the Holy Grail of getting a deal but you know what there's very few people out there that are telling you the truth about buying a foreclosure I've flipped homes for 15 years bought and sold hundreds of properties most of them I've flipped others I've helped clients buy and sell and you know what I've never helped a client buy or have bought myself a foreclosure why well I'm going to give you the top five reasons why in this video you probably don't want to buy a foreclosure I've had a lot of bumps in this road of the real estate game and really I just want to help accelerate your path so you can learn from my mistakes and you know I'm going to give you this list of five here it's not the be all end all but number one is so ridiculously silly you're going to want to stay tuned number five is that you actually don't know how to buy a foreclosure and you know what most people don't not even most real estate agents so there's a reality here that you know people just say go buy a foreclosure what does that mean do you know how many stages there are to the foreclosure process there typically three right there's pre foreclosure there's foreclosure there's the auction and if it doesn't sell at the auction it becomes a bank-owned property so how do you actually buy one well depending on the stage that you're in you know if it's in pre-foreclosure you have to get a list of these properties you can get them from an agent uh sometimes you can pay a lot of sources out there to get you a pre-foreclosure list then you have to Market to them right you have to send the mailers you have to skip Trace their phone numbers you have to call them you have to text them you have to piss people off and be like hey Mr seller um I know you've missed a few payments but I want to buy your house right it's it's a tough business to get into and I'll tell you the truth right now when it comes to marketing for sellers like that expect to spend on average5 to $7,000 per every single one deal so unless you're willing to do that work to put the money into it like it's not even worth it okay then you have stage number two where people are in actual foreclosure right that's where the bank has issued the Ned and hey there's going to be an auction date set here in a handful of months right well at that point buying it is the same as in stage number one got to call them up say hey Mr seller I know you've missed a lot of payments but I want to buy your house um still rather uncomfortable you got to put a lot of leg work into it most real estate agents will not do that leg work for you they're not just paid enough to do it right and then the third is you know it'll go to auction right and you can be a buyer there uh and you have to have cash on hand right you can't go walk through these properties before they go up on the market you just got to be ready to buy now well if it doesn't sell you know if let's say the seller owes too much it becomes what they call a bank-owned property then at that point they might do some work to it they'll put it on the MLS now you can buy it as a forclosure right that's what most people mean when they say they're going to buy a foreclosure they mean they're going to buy a bank owned property okay so if you're not willing to go through all of these headaches for it like it's just kind of a pain in the ass to be honest with you um so I just want you to know what you're getting into now number four is actually 40% of all bank owned properties that go onto the MLS actually sell above market value so what kind of deal is it if it's actually selling over market value now why is that happening well because there just aren't many properties for sale right now especially bank owned properties and people think inherently there's a deal so a lot of people go for them and a lot of them end up selling for over asking price so it's a little ridiculous also not adding up to being this incredible deal number three buying one can actually be really lengthy and complicated okay so depending on the stage of foreclosure that somebody's in uh it affects how you're able to offer on it you know if it's in the pre-foreclosure status it's just like a regular deal okay if it's actually in foreclosure you have to use special contracts uh that most people don't know to buy a house that's in foreclosure and if it's an REO property you know there could be stuff that hangs up the deal for months on end okay so these are not just straightforward things they are a lot more complicated than working with a traditional seller number two there's really no motivation for the bank to give you any sort of a deal there's really not much negotiating power you have look the bank has probably already been through the ringer on this property with the previous owner lots of issues and now they own it at x amount of dollars they've already lost 50 to 100 Grand on this thing and now you come in and try to lowball them there's there's just no reason for them to accept it right the bank has an equation every property that they end up owning they put on the market for x amount of time and if it doesn't sell then they do a slow price drop and they slow price drop it until they get an offer for it and when it comes down to it you know like the let's take this house that I'm walking through for example right now okay they've been on the market for a handful of months this is just a traditional seller um from the looks of it you know this house is really outdated probably going to need minimally 150 Grand worth of work probably all the way up to about 350 to 400 depending on the finish level that you want to take this property to it's about 3500 ft and they have dropped their price by about 25% so far so here's the difference right I can go to this homeowner and maybe it's an estate uh someone inherited the property okay they've got it up on the market for X I go in say hey I'll buy it for why maybe it's a little bit below what they're currently asking right and I go through I can do an inspection right and then I can look at it and I can find out what the sewer Line's doing what real condition the roof is in and just go you know what hey my numbers really didn't pencil on this thing um I'm going to need another 50 Grand 75 whatever it is for a b and c reason then the sellers get together maybe it's the kids that inherited the property talk about it going well what are our options right we can either be on the market for another month two three four months maybe it doesn't even sell maybe we have to fix it up ourselves or we work with this person to be a buyer for it a bank you don't get that flexibility it is what it is it's as is and most of the time the properties are not being taken care of so foreclosure take way longer than you think if you looked up the average time of foreclosure in your state I think you would be shocked Most states are North of 2 years to go into foreclosure for the bank to then repossess the house well what happens during that two years I could tell you the property Goes to Hell in a hand basket right nothing's being maintained maybe the sellers have moved out or the previous owners I should say have moved out and what if the heat isn't running what if pipes have Frozen right there's all sorts of things that can happen when a house is sit in vacant for 3 6 9 12 months and it adds to the risk factor which is another reason why it just doesn't always make sense to try to go for a bank owned foreclosure like they're just not as good of a deal as you think now if you are looking for a fixer up yourself I'm going to give you something right scan this QR code or you can go Link in the description below I've got an ultimate fixer upper buyer guide for you and this thing is super comprehensive completely free my gift to you and this is literally everything I've learned over the last 15 years in this business having flipped hundreds of homes having worked with hundreds of buyers wanting to buy a property but not wanting to pay top-of the market prices right rehab calculators uh cost estimators uh timelines on as far as how long the rehabs are going to take um arv calculators to figure out what top of the market actually is like this is comprehensive this is everything that I use use all of it I still use on a daily basis so all of that is absolutely yours for free just go ahead scan that QR code you can download it if you got any questions of course you can reach out to me and now the number one reason why buying a foreclosure is just simply not a good idea is well there just aren't any okay go onto your market right now call your real estate agent whoever um you know look on the MLS or realor.com and look for REO properties you're going to be hardpressed to find any okay I know in my city right now we got about 4 million people in the entire metro area we've got about 25 currently on the market that is nothing back in 2008 there would have been about 2,000 on the market right now so that old adage of like find yourself a deal from a foreclosure that is Market dependent and up to what the market is doing um and in 2008 that was a possibility but today like it's just not an option and if you are wondering how much it does cost to update a property maybe you and your significant other are having battles over it like we all have in the past with buying a house that needs work check out this video I'm going to break down all the costs that you should expect when buying a fix rer property
Reason 5
Reason 4
Reason 3
Reason 2
The blueprint to buying a fixer-upper
Reason 1
Frequently Asked Questions
Can I buy a foreclosure with an FHA or conventional loan?
You can usually finance an REO (bank-owned) property if it's in livable condition, but auction purchases require cash. Many foreclosures fail FHA appraisal standards because of deferred maintenance, missing appliances, or safety issues, so plan on conventional or renovation loans like a 203(k) or HomeStyle.
What's the difference between a foreclosure and a short sale?
A short sale happens when the homeowner sells for less than they owe with bank approval, and they still hold title. A foreclosure means the bank has repossessed the property after the owner defaulted. Short sales are negotiated with the homeowner first, then the bank. Foreclosures cut the homeowner out entirely.
Are auction foreclosures a better deal than MLS bank-owned listings?
Sometimes, but the risk is much higher. You can't tour the property, you need cash, you take it with all existing liens unless cleared, and you're competing against professional investors who do this daily. For most buyers, auctions are not the right path unless you have local experience and capital reserves.
How do I find pre-foreclosure properties in Denver?
Pre-foreclosure lists come from county public records, paid services like PropStream or BatchLeads, or specialty real estate agents who pull them regularly. Then you market directly to owners through mail, skip-traced calls, and texts. Budget $5,000 to $7,000 per closed deal in marketing costs based on industry averages.
Why do banks sometimes list foreclosures above market value?
Banks price based on broker price opinions (BPOs) and recent comparable sales, not desperation. With low inventory in Denver, demand often pushes final sale prices above list. Banks also factor in carrying costs and loss recovery, so initial pricing reflects what they need to net, not what buyers hope to pay.
Should I hire a real estate agent to buy a foreclosure?
Yes, but find one who has actually closed foreclosure or REO transactions. Most agents have never written a contract on a property in active foreclosure and won't know the special addendums, timing requirements, or how to communicate with bank asset managers. Ask for specific deal history before signing a buyer agreement.
Are there better alternatives to buying a foreclosure in Denver?
Yes. Target estate sales, expired listings, properties sitting 60+ days with multiple price drops, tired rentals owned by burned-out landlords, and direct-to-seller outreach. These sellers have flexibility a bank doesn't, and you can negotiate after inspection, which often produces a better net deal than chasing scarce REO inventory.
Thinking about buying or selling in Denver?
Call or text (303) 552-4804 for a no-pressure conversation about your situation.
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