HOA-foreclosed homes in Colorado are auctioned off for a fraction of their market value, erasing years of equity

The story of how Darin Bigus lost his home starts with a compromised debit card.

A first-time buyer, he paid $267,500 in 2015 for the house on a cul-de-sac in the heart of Aurora. Bigus kept up on his mortgage and watched the value of the three-bedroom, three-bathroom property nearly double as Colorado real estate prices soared. He poured in sweat equity, too, using his construction skills to add personal touches — a remodeled interior, a concrete patio with embedded fiber optic lights, a covered garden. 

But as Bigus built on his investment, he was also digging himself into an unrecoverable financial hole.

When he replaced his stolen debit card in early 2020, Bigus said he inadvertently stopped automatic payments on his monthly homeowners association dues. His debt to the Summerhill II HOA grew to $8,649.55 because of attorneys fees and interest. It was money he didn’t have.

Last year, the HOA filed for foreclosure. The house sold at auction for just $76,000. A few months later, the investor who bought the home sold it again for $520,000. 

Bigus, 37, had to move back in with his parents. “I honestly thought someone was messing with me,” he said. “It completely destroyed me financially. It destroyed my life.”

Bigus’ property is one of more than 250 in Colorado that have been sold at a sheriff’s auction since 2018 for a fraction of their market value — sometimes less than 10% — after being foreclosed on in court by an HOA, according to a Colorado Sun analysis of thousands of court cases filed in the past six years. At least 100 HOA-foreclosed homes were auctioned off for $60,000 or less.

Values of the houses to the left and right of Darin Bigus’ former home, according to Zillow estimates. Investors bought the home for $76,000, and then resold it for $520,000. (Danika Worthington, The Colorado Sun)

The judicial foreclosures were initiated for unpaid HOA debts, not unpaid bank loans, and those debts were sometimes as small as a few thousand dollars before they ballooned with interest, HOA attorneys fees and court costs. Beyond forcing people from their homes, the process eats away at or completely erases generational wealth in a way traditional lender foreclosures for unpaid mortgages, which are more common and involve much larger debts, may not.  

It’s happened across the state, from Colorado Springs to Clifton and Denver to Greeley. Arapahoe County has had the highest number of HOA-foreclosed homes sold at auction since 2018, with at least 45.

The process is highly opaque, playing out in court papers, the legal sections of low-circulation print newspapers and at sheriff’s offices, where in-the-know real estate investors cash in on equity that’s erased from the balance sheets of people who often don’t understand what’s happening to them and their most important financial asset. 

Nearly half of Colorado’s population — or roughly 2.7 million people — lived in one of the state’s 1 million homes in an HOA-governed community at the end of last year, according to the Colorado Department of Regulatory Agencies. And while there’s been a lot of recent focus in Colorado on the power of HOAs to foreclose on homeowners, there’s been much less attention paid to what happens when an association actually follows through. 

A Colorado Sun investigation showed that of roughly 3,000 judicial foreclosures initiated by HOAs in Colorado since 2018, about 8% have resulted in homes being sold at auction. 

Aaron Goodlock, an attorney representing the Colorado Legislative Action Committee for the Community Associations Institute, an HOA trade group, said the foreclosure actions and auctions represent a sliver of the Colorado homes that are part of an HOA. He also pointed out that there are more foreclosures in the state by lenders. “The statistical data regarding HOA foreclosure is evidence of community associations exercising significant restraint in enforcement action as compared to banks and other commercial lenders,” Goodlock said.

But even if they’re rare, the effect of an HOA foreclosure is devastating. 

The Colorado legislature last year considered changing state law to protect people’s equity during HOA foreclosures, but lawmakers backed down under pressure from the associations. 

“Why do they think they’re God?” asked Terry Balmer, whose $1.1 million home in Superior was nearly auctioned off this summer by her HOA for as little as roughly $10,000 before she was able to halt the foreclosure proceedings. “It’s an H-O-A, not G-O-D.” 

Homeowners associations are typically nonprofits whose boards are made up of property owners in an HOA-governed community. But they’re often operated by private, for-profit property management companies.

When someone buys a home in an HOA-governed community, they agree to abide by the association’s rules and pay the association’s charges.

The HOA foreclosure process is governed by the Colorado Common Interest Ownership Act, which is decades-old, 95 pages long and thick with legal arcana. The process generally takes at least 12 months, though it can play out over several years. 

It begins when a homeowner who lives in an HOA-governed community doesn’t pay their monthly dues or doesn’t pay their assessments to cover the cost of improvements or repairs to common areas, such as pools or parking lots.

An HOA is required to notify a homeowner of their debt three separate times — by certified mail, by a notice posted at the property and by either first-class mail, email or text. 

If the payments still aren’t made, the HOA can proceed with court action to seek a lien. The HOA lien takes priority over most every other debt on a home, including a mortgage. Once a homeowner’s unpaid balance grows to the equivalent of six months of their regular HOA dues, the association board members can vote to initiate a judicial foreclosure. (Not every HOA board takes this step.)

Court proceedings can last six months or more before a judge rules that a home should be sold to cover the unpaid debt owed to the HOA. 

Charges rack up along the way in the form of attorneys fees, late fees and government filing fees. 

The attorneys fees alone can sometimes make up one-quarter or more of what a homeowner eventually owes. In Darin Bigus’ case, attorneys fees were $3,352, or 39% of the $8,649.55 he owed his HOA when a judge foreclosed on his home in May 2022, according to court records. By the time the home was actually sold at auction in October 2022, court records show the HOA had racked up another $2,752.38 in attorneys fees — or more than $6,000 total.

“Typically by the time that we would be moving forward with a foreclosure action, the owner is three years delinquent, if not more,” said Jeffrey Smith, a partner at Altitude Community Law, which frequently represents HOAs in Colorado foreclosure cases. “There are some attorneys who are more aggressive. Foreclosure, in our opinion, is the association’s last way to try to collect. We only use it as a last resort.”

(Altitude Community Law was not involved in Bigus’ case.)

If a judge finds a homeowner in default, it’s the responsibility of the sheriff’s office in the county where the home is being foreclosed on to sell the property. The sheriff’s office must advertise the sale several times in a local newspaper. The homeowner then has up until the home is sold to pay off their debt to the HOA, and most people cover the balance before their property is actually sold.

Tracking down when and where the auctions are held is difficult. 

That’s because they’re often advertised in fine print in the legal notices pages of lower-circulation print newspapers. In Denver, for instance, HOA foreclosure auctions are posted in the back of The Intermountain Jewish News, a weekly newspaper. In El Paso County, the sales are listed in The Transcript, a legal notices publication in Colorado Springs that doesn’t appear to have a website. The sale of Bigus’ home was advertised in The Littleton Independent, a newspaper operated by Colorado Community Media, of which The Colorado Sun is a part owner.

Additionally, the auctions are often advertised in the “sheriff’s sale” section of the legal pages, as opposed to with the lender foreclosures. The language is dense and confusing. Information about the auctions isn’t always posted online.

Finally, the auctions frequently don’t happen on the days they’re advertised, which makes them even more difficult to track. That can mean only a handful of people — mostly investors who know the process — show up to bid on an HOA-foreclosed property.

“Sometimes it’s not clear what’s going on because it operates so far out of public view,” said Zach Neumann, executive director and CEO of the Community Economic Defense Project, a Denver-based nonprofit that aids people facing foreclosure and eviction. “Unless you’re really tracking this and aware of this process, you’re not going to be involved.”

During auctions, bidding starts at the amount of debt a homeowner owes to their HOA — which can be as little as a few thousand dollars but also includes attorneys fees, interest and court costs — rather than the market value of the home. Smith, the HOA attorney, said that ensures the HOA gets the money it is owed. If they were to try to sell the home at market value and no one bid, the HOA would become the default owner.

The Sun found more than a dozen instances since 2018 when HOAs became the owner of homes they foreclosed on.

“The association doesn’t want to be a property owner,” Smith said. “If the association owns the property, they have to insure the property. They would then have to make any repairs to the property if they wanted to try to sell it. All of these things cost money that associations don’t have. The only thing the association is trying to do is bring this property back into compliance with the other properties in the association, meaning get it back to a zero balance owed.”

Goodlock, the representative of the Community Associations Institute, said HOAs rely on payments from homeowners to pay for everything from insurance dues to upkeep of common elements, like roofs, elevators and plumbing.

“Any lack of predictability in determining revenue makes budgeting problematic,” he said. “When owners fail to pay, the burden of paying HOA expenses, such as maintenance and insurance, is inequitably shifted to other homeowners in the community. Moreover, if a community has a high delinquency rate, it can directly adversely impact the ability of homeowners to qualify for and obtain conventional financing, especially for first-time homebuyers, due to the association’s poor financial health.”

But the consequence of a home being sold after a HOA foreclosure is that homeowners often lose much, if not all, of the equity they’ve built up over years or even decades.

The average single-family home price has risen in Colorado’s hot real estate market to $555,000 in June from $291,000 in June 2015, according to Zillow. Homes are rarely on the market for more than a few weeks.

Smith said when an HOA-foreclosed home is sold for more than what’s owed to the HOA, the remaining money goes to the next highest lienholder, which is, in most cases, the bank that holds the mortgage on the property. (The mortgage is supposed to be transferred to the new buyer, meaning the lender’s interests are protected.) The HOA is not keeping the excess.

“Any of the overbid funds would first go to pay off any other debts that are owed on the property,” he said, pointing to a mortgage as one of those possible debts. “The owner wouldn’t be getting that money unless whatever the amount that it sold for was enough to cover all liens on the property and then there was excess funds.”

In practice, however, The Sun’s analysis of HOA foreclosure cases indicates homeowners frequently don’t get any money, known as “overbid” dollars. They’re lucky if they recover their original downpayment.

“People think of real estate as (just) a financial asset,” Neumann said. “For most of our clients, it’s not. It’s where they live, it’s where they raise their kids — it’s a savings account that they can use when they need it. So when these things get taken away, it’s just so damaging personally and financially.”

Examples across the state

The lowest sale price of a Colorado home foreclosed on by a HOA and sold at a sheriff’s auction since 2018 was $5,000, according to The Sun’s analysis. 

The home was a 1,230-square-foot, three-bedroom, two-bathroom condominium in Aurora. The owners owed the HOA, the Homeowners Association of Sausalito, $4,889.31, court records analyzed by The Sun show. 

The auction happened Nov. 18, 2021. By April 2022, the unit had been resold on the open market for $420,000. (The owners who were foreclosed on bought the property in November 2016 for $252,000.)

The highest auction price paid for a Colorado home foreclosed on by a HOA since 2018 was $516,096.79. It was for a 3,891-square-foot, three-bedroom, three-bathroom condo on the top floor of the ritzy Beauvallon building in downtown Denver.

The winning bidder was the HOA, court records show, and two years later, the condo was paired with another unit and back on the market — at an asking price above $2 million.

Some of the other cases reviewed by The Sun: 

• A 4,600-square-foot, five-bedroom, five-bathroom home in Golden that was sold at an HOA foreclosure auction in November 2020 for $85,500 to cover a roughly $25,000 unpaid balance. It was resold in December 2021 for $1.5 million.
• A 2,300-square-foot home in Colorado Springs that was sold at an El Paso County sheriff’s auction in September 2021 for $9,562 to cover a roughly $6,000 debt to the HOA. The home was resold in February 2022 for $508,000.
• A 1,500-square-foot home in Lochbuie that was auctioned off for $11,600 in June 2022 to cover an $11,500 debt to the Berkshire Owners Association, an HOA. It resold six months later for $459,000. 
• A 2,000-square-foot house in Castle Rock, sold at auction in August 2022 for $141,000 to pay off about $9,500 owed to an HOA, including about $1,500 in attorneys fees. The excess proceeds — about $130,000 — went to the bank that held the mortgage on the home. The property was listed for sale by its new owner in June for more than $600,000. 
• A Lakewood condo sold at a Jefferson County sheriff’s auction in September 2022 for $22,611.95 to pay off a $16,000 HOA debt, including $3,500 in attorneys fees. The HOA purchased the property and it was resold in May for $283,000.
• Eleven condominium timeshare weeks at the Westin Riverfront Mountain Villas in Avon, sold in January at an Eagle County sheriff’s auction for a total of $163,868.69 to cover unpaid HOA assessments. The HOA overseeing the condominiums purchased the shares. Some timeshare weeks at the property are each valued at tens of thousands of dollars.

The data analysis by The Sun may not capture all the people who lose their homes to an HOA foreclosure. Some sell their properties to investors as a last-ditch way to recover a measure of equity before an HOA-induced foreclosure auction.

In Fort Collins, a man narrowly avoided an HOA foreclosure auction on his late grandmother’s condominium in June by selling the property to an investor for about one-third of the home’s market value. 

The HOA claimed it was owed about $12,000. The man, who asked that The Sun only identify him by his first name, John, fought the proceedings and took the case to trial. He lost, but not before the HOA’s attorneys fees ballooned to about $17,500, for which he was also on the hook.

The man said he went to witness the Larimer County sheriff’s auction, but in the parking lot was offered $110,000 for his home by an investor. The offer stopped the sale and covered what was owed to the HOA and the balance on a home equity line of credit. But it was far lower than the $350,000 market value of the property, estimated by the Larimer County Assessor’s Office. He had 45 days to move out.

John estimates he’ll net $20,000 or $30,000 from the parking lot sale, which is much less than the roughly $250,000 in equity his grandmother had built in the property.

“It’s definitely unfair. Absolutely it’s unfair,” he said. “This is pretty much where I grew up. To have to watch it go for not even anything close to what it’s worth — and to have to watch it go period — just sucks.”

Who buys the homes

The Sun’s analysis showed that a handful of real estate investment firms and limited liability companies are responsible for purchasing many of the HOA-foreclosed homes sold at sheriff’s auctions. They appear to have created an industry out of buying, renovating and reselling or renting out the properties. 

Welcome to Realty, which is based in Fort Collins and bills itself as a real estate brokerage and investment firm, has purchased at least 15 HOA-foreclosed properties in Colorado since 2018. The Breckenridge Property Fund, which is registered in California and doesn’t have a website, has purchased at least eight HOA-foreclosed properties in Colorado over the past six years. 

Po Luxe Homes has also purchased at least eight homes since 2018. The company, along with another LLC, Colt Holdings, that has purchased several homes at HOA foreclosure auctions, entered into a legal agreement with the Colorado Attorney General’s Office in 2018 and each paid monies to resolve an investigation into alleged violations of the Colorado Consumer Protection Act. 

State prosecutors said the companies offered to help homeowners get foreclosure auction overbid funds in at least four instances, but either did not give the funds to the homeowners or did so only after a lengthy delay. In their agreements with the AG’s office, neither Po Luxe Homes nor Colt Holdings admitted they’d done anything wrong.

The Sun attempted to reach out to representatives of all the real estate investment companies listed in this story. None provided comment. 

The Sun attended a Douglas County sheriff’s auction in July of an HOA-foreclosed home in Highlands Ranch. There were five bidders at the auction, which was held in a small room at the county courthouse in Castle Rock. The auction lasted six minutes before the property was sold for $191,000 to settle a roughly $55,000 debt owed to the Highlands Ranch Community Association. Zillow estimates the home is worth more than $500,000.

“I don’t really talk to you guys,” a man who cast the winning bid on behalf of H7R7 LLC said to a Colorado Sun reporter as he left the sale. The LLC, based in Texas, has bought about a half-dozen HOA foreclosed properties in Colorado since 2018. 

A few miles away, the consequences of the sale were already playing out.

The home’s former owners, Susan Eckert and her husband, John, were unsure where they’d go. The property had belonged to Eckert’s mother, who died a few years ago. Susan said she and John are medically disabled seniors. Court records show the HOA had been battling over the property for about a decade. 

“I have lost everything,” a tearful Eckert said in the hours after the sale as her husband cleaned out a camper parked outside the house to try to prepare for being forced to leave. “I have no place to live.”

A legislative effort to force HOAs to sell foreclosed properties for market value fizzled

State Rep. Naquetta Ricks, an Aurora Democrat, attempted to prevent homes under HOA foreclosure from being sold for a fraction of their value when she introduced House Bill 1137, a broad HOA reform measure, in 2022. 

The sponsors of the measure intended to require in the bill that HOA-foreclosed properties be sold for no less than 80% of their market value. But the provision never made it into the legislation, which passed and was signed into law. 

Ricks told The Colorado Sun that lobbyists representing HOAs and property managers fiercely opposed the proposed rule and that it was taken out to ensure the overall measure — aimed at limiting HOA foreclosures altogether — would pass. 

“The bill was a tough bill,” she said. “We had to fight against a very large lobby.”

House Bill 1137 now prohibits HOAs from foreclosing on homeowners for fines stemming from violating community rules, like those around landscaping or noise. It also requires that associations offer to set up an 18-month payment plan with a homeowner before initiating a foreclosure and caps the amount of annual interest that can be charged on unpaid assessments or dues at 8%. Fines for community violations, meanwhile, are now capped at $500 each, but can be issued only after a homeowner is given 30 days to correct the violation.  

The law, which went into effect in August 2022, appears to have slashed the number of HOA foreclosure filings in Colorado. In Arapahoe County, for instance, there were 87 HOA foreclosures filed in the first six months of 2018. This year, there were just 22 filed in the county during the same period.

But HOAs can still foreclose on their members for not paying their monthly dues or special assessments. And the protections offered by House Bill 1137 only apply to HOA actions initiated after the measure went into effect.

Because HOA foreclosures can play out over many years, people are losing their homes at sheriff’s auctions now because of cases filed years ago.

The way a lender forecloses for an unpaid mortgage is different. 

A mortgage foreclosure can be initiated only after a homeowner is more than 120 days behind on their payments — with some exceptions — and in Colorado those foreclosures are often handled out of court through a public trustee.

If a property goes into foreclosure because a homeowner failed to pay their mortgage, the homeowner may be more likely to reap more of the benefits of the equity they’ve built. That’s because the starting auction bid on a mortgage-foreclosed home is generally no less than the outstanding balance of the mortgage.

Goodlock, with the Community Associations Institute, said no lien holders, whether they are mortgage lenders or an HOA, are required to assist homeowners in recovering equity.

“In some situations, foreclosure may be the only suitable means of recovery,” Goodlock said.

When asked whether the Community Associations Institute would support a state law setting a market value minimum for which HOA-foreclosed properties are auctioned off, Goodlock said the institute “endorses legislation that provides a fair and equitable foreclosure process that protects homeowners.” He added that CAI “supports the right of community associations to foreclose for the purpose of collecting delinquent assessments and minimizing future delinquent assessments, in order to promote greater future stability and sustainability.”

The Colorado legislature passed a bill this year creating a task force to study more changes to the state’s HOA laws.

Some homeowners say they didn’t know their house was being foreclosed on until it was sold

In most of the Colorado HOA foreclosures analyzed by The Sun, homeowners aren’t involved in the court case that precedes their property being sold. 

People rarely contest the foreclosures. Homeowners are supposed to be served legal notice of the cases, but some interviewed by The Sun said they had no idea their property was being foreclosed until it was too late. 

Rebekah Mendoza said that’s what happened to her family in Denver’s Green Valley Ranch neighborhood. Their home, which relatives were living in, was sold for $85,000 at a Denver sheriff’s auction in January to cover a $10,667 debt owed to the HOA, including $6,093 in attorneys fees. 

Mendoza said her family learned the home — with a market value of nearly $600,000 — had been sold when the new owner reached out. She said they would have paid the debt if they had known about the foreclosure proceedings.

“We have money,” she said. “We were so close to paying this thing off.”

Court documents show Mendoza and her husband have hired a lawyer and are trying to get the property back, claiming they weren’t properly served notice of the foreclosure case. In court documents, Mendoza’s husband said he wasn’t at the house when a process server said they delivered court documents.

“We’re still fighting,” Mendoza said. “We’re trying to rescind the sale.”

The new owners are opposing the Mendozas’ effort. So is the HOA, whose lawyers argue in court documents that the Mendozas knew about the foreclosure proceedings months before their home was auctioned off and that Rebekah’s husband was properly served notice in the case.

Cordell Lovett Sr. said he found out his Green Valley Ranch home had been foreclosed on by his HOA and sold at a sheriff’s auction when he went to sell the property earlier this year. He learned it belonged to someone else.

Lovett said his son was living at the property and so he wasn’t getting notices in the mail that the association was preparing to sell the home. Court records show documents in the foreclosure case, which was filed in August 2022, were served to Lovett’s son at the home.

The three-bedroom, one-bathroom house was auctioned off in February for $11,773 to recover $6,019.10 in unpaid assessments and interest, as well as $4,411.50 in attorney fees and a few hundred dollars in other costs. Bidding for the home started at $11,771.93.

The house was resold in July — advertised as an as-is “fixer upper” — for $325,000.

“I wanted the money for my retirement,” said Lovett, who owned the house for two decades and bought it for $110,000. “I didn’t want to lose my equity. I needed that. I was expecting that.” 

Terry Balmer, the woman who nearly lost her $1.1 million Superior home to an HOA foreclosure auction, said a process server notified her of the foreclosure proceedings as her husband was undergoing treatment for brain cancer. She said she struggled to find out what was going on and how to pay the HOA. Additionally, she said she is legally blind and can’t read her mail, where HOA notices and legal documents were sent. It wasn’t until a live-in aide read a sheriff’s notification that the home was scheduled for auction that she stopped the sale. 

“I could well afford to pay my bills,” she said, “but I didn’t know there was a bill. You would think they would want to help you keep your house.”

Bigus, who lost his home in Aurora, knew he owed money to his HOA, but by the time the association notified him of the gravity of his unpaid monthly dues he didn’t have the funds to pay off the accumulated debt. When legal notices started arriving at his house, he was confused about what they meant and he thought he was possibly the victim of a scam.

He also read about House Bill 1137 online and thought that would shield him from foreclosure. Bigus said he checked in with his mortgage lender, too, to make sure everything was OK and was reassured that it was.  

Then his home was sold at an Arapahoe County sheriff’s auction in October 2022, 10 months after his HOA filed for foreclosure. It was bought by Kingston Corp, which has purchased at least nine HOA-foreclosed properties in Colorado since 2018. 

“I just was completely lost and didn’t know what to do,”  Bigus said. “Come home from work one day and on my door is a single piece of paper and it basically said: ‘Your house is under new ownership and you have 72 hours to vacate the premises.’”

Rich Johnston, an attorney for the Summerhill II Homeowners Association, said “the allegation Mr. Bigus unknowingly stopped paying his dues is inconsistent” with how the HOA over three years tried to collect on what it was owed. Johnston said Bigus was repeatedly sent and served legal documents, starting in March 2020, and didn’t respond when the foreclosure was initiated in January 2022. 

But it’s easy to see how Bigus could have been confused.

He provided a letter to The Sun from his homeowners association dated Oct. 28, 2022 — eight days after his home was auctioned off — indicating that he still owned the property. It included an itemized transaction history showing missed monthly HOA payments dating back to October 2020 of between $55 and $60, totaling $1,358.50, as well as late fees, fines for community violations, interest and more than $7,000 in attorneys fees. 

“Your urgent attention to this matter is requested,” the letter said.

After the auction, Bigus consulted with an attorney, who suggested that he file a motion with the court to try to recover any money Kingston Corp paid for the home above what was owed to the HOA. About six months after the sale, a judge released about $60,000 to Bigus. It was a fraction of what he would have earned if the house had been sold on the open market. 

In July, Bigus stood outside of his former home and reflected on all the work he had done to improve the property. He walked through the open space behind the house and lamented that someone else was enjoying what he worked on. The covered garden in the backyard remained. It was even prominently featured in the listing images used by the investor. 

Asked if he would ever live in an HOA-governed community again, Bigus said: “I hope not to.”

UPDATE: Following this investigation, Gov. Jared Polis and Democratic state lawmakers called for more changes to Colorado’s HOA laws. >> Read

Credit

Reporting: Jesse Paul
Data Analysis: Jesse Paul, Elliott Wenzler, Parker Yamasaki
Editing: Lance Benzel, Dana Coffield
Photography: Olivia Sun
Graphics: Danika Worthington, Ciara Zavala, Kevin Jeffers
Design: Danika Worthington