Last week, the Colorado Division of Housing uncovered potential flaws with national foreclosure data that was reported by RealtyTrac.com, highlighting a problem that has been flying under the radar for the past few years.

According to reports from the North Colorado Business Report and the Rocky Mountain News, RealtyTrac.com in some cases is triple counting foreclosures in the state. It is the primary reason the company incorrectly labeled Colorado with the dubious distinction of being the top state for foreclosures for nine of the past 13 months.

In fairness, Colorado uses a unique system to track its foreclosures.

Here’s a snip from a report contained within the Rocky Mountain News article:

“The Public Trustee data indicates that foreclosure numbers have been exaggerated by some organizations providing foreclosure data on the state. For example, RealtyTrac has provided widely reported foreclosure data stating that in 2006, Colorado experienced 54,747 foreclosures and had a total foreclosure rate of 1 in 33 households. If this is the case, Colorado has experienced an 85 percent increase in foreclosures since 2005, and a large number of counties would be experiencing foreclosure rates worse than 1 in 33 households.”

It’s important to note that RealtyTrac — one of the more reliable data providers on the Web — is not alone in its miscalculations. In fact, the real estate industry is awash in statistics, making it difficult to discern fact from fiction, right from wrong.

In October 2006, Foreclosure.com made a strategic decision to not release monthly foreclosure statistics. Even though we maintain the most accurate nationwide database — a statement supported by prestigious media outlets such as the Wall Street Journal and esteemed organizations such as the Mortgage Bankers Association — we found it unnecessary to compete with the gaggle of so-called online data providers that crop up all the time.

And, it often put our credibility on the line when it was clear to us and anyone who took the time to look that our numbers best reflected the true foreclosure conditions on the ground.

Put simply, we’ve been at this for more than a decade. In fact, we pioneered the practice of releasing monthly foreclosure numbers even before the Internet became such a monster.

Foreclosure.com published numbers as a courtesy to the industry and press at large. Now that the media is saturated with wild and unsubstantiated numbers — doom and gloom, the sky is falling– sells, more than ever before, it validates our decision to take a step back and re-evaluate how to proceed going forward.

Fortunately, the media and local governments have started to scrutinize foreclosure numbers rather than accept them at face value.

We are confident that if more organizations take the time to analyze foreclosure data from online real estate companies, it will soon become clear that Colorado is not and isolated incident — the problem is more widespread.

Proceed with caution.