Colorado Short Sales & Foreclosures

So much has been made of "SHORT SALES"and Foreclosures in Denver, what are they and how do they work?

The idea of a short sale and getting a great "deal" on some Denver real estate is appealing, however, there always seems to be a catch. And there is...time. If you do not have it, you cannot take advantage of a short sale. A foreclosed or lender owned property is different and can be closed very quickly.

What is a Short Sale? According to Colorado Division of Real Estate there were so many complaints about not being advised as to the pitfalls of Buying a Short Sale they came up with their own form and created an addendum for public disclosure. Click here to see the form or to just read the contents scroll down and pay special attention to lines 180 and on. Imagine, your lease is up and the landlord has your apartment rented, you are waiting for closing, and then you read line 182. Better to know now than then.

And the most difficult part of the transaction may be dealing with someone who has never done a short sale in their career, has never attempted to negotiate for the benefit of the Seller, and does not know how to breath when asked to cut their commission. While that makes a comment about the agents involved, it really goes to the issues of being able to negotiate in a detached manner, something a sucessful transaction requires. Since 1985 I have negotiated dozens of successful short sales, but I do not seek them out as they drain so much out of me, and frankly, the client relationship. However, if you wish to discuss your situation, and would like an experienced representative on your side, give me a call. It would be my pleasure to discuss the oppotunities with you.

SEARCH Foreclosed Properties

There is no current way to search for short sales, only by finding the text in the MLS listing someplace

Here is the text of the addendum from the Colorado Division of Real Estate:

ADDENDUM TO CONTRACT. This Short Sale Addendum (Addendum) is made a
12 part of the following contract that is checked:
13
14 ? Listing Contract (Listing Contract) dated ______________________ for the
15 Property for purposes of disclosing to Seller certain matters of a Short Sale, or;
16
17 ? Contract to Buy and Sell Real Estate between Seller and Buyer (Contract)
18 dated ______________________ relating to the sale of the Property
19
20 known as (Property).
21 Street Address City State Zip
22
23 This Addendum shall control in the event of any conflict with the Contract. Except as
24 modified, all other terms and provisions of the Contract shall remain the same.
25
26 2. PURPOSE AND DEFINITIONS.
27
28 2.1 Purpose of Addendum. Seller has debts secured by one or more liens on the
29 Property. The Purchase Price may not be enough to cover payment for all the liens and
30 costs of sale. If so, for the Closing to occur, the affected Lien Holders (§ 2.2 below) must
31 agree to a Short Sale (§ 2.3 below).
32
33 2.2. Lien; Lien Holder. A Lien is a recorded claim or lien against the Property,

34 including, but not limited to, a mortgage, deed of trust, mechanic’s lien or tax lien (Lien).

35 A title insurance commitment may be used to show the Liens against the Property. A Lien
36 Holder is a creditor who has a Lien and agrees to release its Lien in a Short Sale (§ 2.3
37 below).
38
39 2.3. Short Sale. A Short Sale is a transaction in which any Lien Holder releases
40 its Lien against the Property and (a) accepts an amount less than the full amount Lien
41 Holder claims is owed or (b) treats the debt secured by the Lien differently than as
42 originally provided for in the evidence of debt (such as promissory note) (Short Sale).
43 Before a Short Sale can occur, Buyer, Seller, and each Lien Holder (except those creditors
44 that are to be paid in the full amount claimed) must consent to the terms of the sale.
45 Sometimes, a Lien is released but the Lien Holder does not agree to release Seller from
46 liability or reduce the unpaid portion of the debt, and the Seller and any guarantors will
47 remain liable after Closing for that unpaid portion, despite the release of the Lien against
48 the Property at Closing.

2.4 Short Sale Acceptance. Short Sale Acceptance is when Seller 50 receives one or
51 more written statements, signed by each Lien Holder, that specify the terms and conditions
52 of the Short Sale (Short Sale Acceptance).
53
54 3. MANDATORY DISCLOSURES TO SELLER AND BUYER.
55 Note: The disclosures to Buyer are informational only to Seller when used as an addendum to
56 Listing Contract.
57
58 3.1 SELLER IS ADVISED TO CONTACT THE COLORADO
59 FORECLOSURE PREVENTION HOTLINE OPERATED IN COOPERATION WITH
60 THE COLORADO DIVISION OF HOUSING AT 1-877-601-4673 OR THE HUD
61 HOUSING COUNSELING AND REFERRAL LINE AT 1-800-569-4287.
62

63 3.2. Seller acknowledges that there are alternatives to a Short Sale that may be

64 better for Seller. Seller acknowledges that a Short Sale transaction may result in

65 continued liability of Seller or other persons liable for the debt that could be extinguished

66 through foreclosure, bankruptcy or other loss mitigation options, including but not

67 limited to a negotiated loan modification with Lien Holder. Seller acknowledges that it is

68 the responsibility of Seller to investigate these alternative methods of resolution with

69 Seller's legal, accounting or financial advisors and with Lien Holder and it is not the

70 responsibility of any real estate broker to undertake any investigation of other options

71 that may be available to Seller.

72
73 3.3. Short Sales may have serious adverse legal, tax and economic consequences
74 for Seller and any guarantors. Seller is advised to seek legal and tax counsel to advise
75 Seller of the legal effect and meaning of any Short Sale Acceptance from Lien Holder.
76
77 3.4. Lien Holder is not required to agree to a Short Sale. Even if a Lien Holder
78 agrees to a Short Sale, a Lien Holder is not required to forgive repayment of the debt
79 secured by the Lien or release Seller and any guarantors from liability unless Lien Holder’s
80 claim is paid in full. Seller acknowledges that Lien Holder may or may not agree to release
81 Seller or any guarantors from liability to Lien Holder. If not released, Seller and any
82 guarantors will remain liable to Lien Holder for any amount that remains unpaid after the
83 Short Sale. Any release of liability by Lien Holder, to be binding, must be in writing, must
84 be executed by Lien Holder, and must provide that Seller and any guarantor is released
85 from liability.
86
87 3.5. Lien Holder may condition its agreement on Seller doing any or all of the
88 following to obtain a Short Sale Acceptance: (a) make a cash payment, (b) sign a new

89 promissory note, (c) continue to owe the Lien Holder the unpaid portion of the debt and

90 (d) agree to other requirements made by Lien Holder.

91

92 3.6. If the Lien Holder accepts less than full payment, Seller understands that

93 Seller may incur federal and state tax liability due to a Short Sale and understands that

94 Lien Holder is required to file all required 1099 Forms with the Internal Revenue Service
95 with respect to this transaction. Seller is strongly advised to seek tax advice regarding the
96 potential adverse tax consequences to Seller of a Short Sale.
97
98 3.7. Seller acknowledges that a Short Sale Acceptance by the Lien Holder will not
99 necessarily repair or rehabilitate Seller’s credit rating and Lien Holder has no obligation
100 other than to fairly report this transaction to any credit rating agency.
101

102 3.8. Seller may terminate the Contract: (a) as provided in this Addendum, (b) if

103 Lien Holder does not approve the Contract, or (c) if the terms and conditions from Lien

104 Holder to obtain a release of the Lien are not acceptable to Seller, in Seller's sole

105 discretion, by written notice to Buyer on or before 3 calendar days after the Short Sale
106 Acceptance Deadline (§ 8.1 below).

107

108 3.9. Buyer may terminate the Contract: (a) as provided in this Addendum, (b)

109 if Lien Holder does not approve the Contract, or (c) if the terms and conditions of any

110 Agreement to Amend/Extend Contract are not acceptable to Buyer, in Buyer's sole

111 discretion, by written notice to Seller on or before 3 calendar days after the Short Sale
112 Acceptance Deadline (§ 8.1 below).

113

114 3.10. Release of the Lien against the Property does not by itself release Seller or

115 any guarantors from liability for the debt.

116

117 3.11. Buyer acknowledges that the Short Sale Conditions (§ 4 below) may lead to

118 termination of the Contract. The Short Sale process may result in delays in the Closing.

119 Buyer is advised to consult with legal counsel about this Addendum and its legal effect.

120

121 3.12. Buyer and Seller acknowledge and agree that any Short Sale Acceptance by

122 Lien Holder is made on the condition that none of the terms of the sale shall differ in any

123 material respect from the terms submitted to the Lien Holder on which the Short Sale

124 Acceptance was based. For purposes of the Contract, any change in the date of Closing,

125 Purchase Price, real estate brokerage commissions, concessions or net proceeds to be paid

126 to, or other remuneration to be received by Seller in connection with the proposed Short

127 Sale shall be deemed a material change. Any material change will require that the Short

128 Sale Proposal be re-submitted to the Lien Holder for approval, which could result in

129 delays for approval or even denial of the Short Sale.

130
131 3.13. This Addendum should be signed by both Buyer and Seller at time of
132 contracting, as most Lien Holders will not consider a Short Sale until a signed contract is
133 received for their review.
134
135 4. SHORT SALE CONDITIONS. Notwithstanding anything to the contrary in this
136 Addendum, the Contract between Seller and Buyer, for the benefit of both Seller and

137 Buyer, is conditional upon all of the following occurring:
138

139 4.1. Seller has received from each Lien Holder a Short Sale Acceptance that is

140 acceptable to Seller.
141

142 4.2. Agreement to Amend/Extend Contract signed by Buyer and Seller, so long

143 as both parties agree, in their sole discretion, to the changes to the Contract required by

144 the Short Sale Acceptance.

145
146 5. SELLER DEADLINE FOR SUBMISSION TO LIEN HOLDER. Seller agrees to
147 submit to each Lien Holder a request for a Short Sale and all documents and information
148 requested by Lien Holder, including a copy of the Contract, any Counterproposal, this
149 Addendum and amendments. The initial submission by Seller to each Lien Holder shall be
150 on or before Initial Submission Deadline (§ 5.1 below). Any additional information or
151 documentation requested of Seller by such Lien Holder shall be submitted within five
152 calendar days of such request or Buyer may terminate the Contract pursuant to § 8.2
153 below.
154
155 5.1. Seller Submission Deadline. The Seller Submission Deadline shall be as set
156 forth below.
157Event Deadline From Initial Submission calendar days from MEC (§ 2.4 of Contract)
158

159 5.2. Seller Consents to Lien Holder’s Release of Information. Seller consents

160 that Lien Holder and its representatives may supply and communicate any loan, financial

161 information, or other information of Seller, confidential or otherwise, with any of the
162 following involved in the transaction and their representatives: Seller’s attorney, Broker
163 or Brokerage Firm working with Seller, transaction coordinator, title insurance company,
164 Closing Company, and the following as checked: ? Other Lien Creditors ? Broker
165 or Brokerage Firm working with Buyer ? Buyer ? Buyer’s attorney.

166
167 6. DATES AND DEADLINES.
168
169 6.1. Revised Dates and Deadlines and Other Terms. Buyer and Seller
170 acknowledge that an Agreement to Amend/Extend Contract (Amend/Extend) is required
171 to revise the Dates and Deadlines (§ 2.3 Contract) or other terms based on changes
172 required by the Short Sale Acceptance. If both Buyer and Seller, in their sole discretion,
173 agree to the terms of the Amend/Extend, as evidenced by their signatures on the
174 Amend/Extend; and the offering party to the Amend/Extend receives notice of such
175 acceptance on or before seven calendar days after the earlier of: (a) the receipt by both
176 Buyer and Seller of the Short Sale Acceptance; or (b) the Short Sale Acceptance Deadline
177 (§ 8.1 below), then the Contract shall be so amended. If notice of such acceptance is not
178 timely received, the Contract shall then terminate.

179
180 7. UNCERTAINTY OF SHORT SALE. Buyer and Seller acknowledge:
181
182 7.1. There are no promises or representations regarding: (a) whether Lien
183 Holder will agree to a Short Sale, (b) the terms of any Short Sale Acceptance, or (c) when
184 the Lien Holder will advise of its decision to agree to a Short Sale or provide the written
185 terms and conditions of the Short Sale Acceptance.
186
187 7.2. Until Closing of the Short Sale, Short Sale Acceptance by the Lien Holder
188 will not prevent, hinder or delay the Lien Holder from initiating or proceeding with any
189 enforcement action, including but not limited to a foreclosure. In the event Seller loses
190 ownership of the Property through foreclosure, the Contract shall terminate.
191
192 7.3. A significant period of time may be required to determine if a Short Sale
193 Acceptance will be granted. Therefore, Buyer should inform Buyer’s lender of this fact for
194 structuring Buyer’s loan, duration of “loan lock”, etc. Additionally, Closing is normally
195 required to be held shortly following the Short Sale Acceptance.
196
197 7.4. After a Short Sale Acceptance is given, Lien Holder will normally not agree
198 to any additional changes to the terms of the Contract that differ from the Short Sale
199 Acceptance, to have repairs performed or to reduce the amount it is willing to accept due to
200 the condition of the Property or results of an inspection. Buyer may want to conduct an

inspection of the Property before Seller submits its request for a Short Sale

201 to Lien Holder.

202 The Purchase Price should reflect the condition of the Property and results of such
203 inspection. Buyer recognizes the risk that Lien Holder may not agree to the offer
204 submitted by Buyer.
205
206 8. DEADLINE FOR ACCEPTANCE OF SHORT SALE; TERMINATION. Buyer
207 and Seller must receive written notice of the Short Sale Acceptance on or before Short Sale
208 Acceptance Deadline (§ 8.1 below) or the Contract shall terminate.
209
210 8.1. Short Sale Acceptance Deadline.
211
Event Deadline
Short Sale Acceptance Deadline
212
213 8.2. Termination. If any party has a right to terminate the Contract, such
214 termination shall be governed by § 24 of the Contract upon written notice to the other
215 party as described in § 30 of the Contract.