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. Imagine, your lease is up and the landlord has your apartment rented, you are waiting for closing, and then you read line 215-218. 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:

SSA38-9-08. SHORT SALE ADDENDUM TO CONTRACT TO BUY AND SELL REAL ESTATE Page 1 of 5
The printed portions of this form, except differentiated additions, have been approved by the Colorado 1 Real Estate
2 Commission. (SSA38-9-08) (Mandatory 1-09) (Revised 10-19-09)
3
4 THIS FORM HAS IMPORTANT LEGAL CONSEQUENCES AND THE PARTIES
5 SHOULD CONSULT LEGAL AND TAX OR OTHER COUNSEL BEFORE SIGNING.
6
7 SHORT SALE ADDENDUM
8
9 Date:
10
11 1. 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, judgment or tax
35 lien (Lien). A title insurance commitment may be used to show the Liens against the
36 Property. A Lien Holder is a creditor who has a Lien and agrees to release its Lien in a
37 Short Sale (§ 2.3 below).
38
39 2.3. Short Sale. A Short Sale (Short Sale) is a transaction in which any Lien
40 Holder releases its Lien against the Property and (a) accepts an amount less than the full
41 amount Lien Holder claims is owed or (b) treats the debt secured by the Lien differently
42 than as originally provided for in the evidence of debt (such as promissory note). Before a
43 Short Sale can occur, Buyer, Seller, and each Lien Holder (except those creditors that are
44 to be paid the full amount claimed) must consent to the terms of the sale. Sometimes, a
45 Lien is released but the Lien Holder does not agree to release Seller from liability or reduce
46 the unpaid portion of the debt, and the Seller and any guarantors will remain liable after
47 Closing for that unpaid portion, despite the release of the Lien against the Property at
48 Closing.
SSA38-9-08. SHORT SALE ADDENDUM TO CONTRACT TO BUY AND SELL REAL ESTATE Page 2 of 5
2.4 Short Sale Acceptance. Short Sale Acceptance (S 49 hort Sale Acceptance) is
50 when Seller receives one or more written statements, signed by each Lien Holder, that
51 specify the terms and conditions of the Short Sale.
52
53 3. MANDATORY DISCLOSURES TO SELLER AND BUYER.
54 Note: The disclosures to Buyer are informational only to Seller when used as an addendum to
55 Listing Contract.
56
57 3.1 SELLER IS ADVISED TO CONTACT THE COLORADO
58 FORECLOSURE PREVENTION HOTLINE OPERATED IN COOPERATION WITH
59 THE COLORADO DIVISION OF HOUSING AT 1-877-601-4673 OR THE HUD
60 HOUSING COUNSELING AND REFERRAL LINE AT 1-800-569-4287.
61
62 3.2. Seller acknowledges that there are alternatives to a Short Sale that may be
63 better for Seller. Seller acknowledges that a Short Sale transaction may result in continued
64 liability of Seller or other persons liable for the debt that could be extinguished through
65 foreclosure, bankruptcy or other loss mitigation options, including but not limited to a
66 negotiated loan modification with Lien Holder. Seller acknowledges that it is the
67 responsibility of Seller to investigate these alternative methods of resolution with Seller’s
68 legal, accounting or financial advisors and with Lien Holder and it is not the responsibility
69 of any real estate broker to undertake any investigation of other options that may be
70 available to Seller.
71
72 3.3. Short Sales may have serious adverse legal, tax and economic consequences
73 for Seller and any guarantors. Seller is advised to seek legal and tax counsel to advise
74 Seller of the legal effect and meaning of any Short Sale Acceptance from Lien Holder.
75
76 3.4. Lien Holder is not required to agree to a Short Sale. Even if a Lien Holder
77 agrees to a Short Sale, a Lien Holder is not required to forgive repayment of the debt
78 secured by the Lien or release Seller and any guarantors from liability unless Lien Holder’s
79 claim is paid in full. Seller acknowledges that Lien Holder may or may not agree to release
80 Seller or any guarantors from liability to Lien Holder. If not released, Seller and any
81 guarantors will remain liable to Lien Holder for any amount that remains unpaid after the
82 Short Sale. To be binding, any release of liability by Lien Holder must be in writing, must
83 be executed by Lien Holder, and must provide that Seller and all guarantors are released
84 from liability.
85
86 3.5. Lien Holder may condition its agreement on Seller doing any or all of the
87 following to obtain a Short Sale Acceptance: (a) make a cash payment, (b) sign a new
88 promissory note, (c) continue to owe the Lien Holder the unpaid portion of the debt and (d)
89 agree to other requirements made by Lien Holder.
90
91 3.6. If the Lien Holder accepts less than full payment, Seller understands that
92 Seller may incur federal and state tax liability due to a Short Sale and understands that
93 Lien Holder is required to file all required 1099 Forms with the Internal Revenue Service
94 with respect to this transaction. Seller is strongly advised to seek tax advice regarding the
95 potential adverse tax consequences to Seller of a Short Sale.
96
97 3.7. Seller acknowledges that a Short Sale Acceptance by the Lien Holder will not
98 necessarily repair or rehabilitate Seller’s credit rating and Lien Holder has no obligation
99 other than to fairly report this transaction to any credit rating agency.
SSA38-9-08. SHORT SALE ADDENDUM TO CONTRACT TO BUY AND SELL REAL ESTATE Page 3 of 5
100
101 3.8. Seller may terminate the Contract: (a) as provided in this Addendum, (b) if
102 Lien Holder does not approve the Contract, or (c) if the terms and conditions from Lien
103 Holder to obtain a release of the Lien are not acceptable to Seller, in Seller’s sole discretion,
104 by written notice to Buyer on or before three days after the Short Sale Acceptance
105 Deadline (§ 8.1 below).
106
107 3.9. Buyer may terminate the Contract: (a) as provided in this Addendum, (b) if
108 Lien Holder does not approve the Contract, or (c) if the terms and conditions of any
109 Agreement to Amend/Extend Contract are not acceptable to Buyer, in Buyer’s sole
110 discretion, by written notice to Seller on or before three days after the Short Sale
111 Acceptance Deadline (§ 8.1 below).
112
113 3.10. Release of the Lien against the Property does not by itself release Seller or
114 any guarantors from liability for the debt.
115
116 3.11. Buyer acknowledges that the Short Sale Conditions (§ 4 below) may lead to
117 termination of the Contract. The Short Sale process may result in delays in the Closing.
118 Buyer is advised to consult with legal counsel about this Addendum and its legal effect.
119
120 3.12. Buyer and Seller acknowledge and agree that any Short Sale Acceptance by
121 Lien Holder is made on the condition that none of the terms of the sale shall differ in any
122 material respect from the terms submitted to the Lien Holder on which the Short Sale
123 Acceptance was based. For purposes of the Contract, any change in the date of Closing,
124 Purchase Price, real estate brokerage commissions, concessions or net proceeds to be paid
125 to, or other remuneration to be received by Seller in connection with the proposed Short
126 Sale shall be deemed a material change. Any material change will require that the Short
127 Sale Proposal be re-submitted to the Lien Holder for approval, which could result in delays
128 for approval or even denial of the Short Sale.
129
130 3.13. This Addendum should be signed by both Buyer and Seller at time of
131 contracting, as most Lien Holders will not consider a Short Sale until a signed contract is
132 received for their review.
133
134 4. SHORT SALE CONDITIONS. Notwithstanding anything to the contrary in this
135 Addendum, the Contract between Seller and Buyer, for the benefit of both Seller and
136 Buyer, is conditional upon all of the following occurring:
137
138 4.1. Seller has received from each Lien Holder a Short Sale Acceptance that is
139 acceptable to Seller.
140
141 4.2. Agreement to Amend/Extend Contract signed by Buyer and Seller, so long as
142 both parties agree, in their sole subjective discretion, to the changes to the Contract
143 required by the Short Sale Acceptance.
144
145 5. SELLER DEADLINE FOR SUBMISSION TO LIEN HOLDER. Seller agrees to
146 submit to each Lien Holder a request for a Short Sale and all documents and information
147 requested by Lien Holder, including a copy of the Contract, any Counterproposal, this
148 Addendum and amendments. The initial submission by Seller to each Lien Holder shall be
149 on or before Initial Submission Deadline (§ 5.1 below). Any additional information or
150 documentation requested of Seller by such Lien Holder shall be submitted within five
151 days of such request or Buyer may terminate the Contract pursuant to § 8.2 below.
152
SSA38-9-08. SHORT SALE ADDENDUM TO CONTRACT TO BUY AND SELL REAL ESTATE Page 4 of 5
5.1. Seller Submission Deadline. The Seller Submission Deadline 153 shall be as set
154 forth below.
155
Event Deadline From
Initial Submission days from MEC (§ 2.4 of Contract)
156
157 5.2. Seller Consents to Lien Holder’s Release of Information. Seller consents that
158 Lien Holder and its representatives may supply and communicate any loan, financial
159 information, or other information of Seller, confidential or otherwise, with any of the
160 following involved in the transaction and their representatives: Seller’s attorney, Broker or
161 Brokerage Firm working with Seller, transaction coordinator, title insurance company,
162 Closing Company, and the following as checked:  Other Lien Creditors  Broker or
163 Brokerage Firm working with Buyer  Buyer  Buyer’s attorney.
164
165 6. DATES AND DEADLINES.
166
167 6.1. Revised Dates and Deadlines and Other Terms. Buyer and Seller
168 acknowledge that an Agreement to Amend/Extend Contract (Amend/Extend) is required to
169 revise the Dates and Deadlines (§ 2.3 Contract) or other terms based on changes required
170 by the Short Sale Acceptance. If both Buyer and Seller, in their sole subjective discretion,
171 agree to the terms of the Amend/Extend, as evidenced by their signatures on the
172 Amend/Extend; and the offering party to the Amend/Extend receives notice of such
173 acceptance on or before seven days after the earlier of: (a) the receipt by both Buyer and
174 Seller of the Short Sale Acceptance; or (b) the Short Sale Acceptance Deadline (§ 8.1
175 below), then the Contract shall be so amended. If notice of such acceptance is not timely
176 received, the Contract shall then terminate.
177
178 7. UNCERTAINTY OF SHORT SALE. Buyer and Seller acknowledge:
179
180 7.1. There are no promises or representations regarding: (a) whether Lien
181 Holder will agree to a Short Sale, (b) the terms of any Short Sale Acceptance, or (c) when
182 the Lien Holder will advise of its decision to agree to a Short Sale or provide the written
183 terms and conditions of the Short Sale Acceptance.
184
185 7.2. Until Closing of the Short Sale, Short Sale Acceptance by the Lien Holder
186 will not prevent, hinder or delay the Lien Holder from initiating or proceeding with any
187 enforcement action, including but not limited to a foreclosure. In the event Seller loses
188 ownership of the Property through foreclosure, the Contract shall terminate.
189
190 7.3. A significant period of time may be required to determine if a Short Sale
191 Acceptance will be granted. Therefore, Buyer should inform Buyer’s lender of this fact for
192 structuring Buyer’s loan, duration of “loan lock”, etc. Additionally, Closing is normally
193 required to be held shortly following the Short Sale Acceptance.
194
195 7.4. After a Short Sale Acceptance is given, Lien Holder will normally not agree
196 to any additional changes to the terms of the Contract that differ from the Short Sale
197 Acceptance, to have repairs performed or to reduce the amount it is willing to accept due to
198 the condition of the Property or results of an inspection. Buyer may want to conduct an
199 inspection of the Property before Seller submits its request for a Short Sale to Lien Holder.
SSA38-9-08. SHORT SALE ADDENDUM TO CONTRACT TO BUY AND SELL REAL ESTATE Page 5 of 5
The Purchase Price should reflect the condition of the Property 200 and results of such
201 inspection. Buyer recognizes the risk that Lien Holder may not agree to the offer submitted
202 by Buyer.
203
204 8. DEADLINE FOR ACCEPTANCE OF SHORT SALE; TERMINATION. Buyer
205 and Seller must receive written notice of the Short Sale Acceptance on or before Short Sale
206 Acceptance Deadline (§ 8.1 below) or the Contract shall terminate.
207
208 8.1. Short Sale Acceptance Deadline.
209
Event Deadline
Short Sale Acceptance Deadline
210
211 8.2. Termination. If any party has a right to terminate the Contract, such
212 termination shall be governed by § 25 of the Contract upon written notice to the other
213 party as described in § 31 of the Contract.
214
215 8.3. Additional Rights of Termination. Both Buyer and Seller have the right to
216 Terminate the Contract by written notice to the other party so long as it is received on or
217 before Short Sale Acceptance. Additionally, Seller has the right to accept subsequent offers
218 from other buyers prior to Short Sale Acceptance without liability to Buyer.
219
220
221 Date: Date:
222
223
224 Buyer Buyer
225
226 Date: Date:
227
228
229 Seller Seller