What is a Short Sale in Colorado?

Colorado's housing market has seen significant fluctuations in recent years. From booming growth to occasional downturns, homeowners in the state have faced various challenges. In times of financial hardship, the concept of a short sale is often a potential solution.

But what exactly is a short sale, and how does it differ from a foreclosure? In this article, we will explore the ins and outs of short sales in Colorado, including the definition, reasons for opting for a short sale, the process involved, and the pros and cons homeowners should consider.

Definition of a Short Sale

In simple terms, a short sale refers to selling a home for less than what is owed on its mortgage. Instead of going through the foreclosure process, where the lender takes possession of the property, a short sale allows homeowners to sell it themselves. This option may be viable when homeowners are in financial hardship and cannot maintain their mortgage payments.

A short sale and foreclosure differ. While both involve selling a property under financial distress, a short sale is a proactive approach by homeowners, whereas the lender initiates a foreclosure. With a short sale, homeowners have more control over the process and may have the opportunity to avoid foreclosure and its potential long-term consequences.

Why Choose a Short Sale?

Financial Hardship

One of the primary reasons homeowners choose a short sale is financial hardship. This stems from job loss, unexpected medical expenses, or other unforeseen circumstances that make it difficult to keep up with mortgage payments. Rather than facie foreclosure and its negative impact on credit, homeowners may opt for a short sale to mitigate the financial damage and move towards a fresh start.

Declining Property Value

Another common scenario where a short sale becomes viable is when the property value has declined significantly. In such cases, homeowners find themselves where selling the property for its current market value would not cover the outstanding mortgage balance. By pursuing a short sale, homeowners can avoid the burden of continuing to make payments on a property that is worth less than what they owe.

Mortgage Unaffordability

Sometimes, homeowners struggle to afford mortgage payments. It happens because of increased interest rates, changes in income, or other factors that impact their ability to meet their financial obligations. In such cases, a short sale can provide an opportunity to relieve the burden of an unaffordable mortgage and explore more manageable housing options.

The Process of a Short Sale in Colorado

The short sale process can be complex and time-consuming. While the specifics can vary depending on individual circumstances, the following steps provide a general overview of how a short sale typically unfolds in Colorado.

1. Homeowner Consultation

Before embarking on a short sale journey, homeowners must seek advice from professionals well-versed in Colorado's laws and regulations. Financial advisors and real estate agents experienced in short sales can provide valuable guidance on the best course of action, help navigate through the intricacies of the process, and ensure compliance with all legal requirements.

2. Contacting the Mortgage Lender

Once homeowners have decided to pursue a short sale, the next step is to contact their mortgage lender and inform them of their intent. It is essential to communicate openly and transparently with the lender, providing all necessary documentation and information they may require. Based on their specific guidelines, the lender will evaluate the homeowner's financial situation and determine whether they qualify for a short sale.

3. Listing the Property

To facilitate the short sale process, homeowners typically hire a real estate agent experienced in handling such transactions. The agent will assist in pricing the property competitively to attract potential buyers. Proper pricing generates interest and gets offers that align with the homeowner's financial goals.

4. Getting an Offer and Seeking Lender Approval

Once the property is listed, potential buyers will start submitting offers. With the guidance of their real estate agent, the homeowner will carefully evaluate each offer and choose the most suitable one. The selected offer is then presented to the lender for approval. The lender's response to the offer can take time as they evaluate whether accepting the offer is in their best interest.

Finalizing the Sale

If the lender approves the offer, the final steps of the short sale process can begin. The homeowner and the buyer will work together to complete the necessary paperwork and ensure all legal requirements are met.

Any remaining mortgage balance, if applicable, must be addressed. Once all the paperwork is finalized, the property officially changes ownership, and the short sale is complete.

Pros and Cons of a Short Sale in Colorado

Before pursuing a short sale, homeowners should consider the potential benefits and drawbacks.


  • Less Damaging to Credit than a Foreclosure: While a short sale will still impact credit, it is generally less severe than the long-term repercussions of a foreclosure. This can provide homeowners with a better chance of rebuilding their credit sooner.
  • Release from an Unaffordable Mortgage: A short sale allows homeowners to break free from the burden of an unaffordable mortgage, allowing them to find more financially sustainable housing options.
  • Opportunity for a Fresh Start: By opting for a short sale, homeowners can start anew without the weight of a distressed property and the financial obligations that come with it.


  • Time-Consuming Process: Short sales can be lengthy, often involving multiple parties and extensive paperwork. Homeowners must be prepared for potential delays and stay committed to completing the process.
  • Potential Tax Implications: A short sale may have tax implications depending on the homeowner's specific circumstances. It is essential to consult with a tax professional to understand the potential consequences and plan accordingly.
  • Possible Deficiency Judgments: In certain cases, lenders may pursue a deficiency judgment, which is the difference between the outstanding mortgage balance and the property's sale price. Homeowners should know this possibility and consult legal professionals to understand their rights and options.

Colorado-Specific Regulations and Considerations

Colorado has specific regulations and considerations that homeowners should know when engaging in a short sale process.

The Anti-Deficiency Law

Under Colorado's Anti-Deficiency Law, homeowners who sell their property through a short sale are protected from potential deficiency judgments. This law prevents lenders from pursuing homeowners for the difference between the outstanding mortgage balance and the property's sale price. However, consult with legal professionals to understand this law's implications in individual cases fully.

Mandatory Notice Period

Colorado requires a mandatory notice period before initiating legal actions against homeowners facing foreclosure. This notice period allows homeowners to explore alternatives and potentially avoid foreclosure altogether. Homeowners should familiarize themselves with the specific notice requirements and ensure compliance.

The Role of the Public Trustee

Colorado employs the services of a Public Trustee in the foreclosure process. The Public Trustee acts as an intermediary, ensuring compliance with legal requirements and overseeing the foreclosure process. Homeowners should know the Public Trustee's role and responsibilities throughout the short sale process.

Alternatives to a Short Sale

While a short sale can be a viable option for distressed homeowners, it is not the only solution. Here are a few alternatives homeowners can explore:

Cash Home Sale

In certain situations, selling the property for cash can be a viable alternative to a short sale. Cash home sales typically involve selling the property at a discounted price to an investor or buyer who can close the deal quickly, providing homeowners with a swift resolution.

Loan Modifications

A loan modification involves renegotiating the existing mortgage terms with the lender. This can result in lower monthly payments or a more affordable payment structure, allowing homeowners to retain property ownership.

Deeds instead of Foreclosure

In a deed, homeowners voluntarily transfer the property's ownership to the lender instead of foreclosure, thereby avoiding foreclosure. This option can provide a quicker resolution for homeowners unable to keep up with mortgage payments.

Forbearance Agreements

Forbearance agreements involve temporarily reducing or suspending mortgage payments for a specific period. This option can temporarily relieve homeowners during financial hardship, allowing them to catch up on missed payments later.

Sell Your House Fast in Denver, Colorado

If you need to sell your house fast but don’t want the hassle of a traditional home sale, contact Credible Homes of Colorado. We buy houses as-is. No repairs are needed. Avoid closing costs and realtor commissions. Close in as little as seven days. Call 720-938-3634 to get a fast cash offer from our local home buyers in Colorado.

    Get Your Fair & Honest All-Cash Offer Today! No Obligations!

    By submitting this form, you agree to our Conditions of Use and Privacy Policy. You may receive both automated and personal text messages. Reply STOP at anytime to opt-out.

    Or Call Us Now At 720-938-3634