Short Sales

A short sale occurs when a homeowner in dire financial trouble sells their home for less than they owe on the mortgage. The lender of the original mortgage gets all the proceeds of the sale, and either forgives the difference or gets a deficiency judgment, which requires the original borrower to pay what’s left over. 

 Although this seems like a less-than-ideal arrangement for the lender, especially if the difference is forgiven, it’s often a preferable alternative to foreclosure. A short sale is a way for a homeowner and their lender to get out of a difficult financial situation by taking a loss, so it’s often possible for a buyer to profit by this transaction. However, buyers should be aware that these transactions are not always good investments.

When Does a Home Go into Short Sale?

A home goes into short sale when the homeowner realizes that they can no longer afford to keep up with their mortgage payments. Instead of waiting for the bank to foreclose on the home, the homeowner initiates the short sale process by submitting an application to the lender.

There are two critical factors that the lender will consider when deciding whether to approve a short sale:

  •  The home must be worth less than what the homeowner owes on it. The lender will want to review recent sales of comparable properties to make sure this is the case.

  •  The seller must be able to prove financial hardship. They must show that they don’t have the income or assets to pay back the rest of the mortgage.


Short sales and foreclosures were much more common during the financial recession of 2008. As the economy has improved and the housing market has recovered, short sales have become less commonplace. However, they’re still an option.

In Colorado we haven't really seen too many short sales since the crash in 2009.  But we do still have them and they can be a great deal if you are a buyer!  Just need to be patient.    As your realtor, I will walk you through the process. If you are the seller or the buyer!