A short sale can be a great option for homeowners who are struggling to make their monthly mortgage payments but want to avoid foreclosure.
In Colorado, there are several benefits to completing a short sale, including avoiding foreclosure and being able to stay in your home. If you are considering a short sale, contact your lender to learn more about the process.
Short sales can have a negative impact on your credit score, but it is still usually better than going through foreclosure.
Foreclosure can stay on your credit report for up to seven years, whereas a short sale will only stay for two years. Find out more about how they work and whether or not they’re the right option for you.
Table of Contents
• What Is A Short Sale On A House
• Short Sale Requirements
➥Short Sale Documents Checklist
• Benefits Of Short Sale For Seller
• Disadvantages Of A Short Sale
• How Long Does A Short Sale Take
• What Is The Process Of A Short Sale
• How Often Do Banks Accept Short Sale Offers
• Can You Finance A Short Sale
• Selling House To Avoid Foreclosure
What Is A Short Sale On A House?
A short sale is the sale of a home for less than the outstanding balance of the mortgage. Homeowners who are struggling to make their mortgage payments may opt for a short sale in order to avoid foreclosure.
If you are considering a short sale, it is important to contact your lender to discuss your options. They may be able to work with you to find a solution that works for both parties.
Additionally, with a short sale, you may be able to negotiate with your lender to have the debt forgiven, which is not an option with foreclosure.
Short Sale Requirements
There are a few requirements that must be met in order for a short sale to be approved. These requirements include:
- The seller must be delinquent on their mortgage payments.
- The property must be worth less than the amount of the outstanding mortgage debt.
- The seller must provide documentation of their financial hardship.
- The seller must agree to a sales price that is less than the outstanding mortgage debt.
- The buyer must be willing to pay any back taxes or mortgage insurance that is owed.
Short Sale Documents Checklist
The following documents will be required in order for the short sale to be approved:
- A hardship letter
- Income documentation
- Asset documentation
- Liability documentation
- A purchase agreement
- A home inspection report
- An appraisal report
- A loan approval letter
- The Short Sale Process Timeline
Benefits Of Short Sale For Seller?
There are several benefits to completing a short sale in Colorado. These include:
- avoiding foreclosure
- being able to stay in your home until the sale is complete
- not having to pay any fees associated with the sale
- not having to pay any back taxes or mortgage insurance
Disadvantages Of A Short Sale
There are also some disadvantages to completing a short sale. These include:
- damaging your credit score
- losing the equity in your home
- owing money to the IRS if you are forgiven part of the mortgage debt
It is important to weigh the pros and cons of a short sale before making a decision. If you are struggling to make your mortgage payments, contact your lender to discuss your options.
How Long Does A Short Sale Take?
The length of time it takes to complete a short sale depends on several factors, including the approval process of the lender and the buyer. In Colorado, the average short sale takes four to six months to complete.
After a short sale, the homeowner will no longer own the home. The bank or mortgage company will forgive the debt associated with the home and will release the lien on the property. The homeowner will then be able to purchase another home after a waiting period of two to three years.
During the waiting period, the homeowner will be required to maintain good credit and make all mortgage payments on time. They will also be required to complete a housing counseling program.
What Is The Process Of A Short Sale?
The following is a typical timeline for the short sale process:
Month 1: The seller contacts their lender and explains their financial situation. The lender reviews the seller’s information and decides whether or not to approve the short sale.
Month 2: If the lender approves the short sale, they work with the seller to set a sales price. The home is then listed for sale.
Month 3: An offer is received and forwarded to the lender for approval. If the offer is accepted, the buyer signs a purchase agreement and the escrow process begins.
Month 4: The buyer completes a home inspection and appraisal. The loan is also approved by the lender. Once the loan is approved, the closing date is set.
Month 5: At the closing, the home is transferred to the buyer and the mortgage debt is forgiven.
It’s important to note that not all lenders will approve a short sale. If your lender does not approve the short sale, you may still be able to avoid foreclosure by working out a loan modification or repayment plan.
How Often Do Banks Accept Short Sale Offers?
Banks will typically only accept a short sale offer if it is for the full amount of the outstanding mortgage debt. If the offer is for less than the outstanding debt, the bank may require the seller to make up the difference.
In Colorado, banks are required to review all offers that are received. However, they are not required to accept any offers.
Can You Finance A Short Sale?
It is possible to finance a short sale, but it may be difficult to find a lender who is willing to do so. Lenders are typically more cautious when it comes to financing a short sale because there is more risk involved.
If you are considering financing a short sale, speak to a loan officer about your options. They will be able to help you find a lender who is willing to work with you.
You can also consider selling the house to a cash buyer. This is often the quickest and easiest way to sell your home. There are many investors who are willing to buy homes for cash, regardless of the condition of the property.
Selling House To Avoid Foreclosure
If you are facing foreclosure, you may be able to sell your home to avoid the process. In Colorado, the foreclosure process can take six months or more. This means that you will have time to find a buyer and complete the sale of your home before the foreclosure is finalized.
It’s important to keep in mind that selling your home will not absolve you of the debt you owe to the lender. You will still be responsible for paying off the mortgage balance. However, selling your home can help you avoid damage to your credit score and additional fees associated with the foreclosure process.
If you are considering selling your home to avoid foreclosure, contact us today. We at Colorado Cash Buyers buy houses in as-is condition and can close quickly. We will work with you to ensure that the sale of your home is completed before the foreclosure process is finalized.