Denver Homes Online

search homes denver colorado mls


Short Sale Vs Foreclosure


How Is A Short Sale
Different From A Foreclosure? 


short sale process

Short Sales have been a large part of the Denver housing market in recent years.  With rising home values, however, we are seeing fewer and fewer of them.

A short sale is a voluntary process that occurs when the bank or lender agrees to allow the homeowner sell the property for less than what is owed on the mortgage loan. 

A "foreclosure" is different in that it's a legal process where the homeowner forfeits their rights to the property. 


Even though prices have been on the climb, some homeowners still owe more against their loans than the property is worth.  If you owe more than your home is worth, a short sale may allow you to avoid foreclosure.  Many mortgage lenders still agree to participate in a short sale, because they can avoid the legal expenses and hassles of foreclosure.


A Short Sale Spares Greater Financial Hardship

With both a short sale or foreclosure, the homeowner ultimately loses their home or property.  In the case of a short sale, however, the financial hardship may be less severe.  A short sale has an adverse impact on one's credit score, but in the case of foreclosure, that impact is far more painful.  Just review the chart below, that compares the probable outcome on your credit between the two alternatives. 

One benefit to a successful short sale is that some homeowners are now eligible to obtain a new mortgage loan for the purchase of a replacement house.  That is not possible with a foreclosure.  The typical wait period is a minimum of 3 to 7 years.


A Short-Sale Scenario

● Homeowner owes $200,000 on their mortgage, but the fair market value is less.
● Homeowner puts house on the market as a Short Sale.
● Buyer agrees to pay fair market value for home - $175,000.
● Mortgage lender agrees to accept the $175,000 as full payoff of the mortgage.
● House sale closes.
● Homeowner owes no additional mortgage debt and avoids foreclosure.


Common Reasons To Short Sale

  • The home was refinanced at 100% (or greater) than its present fair market value.
  • The home requires too many costly repairs to sell, and the market won't support a sufficient price.
  • The home was financed with an interest-only loan, and homeowner is now unable to refinance.
  • The home is located in a neighborhood or area with distressed economic conditions.
  • The home was purchased at the top of the real estate cycle, and a substantial drop in value has occurred.

short sale on credit

Why Did This Happen?

Many uncontrollable events happen in life that lead to a short sale or foreclosure.  Unexpected illnesses, divorce, job relocation, active military duty, unemployment, local economic conditions, excessive debt, financial insolvency, a death in the family, or any combination of these events.  

Another common reason for homeowners to seek short sale assistance is related to the financial and credit market collapse several years ago.  The resulting decline in property values during that collapse, resulted in many mortgage loans exceeding the current value of the real estate.  Given this, it wasn't possible for the homeowner to sell and move, without bringing a sack of money to the closing table.  That is why some homeowners still seek short sale assistance from their mortgage lender, if they can no longer make the payments. 


Plan Ahead And Discover Your Options

Homeowners facing economic hardships may have a foreclosure looming, but are often too proud or uninformed to do anything about it, until its too late.  Before considering bankruptcy or allowing the bank to foreclose, consider a short sale.  Although there is no guarantee your lender will agree to a short sale, here is a list of the benefits of participating in a short sale, versus being foreclosed upon. 


Benefits Of A Short Sale Versus Foreclosure

  • Sellers can apply for a short sale even if they're not behind in payments.
  • Lender pays all the selling costs and real estate commision.
  • Sellers receive professional guidance from real estate agent when doing a short sale.
  • A short sale may postpone the foreclosure action to allow enough time for house to be sold.
  • Seller may qualify for financial or relocation incentives from the lender.
  • A short sale may be less damaging on your credit score.
  • Homeowner may qualify for another mortgage loan much sooner, as compared to a foreclosure.
  • Mortgage lender may agree to a release of liability for any deficiency judgment.**
  • Possible tax relief from cancellation of any debt income.
  • Short sales are not likely to affect jobs that require a security clearance.
  • It is easier to recover financially and emotionally from a short sale, than a foreclosure.


How We Can Help

If you think you'd benefit from selling your house as a short sale, but you're behind on your mortgage payments or you have little or no equity, we should schedule an appointment to explore the options.  I look forward to working with you to help prevent a foreclosure.  I'll communicate with your lender to determine if you qualify for a short sale.  If you do, we'll market your home for a realistic sales price in order to get the house sold prior to foreclosure.  We manage the entire process, so you can concentrate on other things and get your life and finances back on track.

NOTE:  If a foreclosure is already in process, I and my team may be able to persuade your lender to grant an extension of the foreclosure sale date. 

Personal Appointments Every Week - And They're FREE

Our short sale appointments are the quickest way to answer your questions, and help you understand the best options.  Sometimes its difficult to seek professional advice, buy you'll be glad you did.  CALL TODAY. Consultations are FREE - (303) 514-4000.


Short Sale And Foreclosure Disclosures:

  • We never ask for any fees to be paid up-front, or in exchange for a counseling service.
  • Your lender may not approve you or your property for a Short Sale.
  • If any company tells you to stop paying your mortgage, they must also tell you that you could lose your home and damage your credit rating.
  • If we are unable to assist you with the sale of your home or property, we do not earn a brokerage commission.
  • Our real estate professionals are not associated with the government, and our information and services relating to short sales and foreclosures are not endorsed by either the government or your lender.
  • You can also get relief and learn more from HUD in Colorado, or through the national HUD Hope Hotline.

**Congress enacted H.R. 3648, "Mortgage Forgiveness Debt Relief Act of 2007." This legislation discharged mortgage tax indebtedness after January 1, 2007.  Federal Bailout Legislation H.R. 1424, extends the relief through December 31, 2012.  Colorado state law also also restricts the lender from pursuing deficiencies in some circumstances.  Also see Definition of Short Sale.

  • foreclose
  • short sale
  • short sales

Michael Dagner is an expert in Denver-Area home sales.
Call today, (303) 514-4000, for help with your home sale or purchase.

michael dagner realty expert denver


by Michael Dagner: Google+