Make No Assumptions regarding Colorado Short Sales
Because Short Sellers have worked with their lander to avoid
foreclosure and are not scheduled with a foreclosure sale date, the
Short Seller does not fall under the Colorado Foreclosure Act and the
regular Colorado Contract Buy/Sell Real Estate should be used with the
Short Sale Addendum, right? Not always.
I recently learned that even if a property is NOT scheduled for
Foreclosure, the Seller may in fact be protected by the Act, in which
case the agent is to use the Foreclosure version of the Contract. The
reasons are applicable whether or not the property is offered as a
Short Sale.
Paragraph 30.1 of the Foreclosure Contract states "The Colorado
Foreclosure Act applies when: (1) the Property is residential, (2) the
Property is Seller's Principal place of residence, (3) any loan secured
by the Property is at least thirty days delinquent or in default, (4)
Buyer does not reside in the Property for at least one year and (5)
Buyer is subject to the Act. The parties are further advised to consult
with their own attorney." If all five stipulations are true, then
Colorado Agents should use the Foreclosure version of the Contract to
make an offer.
I have a client who is a short sale investor who is subject to the
Act, so (4) and (5) are always true when I'm working with him. Because
(1) and (2) are typically the case in a Short Sale, it is delinquency
that I usually look for to determine whether to use the Foreclosure
version of the Contract.
In writing an offer on one particular short sale I learned that the
Seller, who I knew lives in our community, was delinquent in his
mortgage payments and initially I assumed this property was going to
fall under the Act. However, the house was vacant. Therefore, "(2) the
Property is Seller's principal place of residence," was not applicable,
and I was not required to use the Foreclosure version of the Contract.
I have since learned of another Short Sale property that is vacant.
I find that Short Sale properties are often delinquent or become
delinquent during the waiting period. I suggest being careful to check
all three points in regard to the Seller in Par. 30.1., and don't
assume that because the payments are delinquent the property will fall
under the Act.