Took a short sale listing? Start here.
Find out what type of loan it is, then follow the path. Every lender has its own rules — this shows you what to ask and what numbers to expect.
Know the Colorado foreclosure clock
- 1
Default
First foreclosure filing generally waits until the loan is more than 120 days delinquent.
- 2
NED recorded
The Notice of Election and Demand starts the Public Trustee clock.
- 3
Combined Notice
The mailed and published notice lists the sale date, cure rights, and contacts.
- 4
Sale date
Set 110–125 calendar days after the NED for non-agricultural property.
- 5
Trustee sale
El Paso County auctions are Wednesdays at 10:00 a.m.; an unsold property becomes REO.
- 6
After the sale
Junior liens get 8 business days to seek redemption; the homeowner has no post-sale redemption right.
Do these first (every short sale)
- Get a signed third-party authorization from the seller so the servicer will talk to you.
- Pull the latest mortgage statement: servicer name, loan number, and any second mortgage/HELOC.
- Open title early. A title search shows every lien that has to agree to a release: second mortgages, HELOCs, HOA liens, judgments, tax liens. Chicago Title can run this for you.
- Check the county Public Trustee for a recorded Notice of Election and Demand (NED) and any scheduled sale date. A listing does not stop a foreclosure sale — get any postponement in writing from the servicer.
- Document the seller's hardship (job loss, divorce, death, medical, relocation, reduced income).
- Assemble the short sale packet (see checklist below).
What goes in the short sale packet
- Third-party authorization
- Listing agreement with short sale addendum
- MLS printout
- Signed purchase contract with short sale addendum
- Buyer's pre-approval or proof of funds
- Loss mitigation application
- Hardship letter
- Financials (bank statements, pay stubs, tax returns as requested)
- Estimated settlement statement
- IRS Form 4506-C
What type of loan is it?
What type of loan is it?
Not sure? Check the closing docs, ask the servicer “who is the investor?”, or use the Fannie Mae lookup and Freddie Mac lookup.
VA short sale
- 1Call loss mitigation — home retention review first
- 2Servicer orders the VA liquidation appraisal — meet the appraiser
- 3Required net = appraisal × 84.05%
- 4Clear second liens and other liens
- 5Get written approval
- 6Close by the deadline
More detail
VA's published 15.95% cost factor makes the minimum net 84.05% of the liquidation appraisal. The Federal Register update took effect December 23, 2015; some servicers or investors may require more.
VA renamed “compromise sale” to “short sale” in Servicer Handbook M26-4 in May 2024, although both terms remain in use.
$450,000 appraisal × 84.05% = $378,225 net.
Pop quiz — click to reveal
A seller bought for $465,000, owes $404,500, and the VA appraisal is $420,000. Is the required net A) $390,832.50, B) $339,982.25, or C) $353,010?
Answer: C — $420,000 × 84.05% = $353,010. The appraisal, not the purchase price or loan balance, sets the number.
Test the lender's minimum net
Use this as a planning check only. The servicer's written approval controls.
FHA Pre-Foreclosure Sale
- 1Seller applies — servicer runs the HUD waterfall first
- 2Seller must be 61+ days late and not eligible to keep the home
- 3FHA appraisal sets the as-is value
- 4Approval to Participate (HUD-90045) — sign within 10 days
- 5List within 7 days at or above the as-is value
- 6Four-month window: 88% days 1–30 → 86% days 31–60 → 84% last 60 days
- 7Lender approves the contract
- 8Close — or Deed-in-Lieu / foreclosure if no contract meets the deadline
More detail
Who qualifies
- Documented financial hardship.
- 61+ days delinquent as of the servicer's approval.
- Has used up, or been found ineligible for, all permanent home retention options.
- Still in default (at least 31 days delinquent) on the closing date.
- Arm's-length buyer only: no family, business associates, or other favored party; no hidden terms or side agreements.
- Exception: a Streamlined PFS for servicemembers with PCS orders to a duty station 50+ miles away (affidavit required that the home was the primary residence).
What's in the ATP letter
- As-is appraised value = minimum list price.
- Minimum net dollar amount for days 1–30, and the 86% / 84% steps after.
- Deadline for a signed contract.
- Cash Reserve Contribution — some owner-occupants are required to contribute cash at closing (often $0; check the letter).
- Relocation service contribution — an employer relocation company may contribute toward the shortfall.
- Maintenance — the seller must maintain the home until closing (lawn, snow, utilities, repairs, winterize if vacant) and report damage to the insurer and servicer.
- Homeowner incentive — eligible owner-occupants may receive up to $3,000. It can be used to resolve junior liens and cover costs HUD won't pay (home warranty, optional repairs, buyer closing costs); what's left can go to the seller only for relocation.
- If the seller agrees to pay buyer-type costs (points, home warranty, non-required repairs), the seller pays them — HUD doesn't.
Test the lender's minimum net
Use this as a planning check only. The servicer's written approval controls.
Conventional short sale
- 1Identify the investor — Fannie, Freddie, or portfolio
- 2Submit the hardship package
- 3Investor orders a BPO or appraisal and sets the required net
- 4Negotiate second liens and PMI
- 5Get written approval — confirm deficiency is waived in writing
- 6Close
More detail
Death of a borrower, divorce or legal separation, illness or disability, or a distant employment transfer may qualify before the seller is behind.
Payments to subordinate lienholders have historically been capped at $6,000 total; confirm the current limit with the servicer. PMI may require a separate approval or contribution.
Illustration from a real file: $400,000 appraisal → $352,000 required net (88%). Conventional requirements vary by investor; this is not a fixed rule.
Other / Not sure
- 1Call the servicer
- 2Ask: “Who is the investor and what are your short sale requirements?”
- 3Follow the matching path
More detail
USDA, portfolio, private, HELOC-only, and unknown-investor loans do not share one standard process. Get the investor and program requirements directly from the servicer before setting expectations.
Every approval letter
- Closing deadline
- Minimum net / approved price
- Seller gets no cash at closing unless the letter allows it
- No side agreements
- Any seller contribution or promissory note required
- Deficiency waived or not (in writing)
- Send the approval letter to your title company immediately
- Sale date approaching with no written postponement
- Liens nobody disclosed
- Buyer asking for side money
- Seller expecting cash back
- Offer won't clear the minimum net
Educational only. Program rules change and servicers can have stricter requirements. Confirm every number with the servicer. Not legal or tax advice — sellers should talk to a CPA about possible tax on forgiven debt and an attorney about deficiency.
- Federal Register — VA Net Value Percentage Update (15.95%)
- VA Servicer Handbook M26-4
- HUD Mortgagee Letter 2025-12
- Fannie Mae Servicing Guide D2-3.3-01
- El Paso County Public Trustee
- Arapahoe County Public Trustee foreclosure timeline
- HUD Approval to Participate form HUD-90045
Last reviewed: September 2026