The Colorado Short Sale Addendum form is a legal document that modifies a real estate contract to address the complexities of a short sale. This addendum outlines the obligations and rights of both sellers and buyers when the sale price of a property is less than the outstanding debts secured by liens against it. Understanding this form is crucial for parties involved in a short sale to navigate potential legal and financial implications effectively.
The Colorado Short Sale Addendum form is an essential document for real estate transactions involving properties that are subject to liens exceeding their market value. This addendum is incorporated into the main contract between the seller and buyer and addresses critical issues surrounding short sales, where the seller's debts secured by liens may not be fully covered by the sale proceeds. The form outlines the roles of lien holders, who must agree to accept a reduced payoff amount to facilitate the sale. Key elements include mandatory disclosures to both parties, emphasizing the potential legal and financial implications of a short sale. Sellers are advised to explore alternatives, such as loan modifications or other loss mitigation options, before proceeding. The addendum also sets forth specific conditions that must be met for the transaction to move forward, including obtaining written agreements from lien holders. Timely submission of required documents and adherence to deadlines are crucial, as delays can jeopardize the sale. Both buyers and sellers must understand that while a short sale may alleviate some financial burdens, it does not automatically release them from liability for any remaining debt. The urgency of navigating these complexities effectively cannot be overstated, as the stakes are high for all parties involved.
1The printed portions of this form, except differentiated additions, have been approved by the
2Colorado Real Estate Commission. (SSA38-1-08) (Mandatory 3-08)
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5THIS FORM HAS IMPORTANT LEGAL CONSEQUENCES AND THE PARTIES
6SHOULD CONSULT LEGAL AND TAX OR OTHER COUNSEL BEFORE SIGNING.
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131. ADDENDUM TO CONTRACT.
14This Short Sale Addendum (Addendum) is made a part of the following contract that is
15checked:
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17□ Listing Contract (Listing Contract) for the Property dated
18, for purposes of disclosing to Seller certain matters of a Short Sale, or;
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Contract to Buy and Sell Real Estate
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□
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between Seller and Buyer (Contract), dated
, relating to the sale of the
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real estate
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known as
(Property).
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Street Address
City
State
Zip
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27This Addendum shall control in the event of any conflict with the Contract. Except as
28modified, all other terms and provisions of the Contract shall remain the same.
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302. PURPOSE AND DEFINITIONS.
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322.1 Purpose of Addendum. Seller has debts secured by one or more liens on the
33Property. The Purchase Price may not be enough to cover payment for all the liens and
34costs of sale. If so, for the Closing to occur, the affected Lien Holders (§2.2 below) must
35agree to a Short Sale, (§ 2.3 below).
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372.2. Lien; Lien Holder. A Lien is a recorded claim or lien against the Property,
38such as a mortgage, deed of trust, mechanics lien or tax lien (Lien). A title insurance
39commitment may be used to show the Liens against the Property. A Lien Holder (Lien
40Holder) is a creditor who has a Lien and who agrees to (a) release its Lien against the
41Property and either (b) accept an amount less than the full amount Lien Holder claims is
42owed or (c) treat the debt secured by the Lien differently than as originally provided for in
43the evidence of debt (such as promissory note) (Lien Holder). (§3.3 below.)
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452.3. Short Sale. A Short Sale is a transaction in which any Lien Holder releases
46its lien against the Property and accepts an amount less than the full amount Lien Holder
47claims is owed or treats the debt secured by the Lien differently than as originally provided
48for in the evidence of debt (such as promissory note) (Short Sale). (See § 3.3 below.) Before
49a Short Sale can occur, the Buyer, Seller and each Lien Holder (except those creditors that
SSA38-1-08. SHORT SALE ADDENDUM TO CONTRACT TO BUY AND SELL REAL ESTATE
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50are to be paid in the full amount claimed) must consent to the terms of the sale. Sometimes,
51the Liens are released but the Lien Holder does not agree to release Seller from liability or
52reduce the unpaid portion of the debt, and the Seller and any guarantors will remain liable
53after Closing for that unpaid portion, despite the release of the Lien against the Property at
54Closing (§ 3.3 below).
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563. MANDATORY DISCLOSURES TO SELLER AND BUYER.
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3.1 SELLER IS ADVISED TO CONTACT THE COLORADO
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FORECLOSURE PREVENTION HOTLINE OPERATED IN
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COOPERATION WITH THE COLORADO DIVISION OF HOUSING AT 1-
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877-601-4673 OR THE HUD HOUSING COUNSELING AND REFERRAL
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LINE AT 1-800-569-4287.
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3.2. Seller acknowledges there are alternatives to a Short Sale that may be better
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for Seller. Seller acknowledges that a Short Sale transaction may result in continued
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liability of Seller or other persons liable for the debt that could be extinguished through
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foreclosure, bankruptcy or other loss mitigation options, including but not limited to a
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negotiated loan modification with Lien Holder. Seller acknowledges that it is the
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responsibility of Seller to investigate these alternative methods of resolution with Seller's
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legal, accounting or financial advisors and with Lien Holder and it is not the
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responsibility of any real estate broker to undertake any investigation of other options
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that may be available to Seller.
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743.3. Short Sales may have serious adverse legal, tax and economic
75consequences for sellers and any guarantors. Seller is advised to seek legal
76and tax counsel to advise Seller of the legal effect and meaning of any Short
77Sale Acceptance from Lien Holder.
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793.4. Lien Holder is not required to agree to a Short Sale. Even if a Lien
80Holder agrees to a Short Sale, a Lien Holder is not required to forgive repayment of the
81debt secured by the Lien, or release Seller and any guarantors from liability unless Lien
82Holder’s claim is paid in full. Seller acknowledges that Lien Holder may or may not agree
83to release Seller or any guarantors from liability to Lien Holder. If not released, Seller
84and any guarantors will remain liable to Lien Holder for any amount that
85remains unpaid after the Short Sale. Any release of liability by Lien Holder, to be
86binding, must be in writing, executed by Lien Holder and provide that Seller and any
87guarantor is released from liability.
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893.5. Lien Holder, if it agrees to a Short Sale, may condition its agreement on
90Seller doing any or all of the following to obtain a Short Sale Acceptance: (a) make a cash
91payment, (b) sign a new promissory note, (c) continue to owe the Lien Holder the unpaid
92portion of the debt, (d) agree to other requirements made by Lien Holder.
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943.6. If the Lien Holder accepts less than full payment, Seller understands that
95Seller may incur federal and state tax liability due to a Short Sale and understands that
96Lien Holder is required to file all required 1099 Forms with the Internal Revenue Service
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97with respect to this transaction. Seller is strongly advised to seek tax advice of the
98potential adverse tax consequences of a Short Sale to Seller.
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1003.7. Seller acknowledges that a Short Sale Acceptance by the Lien Holder will not
101necessarily repair or rehabilitate Seller’s credit rating and Lien Holder has no obligation
102other than to fairly report this transaction to any credit rating agency.
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1043.8. The Contract may be terminated by Seller, if Lien Holder does not approve
105this Contract, or if the terms and conditions from Lien Holder, to obtain a release of the
106Lien, are not acceptable to Seller, in Seller's sole discretion, on or before the Short Sale
107Acceptance Deadline (§ 8.1 below).
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1093.9. The Contract, although accepted by Buyer, may be terminated by Buyer as
110otherwise provided herein, or if Lien Holder does not approve this Contract or if the
111terms and conditions of any Agreement to Amend/Extend the Contract are not acceptable
112to Buyer, in Buyer's sole discretion.
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1143.10. Release of the lien against the Property does not by itself release Seller and
115any guarantors from liability for the debt.
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1173.11. Buyer acknowledges that the Short Sale Conditions (§ 4 below)
118may lead to termination of the Contract. The Short Sale process may result
119in delays in the Closing. Buyer is advised to consult with legal counsel about
120this Addendum and its legal effect.
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122 3.12. Buyer and Seller both acknowledge and agree that any Short Sale
123Acceptance by Lien Holder is made on the condition that none of the terms of the sale
124shall differ in any material respect from the terms submitted to the Lien Holder on which
125the Short Sale Acceptance was based. For purposes of the Contract, any change in the
126date of Closing, Purchase Price, real estate brokerage commissions, concessions or net
127proceeds to be paid to, or other remuneration to be received by Seller in connection with
128the proposed Short Sale shall be deemed a material change. Any material change will
129require that the Short Sale Proposal be re-submitted to the Lien Holder for approval,
130which could result in delays for approval or even denial of the Short Sale.
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1323.13. This Addendum should be signed at time of contracting by both Buyer and
133Seller, as most Lien Holders will not consider a Short Sale until a signed contract is
134received for their review.
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1374. SHORT SALE CONDITIONS. Notwithstanding anything to the contrary in this
138Addendum, the Contract between Seller and Buyer, for the benefit of both Seller and
139Buyer, is conditional upon all of the following occurring:
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1414.1. A written statement signed by each Lien Holder of a payoff amount less than
142the full amount Lien Holder claims is owed.
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1444.2. A written statement signed by each Lien Holder that it agrees to release its
145lien against the Property upon payment of the agreed upon payoff amount.
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1474.3. A written statement signed by each Lien Holder and acceptable to
148Seller (Short Sale Acceptance) that specifies the terms and conditions of the Short
149Sale.
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1514.4. Agreement to Amend/Extend Contract signed by Buyer and Seller, so long
152as both parties agree, in their sole discretion, to the changes to the Contract required by
153the Short Sale Acceptance.
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1555. SELLER DEADLINE FOR SUBMISSION TO LIEN HOLDER. Seller agrees to
156submit to each Lien Holder a request for a Short Sale and all documents and information
157requested by Lien Holder, including a copy of the Contract, any Counter Proposal, this
158Addendum and amendments. The initial submission by Seller to each Lien Holder shall be
159on or before Initial Submission Deadline (§ 5.1 below). Any additional information or
160documentation requested of Seller by such Lien Holder shall be submitted within 5
161calendar days of such request or Buyer may terminate the Contract pursuant to § 8.2
162below.
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1645.1. Seller Submission Deadline. The following deadline shall be the calendar
165days set forth below.
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Event
Deadline
From
Initial Submission
MEC (§ 2.4 of Contract)
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1685.2. Seller Consents to Lien Holder’s Release of Information. Seller consents
169that Lien Holder and its representatives may supply and communicate any loan, financial
170or other information of Seller, confidential or otherwise, with any of the following
171 involved in the transaction: Seller’s attorney, Broker or Brokerage Firm and its
172representatives working with Seller, transaction coordinator, title insurance company, its
173representatives, Closing Company or its representatives; and the following as checked:
174□ Broker or Brokerage Firm and its representatives working with Buyer □ Buyer □
175Buyers attorney.
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1776. DATES AND DEADLINES.
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179 6.1. Revised Dates and Deadlines and Other Terms. Buyer and Seller
180acknowledge that an Agreement to Amend/Extend Contract ("Amend/Extend") is
181required to revise the Dates and Deadlines (§ 2.3 Contract) or other terms based on
182changes required by the Short Sale Acceptance. If both Buyer and Seller, in their sole
183discretion, do not agree to the terms of the Amend/Extend, as evidenced by their signatures
184on the Amend/Extend and the offering party to such document receives notice of such
185acceptance on or before 7 calendar days after the earlier of (a) the receipt by both Buyer
186and Seller of the Short Sale Acceptance or (b) the Short Sale Acceptance Deadline (§ 8.1
187below), then the Contract shall terminate.
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1897. UNCERTAINTY OF SHORT SALE. Buyer and Seller acknowledge:
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1917.1. There are no promises or representations regarding (a) whether Lien Holder
192will agree to a Short Sale, (b) the terms of any Short Sale Acceptance, and (c) when the
193Lien Holder will advise of its decision to agree to a Short Sale or provide the written terms
194and conditions of the Short Sale Acceptance.
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1967.2. Until Closing of the Short Sale, Short Sale Acceptance by the Lien Holder
197will not prevent, hinder or delay the Lien Holder from initiating or proceeding with any
198enforcement action, including but not limited to a foreclosure. In the event Seller loses
199ownership of the Property through foreclosure, the Contract shall terminate.
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2017.3. A significant period of time may be required to determine if a Short Sale
202Acceptance will be granted. Buyer should inform Buyer’s lender of this fact for
203structuring Buyer’s loan; i.e., duration of “loan lock”; and Closing is required to be held
204very shortly following the Short Sale Acceptance.
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2067.4. Lien Holder, once a Short Sale Acceptance is given, will normally not agree
207to any additional changes to the terms of the Contract that differ from the Short Sale
208Acceptance, to have repairs performed or to reduce the amount it is willing to accept due to
209the condition of the Property or results of an Inspection. Buyer may want to conduct an
210Inspection of the Property prior to submission of Seller’s request for a Short Sale to Lien
211Holder. The Purchase Price should reflect the condition of the Property and results of
212such Inspection. Buyer recognizes the risk that Lien Holder may not agree to the offer
213submitted by Buyer.
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2158. DEADLINE FOR ACCEPTANCE OF SHORT SALE; TERMINATION. Buyer
216and Seller must receive written notice of the Short Sale Acceptance, on or before Short Sale
217Acceptance Deadline (§ 8.1 below), or either party may thereafter terminate this Contract
218by written notice to the other party.
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8.1.
Short Sale Acceptance Deadline.
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Short Sale Acceptance Deadline
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2238.2. Termination. If any party has a right to terminate the Contract, such
224termination shall be governed by § 24 of the Contract upon written notice to the other
225party as described in § 30 of the Contract.
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Date:
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Buyer
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Seller
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The printed portions of this form, except differentiated additions, have been approved by the Colorado Real Estate Commission. (SA20-1-08) (Mandatory 3-08)
SELLER AUTHORIZATION
Date: ____________
Seller:_______________________________________________________
Lien Holder:__________________________________________________
Property:_____________________________________________________
Loan No._____________________________________________________
Seller Consents to Lien Holder’s Release of Information. Seller Consents to Lien Holder’s Release of Information. Seller consents that Lien Holder and its representatives may supply and communicate any loan, financial or other information of Seller, confidential or otherwise, with any of the following involved in the transaction: Seller’s attorney, Broker or Brokerage Firm and its representatives working with Seller, transaction coordinator, title insurance company, its representatives, Closing Company or its representatives; and the following as checked: □ Broker or Brokerage Firm and its representatives working with Buyer □ Buyer □ Buyers attorney.
Note: This Seller Authorization should be submitted to the Lender’s Loss Mitigation Department. If the Property is in foreclosure this form should also be submitted to the Lender’s law firm.
SA20-1-08. SELLER AUTHORIZATION
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