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.
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