Buyer's Guide · Owner Occupants & Investors · Short Sale Expert · Colorado Springs, CO

How to Buy a Short Sale
Colorado Springs

Jerrod Butler · Realtor · SFR · CDPE · C-REPS Certified · 14 Years Experience

Knowing how to buy a short sale in today's market will become increasingly important as they grow in supply. Home values in Colorado Springs have peaked and are coming down slowly — a growing number of sellers don't have enough margin to cover selling costs and are underwater. Getting the best deal on a short sale requires a Realtor who is highly knowledgeable in BPOs, net requirements, lender negotiation and short sale addendums. That's Jerrod Butler.

Short Sale Buyer ExpertSFR CertifiedCDPE CertifiedC-REPS / BPO SpecialistOwner OccupantsInvestor BuyersVA · FHA · ConventionalFree Consultation

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Jerrod ButlerHow to Buy a Short Sale · Colorado Springs

14-year Colorado Springs market expert. Boutique concierge service — you work with Jerrod directly, from consult through closing. Military precision and mission focus on every transaction with an Army Ranger Veteran.

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Short Sale Buyer's Guide — 10 Things You Need to Know

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1. Does It Make Sense to Buy a Short Sale?

Not all short sales are built the same and each one should be evaluated individually before deciding to pursue it. If you have time on your hands and don't have an urgent requirement to get into a home, a short sale may be right for you — many take 4 to 6 months, though Jerrod has closed short sales in as little as 2 months. If you are OK buying a home as-is and recognize that you may need to do some relatively minimal work after closing, a short sale can deliver significant savings. Having a buyer agent REALTOR® with experience in short sales, foreclosures and normal properties gives you access to the greatest inventory on the market.

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2. What Is a Short Sale?

A short sale gets its name from the financial loss to the bank — not the time involved. It means selling short of the full amount owed on the loan in default. The bank takes a loss — getting "shorted" on the money they lent. A homeowner seller can take on a deficiency if they don't receive a deficiency waiver in the short sale approval. In most cases sellers do receive a deficiency waiver, though it may affect their loan eligibility in the future, result in tax liability on the deficiency amount, or delay them from buying again for a few years. In today's Colorado Springs market, an increasing number of sellers are underwater because home values have peaked and are slowly declining — making short sales an increasingly important part of the market.

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3. Are You Sure You Want to Buy a Short Sale?

Most buyers pursue short sales because they believe they can get a better deal than on a normal listing — but this is not always the case. Getting a good deal depends on many variables. If your REALTOR® knows what they are doing, you can generally achieve at least a 10% savings compared to buying a comparable normal home, with potential for much greater savings depending on the specific situation. If you are an investor buyer, you likely need a greater margin to make it feasible. If you are an owner-occupant, you are probably more motivated by the home itself — with a good deal as an added bonus. All short sales are not built equally. Some are not worth pursuing. Each must be evaluated on a case-by-case basis. If a deal is only a potential 5% savings, ask yourself — is it really worth it given all the other variables? Remember: time is money too.

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4. How Do I Get the Best Deal on a Short Sale?

The short answer: pick the right type of short sale and work with a REALTOR® who is highly knowledgeable in BPO (Broker Price Opinion) valuation. Jerrod is a member of NABPOP — National Association of Broker Price Opinion Professionals — and holds the C-REPS (Certified Real Estate Pricing Specialist) credential, a nationally recognized certification for advanced property valuation expertise. This is similar to a lender appraisal but performed by a Realtor. Banks, lenders and investors base their net requirement percentage on FMV as determined by an appraisal or BPO — so accurate valuation is critical to your bottom line as a buyer. A variance can be submitted to request approval on an offer below net requirements, but this applies only in special circumstances.

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5. Net Requirements by Loan Type

Net requirements determine the minimum the bank will accept as a percentage of Fair Market Value. A buyer's REALTOR® must first identify the loan type in default. VA Net Requirements: 85.05% of FMV (note: updated VA servicing regulations under 38 C.F.R. § 36.4322 now require net proceeds equal to or exceeding the "net value" as determined under VA's approved valuation methodology — in practice servicers still calculate this using the 85.05% benchmark). FHA Net Requirements: 88% for 0–30 days on market; 86% for 31–60 days on market; 84% for 60+ days on market. Conventional Net Requirements: none specified — lender or investor dependent. A buyer can sometimes get an offer accepted below net requirements, but there are special circumstances to consider.

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6. Short Sale Closing Costs

A good Realtor® will consult with the buyer's lender to get projected closing costs and in turn ask the seller to pay those as seller concessions — so the buyer brings as little to closing as possible beyond any required down payment. On a $450,000 loan this is approximately $7,500 in closing costs. In our example we ask for $10,000 in seller concessions — any excess beyond actual closing costs can be used (depending on loan type) for rate buy-down, paying off a credit card or other lender-approved uses. It is very probable the seller will pay buyer closing costs on a short sale as long as net requirements are met.

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Selling a home on a short sale? See the seller's guide. VA Compromise Sale, FHA Pre-Foreclosure Sale and conventional short sale options for sellers who owe more than their home is worth.

Short Sale Seller Guide →

How It Works

Short Sale Buyer Process — What to Expect

Evaluate the Short Sale

Not every short sale is worth pursuing. Jerrod reviews the loan type in default, days on market, BPO/appraisal value, lender reputation and listing agent experience to determine whether a specific short sale is worth your time and offers a genuine deal before you invest any effort.

Determine Your Minimum Acceptable Offer

Using the net requirements, estimated seller expenses and FMV, Jerrod calculates the minimum offer the bank is likely to accept — and what that means for you as a buyer in terms of savings versus buying a comparable normal listing.

Structure the Offer with Short Sale Addendum

Every Colorado short sale offer must include the Colorado Real Estate Commission Short Sale Addendum alongside the standard Contract to Buy and Sell. This addendum protects you — you can back out any time before 3 days after short sale approval and receive your earnest money back. Jerrod ensures you never sign a third-party supplemental addendum that removes these protections. He also includes critical protective language in every short sale offer: Buyer has the right to terminate the Contract by written notice to Seller as long as it is received on or before the Short Sale Acceptance Deadline as indicated in the Short Sale Addendum. This protects you against listing agents who do not set the property to Under Contract until bank approval — a practice that leaves your offer exposed while other offers are submitted to the bank without your knowledge.

Submit & Monitor the Bank Process

Jerrod actively manages lender communication after submission — following up, responding to documentation requests and monitoring progress. Timeline depends on whether the short sale is pre-approved and which bank is servicing the loan.

Short Sale Approval & Your 3-Day Window

Once the bank issues a Short Sale Approval letter, you have 3 days under the Colorado Short Sale Addendum to review the terms and decide whether to proceed. This is your protected window to accept or back out with earnest money returned.

Closing on Your Short Sale

Once you accept the short sale approval terms, the transaction proceeds to closing — typically 30 days from approval. Jerrod coordinates all closing details and helps you understand what repairs or condition issues to expect given the as-is nature of most short sale purchases.

Local Market Expertise

Acceptable Minimum Offer on a Short Sale — Example

Net requirements for FHA and VA short sales are calculated as a percentage of Fair Market Value (FMV) as determined by a BPO or appraisal. To determine whether a short sale is a good deal, you need to look at two things: what are the typical seller expenses, and how much below FMV can you offer? Using a $450,000 VA short sale as an example: typical seller expenses include seller concessions $10,000 + real estate commissions 5.5% ($24,750) + owner's title policy $1,500 + property taxes $3,000 + closing services fee $400 + HOA status letter $400 = approximately $40,050 total expenses. VA Appraised Fair Market Value: $450,000. Required Net at 85.05%: $382,725. Adding net requirements plus seller expenses: Minimum Purchase Price approximately $421,190 — Practical Offer Price $421,500–$422,000. This is not necessarily what you offer — it is the floor. Your actual offer strategy depends on days on market, competition and the specific variables of the short sale. For FHA short sales the net requirement varies by days on market (88% at 0–30 days, 86% at 31–60 days, 84% at 60+ days), creating different floor calculations. Conventional short sales have no published net requirement — negotiation is entirely lender-dependent. Important note: a buyer can sometimes get an offer accepted below net requirements under special circumstances — something Jerrod evaluates case by case.

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Professional Designations & Certifications

Credentials That Set the Standard

GRI

Graduate Realtor Institute

National Association of Realtors ABR

Accredited Buyer's Representative

National Association of Realtors MRP

Military Relocation Professional

National Association of Realtors SFR

Short Sale & Foreclosure Resource

National Association of Realtors CDPE

Certified Distressed Property Expert

Distressed Property Institute REO

Institute of REO Certification

Equator Certified · RES.NET · BidOnHomes C-REPS

Certified Real Estate Pricing Specialist

NABPOP

Army Ranger Veteran

U.S. Army · Military Relocation Expert

Common Questions

Short Sale Buyer FAQ — Colorado Springs

Can a buyer back out of a short sale?›

Absolutely. In Colorado, the buyer can back out of a short sale purchase contract on or before 3 days after short sale approval per the Colorado Short Sale Addendum, which must accompany every Contract to Buy and Sell on a short sale offer. The buyer is protected throughout the entire short sale process before this deadline and can receive their earnest money back. The key caveat: if a listing agent uses a third-party vendor like the Short Sale Cooperative and requires you to sign a supplemental short sale addendum, those buyer protections may not apply. Jerrod always reviews any supplemental addendums before you sign.

What verbiage should my offer include to protect me during the short sale process?›

It is critical that your offer include the following protective language: Buyer has the right to terminate the Contract by written notice to Seller as long as it is received on or before the Short Sale Acceptance Deadline as indicated in the Short Sale Addendum. This matters because some listing agents solicit multiple offers and do not set the property to Under Contract until the bank issues a short sale approval. This practice leaves your offer exposed while other offers are being submitted to the bank without your knowledge — effectively allowing the listing agent to shop your offer against competing buyers. This language paired with the Colorado Short Sale Addendum ensures you have a defined deadline and the right to terminate cleanly. Jerrod includes this protection in every short sale offer he writes on behalf of buyers.

How long does it take to buy a short sale?›

For a pre-approved short sale, it can take as little as 30 days once under contract — but more likely 2 to 3 months depending on many variables. For short sales that are not pre-approved, plan for 4 to 6 months. There are cases where short sales take a year or more — Jerrod recommends setting a maximum 6-month deadline for short sale approval before backing out. Evaluating whether to pursue a specific short sale is critical to prevent wasting your time. A pre-approved short sale means the bank has communicated an acceptable price — but this does not mean a Short Sale Approval letter has been issued and the offer still must be processed.

What loan types can I use to buy a short sale?›

FHA, VA and Conventional loans can all be used to purchase a short sale. Each loan type has different requirements. VA loans have specific property condition standards that can complicate short sales on homes needing significant repairs. FHA loans also have condition requirements and the property must pass an FHA appraisal. Conventional loans are generally the most flexible for as-is condition. Cash purchases eliminate the financing condition and appraisal requirements entirely — often making cash offers more competitive on short sales. Jerrod advises on the best loan type for each specific short sale situation.

What is a BPO and why does it matter when buying a short sale?›

A BPO (Broker Price Opinion) is a property valuation performed by a licensed real estate broker — similar to an appraisal but done by a Realtor. Banks use BPOs to establish the FMV on which net requirements are calculated. If the BPO comes in too high, your minimum acceptable offer increases and the deal becomes less attractive. A BPO can be appealed but this adds time to the process. Jerrod holds the C-REPS certification from NABPOP — giving him the same advanced valuation expertise used by lenders — which means he can assess whether a BPO is accurate and advise on appeal strategy when warranted.

What does as-is mean when buying a short sale?›

Short sales are generally sold as-is — meaning the seller (and the bank) will not make repairs or provide credits for condition issues discovered during inspection. You still have the right to inspect the property and back out during the inspection period if condition issues are unacceptable. The as-is nature is why short sales are priced below market — the discount should account for the condition. Jerrod helps buyers evaluate whether the discount justifies the condition before going under contract.

What variables determine whether a short sale is a good deal?›

The key variables are: 1) Type of loan in default — determines net requirements and closing cost flexibility. 2) The BPO or appraisal value — if too high, the floor offer goes up. 3) Pre-approval status — a pre-approved short sale moves faster. 4) Experience of the listing agent — an experienced short sale listing agent dramatically shortens timelines. 5) Which bank is servicing the loan — major banks like Chase, Wells Fargo and Bank of America have streamlined short sale departments; some smaller servicers are notoriously slow. 6) Current market conditions and days on market — FHA net requirements drop as days on market increase. Jerrod evaluates all six variables before advising you to pursue any short sale.

Should I use a buyer's agent for a short sale?›

Absolutely — and specifically a buyer's agent with genuine short sale experience. Short sale transactions involve the Short Sale Addendum, BPO/appraisal analysis, net requirement calculations, lender negotiation and timeline management that are completely absent from normal transactions. An inexperienced buyer's agent can cost you thousands in missed negotiating opportunities or get you locked into a bad deal. Jerrod's SFR (Short Sale and Foreclosure Resource) and CDPE (Certified Distressed Property Expert) certifications are specifically designed for exactly this type of transaction.

Is a short sale better than a foreclosure (REO) for a buyer?›

Both offer potential below-market pricing but in very different ways. A short sale involves an owner still in title — you negotiate with both the seller and the bank, which takes longer but often results in better-maintained properties and cleaner titles. An REO (bank-owned) property means the foreclosure has already completed — the bank owns it outright and the process is typically faster, but properties are often in worse condition and sold strictly as-is with no flexibility. Jerrod has extensive experience with both and helps buyers determine which type best fits their timeline, condition tolerance and financial goals.

How to Buy a Short SaleColorado Springs