The short answer
A short sale listing agent runs two jobs at once. You market the home like any listing, and you manage a file that a lender has to approve. That means the right addendum, honest MLS wording, a clean seller package, a strong showing at the lender's BPO, fast offer submission, buyers kept in the loop, and a careful read of the approval letter before anyone schedules a closing.
This page is the agent's side. If you need the seller explainer first, start with short sale basics for underwater sellers.
Step by step: running a short sale listing
Here's how I do it, in order.
- Talk to your managing broker first. Many brokerages approve short sale listings and have rules on negotiators and fees.
- Sign the listing with the short sale addendum. Colorado has Real Estate Commission approved short sale addenda for the listing contract and the buy-sell contract. Pull the current versions from your forms library. The addendum tells the seller in writing that the lender must approve and can change terms.
- Decide who negotiates. You, a third-party negotiator, or a real estate attorney. Put roles, fees and disclosure in writing. Some lenders won't allow a negotiation fee on the settlement statement, so check before you promise one.
- Order title and the HOA status letter at listing. Find every lien in week one. A surprise judgment can add weeks.
- Start the seller package. Hardship letter, income proof, bank statements, tax return, the lender's application and a third-party authorization. Many addenda give the seller only a few days to answer each lender request.
- Write the MLS honestly. Use the short sale field. In remarks, say the sale is subject to approval by the seller's lienholder(s) and that price and terms may change. Never write "approved short sale" without a written approval for that exact deal.
- Price it to the lender's eyes. The lender orders its own BPO or appraisal, and its number wins. See how to price a listing.
- Pick the strongest file, not just the highest price. A solid pre-approval and a buyer who understands the wait beat a shaky loan.
- Submit fast. Contract, pre-approval or proof of funds, a preliminary settlement statement and the seller package go to every lienholder by the contract deadline. Get proof of receipt.
- Meet the lender's BPO agent. See below.
- Keep the buyer warm. Written weekly updates to the buyer's agent. Silence makes buyers walk.
- Check the approval letter, then match it to the settlement statement.
- Close by the approval deadline. Set the date with title and the buyer's lender the day approval arrives.
The lender's BPO: your one shot at the value
The lender usually orders a BPO from a local agent. Make it easy for them. Confirm access the day they call, and meet them at the home if you can. Hand over one page: three to six sold comps with notes, current competition, and an itemized repair list with bids. Point out what photos won't show, like an old roof or water in the basement. You can't tell them what number to use. You can make sure they see the facts. See how to do a BPO step by step.
Approval letter checklist
| Check | What to look for |
|---|---|
| Price, buyer, address | Match the contract exactly |
| Net to the lender | Matches the preliminary settlement statement |
| Closing deadline | A date you can hit, with time for the buyer's loan |
| Commission | The amount the lender approved |
| Second liens and HOA | Each payoff approved in writing |
| Seller contribution | Any cash or note the lender wants from the seller |
| Deficiency language | Released from the remaining debt, or only the lien released |
| Expiration | What happens if closing slips |
Any change after approval, such as price, credits, repairs or the date, needs the lender's approval too.
Commission: the lender sets it
The lender pays the commission out of money it's already losing, so the approval letter sets it. Some investors cap it. Some lenders cut it during negotiation. Tell your seller and the buyer's agent at the start that the lender has the final say.
FHA loans run through HUD's Pre-Foreclosure Sale (PFS) program, with written rules on pricing, marketing time and net proceeds in HUD Handbook 4000.1. Read the servicer's approval to participate before you price.
The arm's-length affidavit
Most lenders want buyer, seller and both agents to sign one. It says the parties aren't related or in business together, there are no side deals, and the seller isn't staying as a tenant or buying it back. Some versions limit a quick resale. A false affidavit is fraud. If any relationship exists, tell your broker and the lender up front.
How to explain it to your client
The client here is the seller.
"We list your home at a fair market price and find a buyer. Then your lender decides whether to accept less than you owe. I'll manage the lender, and you'll hear from me every week. Your job is to send documents fast when I ask. The lender sets the final terms, including my commission and whether you're released from the rest of the debt. Have an attorney read the approval letter with you. And please call a HUD-approved housing counselor. They're free."
Watch-outs
- The foreclosure clock keeps running. A listing doesn't stop a public trustee sale. See how foreclosure works in Colorado.
- Lien release isn't debt release. Deficiency wording is an attorney question.
- Never promise approval or a timeline.
- No side money. Nothing outside the settlement statement.
- Inspections can reopen the deal. A repair credit after approval needs new approval.
- Forgiven debt and taxes. Send the seller to a CPA for the year of the sale.
Sources
Further reading
- Short sales in Colorado on kennarealestate.com
- Denver short sale realtor on kennarealestate.com
- FHA short sale: HUD's Pre-Foreclosure Sale program on denver-hudhomes.com
Keep going
- Short sale vs foreclosure for sellers
- How foreclosure works in Colorado
- Underwater seller options compared
- How to do a BPO step by step
Want the whole system? The BPO & REO Kit gives you the asset-manager outreach playbook, six email templates, the BPO checklist, photo shot list, comps worksheet, REO listing checklist and a tracking sheet.
This is training for real estate agents. It isn't legal, tax, lending or appraisal advice. Program rules change; check the official source. Check with your managing broker. Owners facing foreclosure should talk to an attorney and a HUD-approved housing counselor.
BPO & REO Kit
Go after BPO work and bank-owned listings the organized way: who to contact, what to send, when to follow up, and how to do the work.
$79 kit / $199 done-for-you setup (proposed)
See BPO & REO KitQuestions
What does a short sale listing agent do differently?
You market the home and also manage the lender's approval: the seller package, the lender's BPO, offer submission, approval review and a closing that matches the approval letter.
Do I need a short sale negotiator?
No, but many agents use one. Get the roles and fees in writing, follow your brokerage policy, and confirm the lender allows any fee before you promise it.
Can the lender cut my commission on a short sale?
Yes. The lender approves the commission in the approval letter, and it may be less than the listing agreement says.
What should I check on a short sale approval letter?
Price, buyer, net to the lender, closing deadline, commission, lien payoffs, any seller contribution and the deficiency language. Then match it to the settlement statement.
What is an arm's-length affidavit?
A signed statement that buyer and seller aren't related, have no side deals, and the seller isn't staying or buying back. Read it before signing.
Brian Lee Burke is the founder of PadLeaders, a Colorado real estate broker licensed since 2003, team leader of The Kenna Group at Keller Williams DTC (formerly Kenna Real Estate Group) and the author of Mastering Real Estate and The Real Estate Playbook. More about Brian.
- Agent training by Brian Lee Burke, The Kenna Group at Keller Williams DTC
- HUD Handbook 4000.1 (https://www.hud.gov/program_offices/housing/sfh/handbook_references)
- Colorado Division of Real Estate (https://dre.colorado.gov)
- HUD housing counselor search (https://www.hud.gov/findacounselor)
- HUD Handbook 4000.1
- Colorado Division of Real Estate
- HUD: find a housing counselor
- Short sales in Colorado on kennarealestate.com
- Denver short sale realtor on kennarealestate.com
- FHA short sale: HUD's Pre-Foreclosure Sale program on denver-hudhomes.com