Revolutionizing · Modernizing · Simplifying
Revolutionizing · Modernizing · Simplifying
For most of the last decade, "short sale" was a phrase Colorado agents rarely had to say out loud. Prices only went up, equity only got deeper, and an owner who needed out could almost always sell for more than they owed. That math is starting to bend.
It is not 2008, and nobody should pretend it is. But after three years of a flat-to-cooling Front Range market — higher rates, longer days on market, and more homes going unsold than at any point in recent memory — a small but growing group of owners are running into an uncomfortable truth: they owe more on the house than it will realistically sell for once commissions and closing costs come out. When that gap can't be covered at the closing table, a normal sale turns into a short sale, where the lender agrees to accept less than the full balance.
Three kinds of owners are carrying most of that risk right now.
In 2022 and 2023, when rates jumped fast, builders and sellers leaned hard on temporary buydowns — the 2-1 and 3-2-1 deals that shave your interest rate for the first year or two and then step it back up to the real note rate. They were a smart way to get a deal done. The catch was always that the discount was temporary, and a lot of those clocks are now running out.
When a 2-1 buydown fully expires, the monthly payment doesn't nudge — it jumps, often by several hundred dollars, to the payment the loan was always going to require. A household that qualified comfortably at the teaser payment can find itself stretched at the real one. If they also bought near the top with little cushion, selling to escape the payment may not even clear the loan.
Adjustable-rate mortgages never went away; they just got quiet while fixed rates were cheap. Owners who took an ARM to reach a bigger house — or who rolled into one during the low-rate window — are now hitting their first adjustments in a much higher-rate world. An ARM that adjusts upward behaves a lot like an expiring buydown: the payment resets to something the household never actually budgeted for. And in a market that isn't handing out easy appreciation to bail anyone out, refinancing away from the reset isn't always possible, because the equity to refinance against may not be there.
This is the biggest group, and the easiest to overlook. A buyer who put 3% down on an FHA loan, or nothing down with a VA loan, in 2022 or 2023 started with almost no equity. The cost of selling a home — agent commissions, title, transfer, seller concessions — typically runs 8 to 10% of the price. So even a home that has simply held flat can leave its owner underwater the moment they try to sell, because the selling costs alone outrun the sliver of equity they built.
Add a life event — a job change, a divorce, a relocation, an illness — and a household that is perfectly current on its mortgage can still be unable to sell without bringing cash to closing they don't have. That is the exact situation short sales exist to solve.
A short sale is not a foreclosure, and treating it like one is the most expensive mistake owners in this spot make. Foreclosure is something that happens to you; a short sale is something you negotiate. Handled early — before missed payments pile up — it protects your credit far better than a foreclosure, keeps you in the driver's seat, and in many cases the lender absorbs the shortfall rather than chasing you for it later.
The owners who get hurt are the ones who wait: who keep making a payment they can't afford until the savings are gone, and only then face foreclosure with no options left. The ones who come out fine are the ones who look at the numbers honestly the moment the math stops working — pull a real, current estimate of what the home would sell for today, subtract what they owe and what it costs to sell, and get a straight answer about whether they're above water or below it.
If you're in one of these three buckets — a buydown about to expire, an ARM about to reset, or a low-down-payment purchase from the last three years — that number is worth knowing now, while you still have every option on the table. We're happy to run it with you, no pressure and no cost. The worst version of this problem is the one you find out about too late.