VA Compromise Sale in Colorado: The VA Short Sale, Explained

A VA compromise sale is the VA version of a short sale. A Colorado homeowner with a VA loan sells the house for less than the loan balance, and VA pays the servicer a claim to cover part of the shortfall. The sale must close before the Public Trustee sale date. This guide answers what a VA compromise sale is, who qualifies, how long it takes in Colorado, whether you will owe VA money afterward, what happens to your VA entitlement, and how it compares with a deed in lieu or a foreclosure.

Colorado has a large VA borrower base, from El Paso County to Aurora. When a VA loan cannot be saved, the compromise sale is usually the cleanest exit. If the loan is FHA instead of VA, read our FHA short sale in Colorado guide. The rules are different.

What is a VA compromise sale?

It is a sale of the home to an outside buyer for less than the payoff. The servicer accepts the net proceeds. VA then pays the servicer a guaranty claim toward the remaining loss. The servicer waives any balance not covered by the sale proceeds and the VA claim.

The servicer runs the process. VA delegates most compromise sale decisions to the servicer, inside VA’s rules. That means the homeowner works with the servicer’s loss mitigation team, not with a VA office.

Who qualifies for a VA compromise sale?

Servicers look for four things:

• A real hardship. Job loss, a pay cut, divorce, illness, a death in the family, or a military move the owner cannot carry.
• No way to keep the home. The servicer usually reviews retention options first, such as a repayment plan, a loan modification or a VA partial claim.
• An arm’s-length buyer. The buyer cannot be a relative, a business partner or anyone tied to the seller. Both sides sign an affidavit saying so.
• A price the servicer approves. The servicer orders a value and sets the minimum net proceeds it will accept.

The owner does not need to be behind on payments to ask. Owners who are already behind should apply right away, before the Notice of Election and Demand is recorded.

How does a VA compromise sale compare with other options?

Option	Keep the home?	How it ends	Best fit
Repayment plan or modification	Yes	Missed payments spread out or added to the loan	Income is back and steady
VA partial claim	Yes	VA pays the arrears; the owner repays VA later	Owner can afford the regular payment again
VA compromise sale	No	Owner sells; VA claim covers part of the shortfall	Owner owes more than the home is worth and must move
Deed in lieu	No	Owner signs the house over to the servicer	Listing failed and title is clean
Public Trustee foreclosure	No	House sold at the county sale; VA may take it back and resell it	Last resort; avoid when any option above works

VA homes that go through foreclosure can come back on the market as VA-owned properties. See VA foreclosures in Colorado and VA Vendee financing for the buyer side.

How long does a VA compromise sale take in Colorado?

Plan on three to six months from listing to closing. Servicer review of the buyer’s offer often takes 30 to 60 days by itself.

The Colorado foreclosure clock runs at the same time. The Public Trustee sets the sale 110 to 125 days after the Notice of Election and Demand is recorded. A compromise sale must close before that date. The servicer can postpone the sale while an approved sale is pending, but the owner has to ask in writing. Our Colorado foreclosure timeline shows every step.

Does a VA compromise sale stop foreclosure?

Yes, when it closes. Listing the house does not stop the foreclosure by itself. The servicer must approve the sale and agree to postpone the Public Trustee sale if closing will land after it. Get the postponement in writing.

Will I owe VA money after a compromise sale?

The servicer waives the rest of the loan balance. VA can still treat its guaranty claim payment as a debt owed by the veteran. Veterans can ask VA’s Debt Management Center for a waiver, and VA reviews hardship when it decides. Ask the servicer, in writing, how the claim will be handled before you sign the approval.

Forgiven mortgage debt can also have tax effects. Talk to a tax professional about your case.

Can I get another VA loan after a compromise sale?

Yes, in most cases. The entitlement used on the old loan stays tied up until VA’s loss is repaid. Many veterans still have remaining entitlement and can buy again with it. Each lender sets its own waiting period after a short sale. Ask the lender before planning the next purchase. Our HUD financing page covers loan types that work on HUD homes, including VA loans.

Who pays the commission and closing costs?

The servicer approves the closing costs and pays them from the sale proceeds. That usually includes the listing and buyer broker commissions, title fees and recording fees. The owner normally brings no money to closing. The servicer can refuse costs it did not approve, so every fee must be on the approval letter.

What about active-duty servicemembers?

Servicemembers on active duty may have extra foreclosure protection under the Servicemembers Civil Relief Act for loans taken out before service. Owners with permanent change of station orders should tell the servicer right away. A military move is a recognized hardship for a compromise sale.

What does the process look like step by step?

1. Call the servicer and ask for a loss mitigation application. Ask for a VA compromise sale review by name.
2. Hire a listing broker who handles short sales. List at market value.
3. Send the hardship letter, income documents, bank statements and the listing agreement.
4. Accept an arm’s-length offer and send it to the servicer with the signed affidavit.
5. The servicer orders a value, reviews the net, and issues an approval letter with a closing deadline.
6. Close by the deadline. The servicer files the VA claim after closing.

The Kenna Group at Keller Williams DTC lists short sales across the Denver metro, Colorado Springs and Northern Colorado. See our short sale help page, or call or text 303-955-4220 to talk through a VA loan today.

Frequently asked questions

What is a VA compromise sale?

It is the VA version of a short sale. The owner sells the home for less than the loan balance, and VA pays the servicer a claim toward the shortfall.

How long does a VA compromise sale take?

Plan on three to six months. In Colorado it must close before the Public Trustee sale, which is set 110 to 125 days after the Notice of Election and Demand is recorded.

Will I owe money after a VA compromise sale?

The servicer waives the rest of the loan. VA can treat its claim payment as a debt, and veterans can ask VA’s Debt Management Center for a waiver.

Can I get a VA loan again after a compromise sale?

Yes, in most cases, using remaining entitlement. The entitlement used on the old loan stays tied up until VA’s loss is repaid. Lenders set their own waiting periods.

Do I pay the real estate commission in a VA compromise sale?

No, in most cases. The servicer approves the commission and closing costs and pays them from the sale proceeds.

Is a VA compromise sale better than a deed in lieu?

Usually. A sale lets the owner pick the buyer, the price and the move date. Many servicers review a sale before they accept a deed in lieu.

The Kenna Group is a HUD-registered brokerage rated 4.9 stars across 332 reviews. Questions about a VA loan, a short sale or a HUD bid? Call or text 303-955-4220. A live person answers.

Where to go next

• FHA short sale in Colorado (Pre-Foreclosure Sale)
• Using a VA loan on a HUD home
• Colorado HUD homes for sale
• Colorado HUD inventory report
• HUD home FAQs
• Find a HUD-registered agent

Disclosure: The Kenna Group are licensed real estate brokers. We are not attorneys, tax advisors or credit professionals, and this page is not legal, tax or credit advice. Talk to a qualified professional and your loan servicer about your situation.