Explanation of the Utah Short Sale Process

If you haven't heard of a real estate short sale up until now, you probably will in the very near future. So in this article, I'll explain how the short sale process works in Utah and what it has to do with you.

Why Are Short Sales Popular Lately?

Chances are, you've heard about the record numbers of home foreclosures across the United States. After all, you see it just about every time you turn on the evening news or read the paper. This rise in foreclosures directly corresponds to a rise in the number of short sales, because the two things are closely related.

Let's start with a definition:

Short sale -- The sale of a home (by its owner) for less than the amount owed on the property.

Here is the first question most people have: "Why would somebody sell their home for less than market value? And why would the mortgage lender accept less than what is owed by the homeowner?" These are both excellent questions. So to properly understand the process of Utah short sales we must answer them both.

When homeowners can no longer afford the mortgage payments on a home, they face a possible foreclosure. The lender will foreclose on the property and sell it as quickly as possible, typically at an auction.

But in most cases, the lender does not want to pursue the full foreclosure process any more than the homeowner wants to be foreclosed upon. It can be very expensive for the lender to foreclose on the home. They have to pay an attorney to handle the foreclosure, as well as the real estate auction process.

Many times the property will not sell at auction and the lender will have to take the property back, make any necessary repairs, hire a real estate agent and then market the property until it resells, usually at a discount.

Obviously, the homeowner wants to avoid the process too. Having a foreclosure can destroy your credit. Also, whatever loss the lender takes when the property finally sells could come back to haunt the homeowner in the form of a 1099 or a deficiency judgment.

The Utah Short Sale to the Rescue

This is where short sales come into the picture. Through this process, the mortgage lender will often grant the homeowner time to sell the home prior to foreclosure, and will usually even agree to accept less than what is owed on the mortgage.

Yes, the lender does lose money in this process. But they stand to lose even more by keeping the non-performing loan on their books, and by going through the foreclosure process, and by maintaining and marketing the property, etc. So a short sale is a way for them to cut their losses sooner rather than later.

You can think of the short sale as the closest thing to a win-win situation as possible, given the circumstances. The homeowner avoids foreclosure and the credit-damaging effects of such a process and minimizes future repercussions. The lender gets some of their money back and avoids further losses.

In a perfect world, there would be no home foreclosures in Utah or anywhere else. All homeowners would make their mortgage payments, and they would never find themselves in dire financial straights. But we don't live in a perfect world. Foreclosures do happen, and lately they've been happening a lot. So the Utah short sale process performs a necessary function that benefits the economy in troubled times.

If you have questions about the short sale process in Utah from either a buying or selling perspective, I would be happy to help you. Please contact me at your convenience.