Search Utah Real Estate
What is a Short Sale?
The term “Short Sale” is used in the real estate business to describe a situation where the current fair market value of the property is less than the debt owing against the
property. In other words, the Seller can’t sell the property unless creditors (“Third Parties”) agree to accept a payment that is less than (or “short” of) the amounts actually
owed to those Third Parties.
The Third Parties may include mortgage lenders, mortgage insurers, bankruptcy trustees, and federal, state and local taxing authorities (such as the IRS or State Tax Commission) or other lien holders. (Source: Short Sale Disclosure Form, Utah Association of Realtors)
A Short Sale does not mean the process to purchase the home will be “short.” Ironically, it can be a very long process to endure. On average, a short sale can take 4-6 months to complete.
Why do some buyers avoid short sales?
Short Sales are highly unpredictable. Typically once a Buyer and a Seller agree on an offer, the Seller (Homeowner) submits the offer to the Bank (Third Party).
Please remember, the Bank is NEITHER the buyer nor seller in the transaction and is under NO obligation to agree to the terms in the offer. A bank may agree to the terms of the offer or the bank may ask that the terms change. Many times, a bank will require more money for the home than was agreed to in the offer. This may cause a lot of frustration.
The Bank may not respond to an offer for several months. There is no way to force a bank to respond by a certain date. If a buyer needs to move into a home by a certain time, this can cause a lot of problems. Unless a buyer has flexibility with the closing date, a short sale isn’t a good option.
The Bank requires the home stay on the market even though an offer has been submitted. There may be several offers on a short sale property but it’s still being actively marketed. There are no specific rules how a homeowner ranks or prioritizes the offers in play. They may accept or reject any offer for any number of reasons.
Are Short Sales a “Good Deal?"
Maybe. A Bank will order either a BPO (broker’s price opinion) or appraisal to determine value before agreeing to the terms of a Short Sale. The list price of a home isn’t the price the bank has approved. The list price may appear to be a good deal, but the bank may want more money for the home once the BPO or appraisal has been done.
Please don’t think the list price will be the final price agreed upon!
Looking for programs that don't require a down payment? Check out Utah Housing on our website.