Utah Short Sales
Quite often the owners of the pre-foreclosure homes are upside down. They owe more than the property is worth. It is still possible to purchase these homes. To help avoid foreclosure, banks will often times approve a "short sale." When a blank house is in short sale status, the bank forgives a portion of the debt and sells the home for less than what is owed. For banks, foreclosing is a very expensive process and they are often better off taking a "short sale" than foreclosing. Many blank short sale houses are listed on the MLS. They are noted with a special "SS" mark by the listing. Homes are in this status all over Utah from Salt Lake City to St. George.
Purchasing Short Sales
Purchasing short sales is a little different than purchasing a traditional home. It's not guaranteed, and takes a lot more patience. Banks must approve the short sale amount, and they are not the easiest to deal with.
There are a few fundamental differences when purchasing a Short Sale in Utah:
- The offer needs to be accepted by both the home owner and the bank.
- The offer must be as is. There will be special addendums that state that the home will not be warranted.
- The lender most likely will not allow any concessions, closing costs, allowances, etc.
- Deadlines mean nothing. The bank will do things at their pace.
- Earnest money does not have to be deposited until after the bank accepts the offer.
- There is a good chance you won't get the house even after your offer has been accepted by the owner.
- Banks often wait until they have multiple offers before acting.
Short sales will only be approved by the bank if:
- The borrower demonstartes that they really are suffering from a financial hardship. Distressed borrowers should complete the Freddie Mac Short Sale Hardship letter found here.
- They usually have to have missed payments in order for the bank to work with them.
The pre-foreclosure stage begins when home owners receive a "notice of default", because they have missed mortgage payments. The owners still have an opportunity to make up the missing payments. If the home owner cannot make up the missing payments, and the owners owe more than the homes market value, the home owner can often sell their house under "short sale status." Many investors step in and contact these owners directly offering to buy their house in order to prevent the foreclosure. Many distressed homeowners also list their homes in effort to save their equity.
When a house is in short sale status, the bank forgives a portion of the debt and sells the home for less than what is owed. For banks, foreclosing is a very expensive process and they are often better off taking a "short sale" than foreclosing.
Utah Short Sale Procedures
A short sale is a legally-binding agreement to allow a home to be sold for less than the amount owed. Short sales are not easy, lenders are much more eager to negotiate with borrowers who are having trouble paying their mortgages than to let the property foreclose. For potential home buyers and real estate investors, a short sale also offers a great opportunity to purchase property at a discount.
Don't expect a lot of help from the lender without first providing a sales contract from a qualified buyer and all the information required by the lender's loss mitigation department.
Lenders are not looking to bail out investors or flippers or other borrowers who simply overextended themselves. In most cases, a borrower must have suffered a serious financial hardship that directly caused him or her to default on the mortgage such as: a loss of a job, a serious illness, death, or serious injury. In addition, the borrower must be at least three months delinquent before a lender will even consider a short sale.
A written declaration and supporting documentation demonstrating financial hardship will be required by the lender. This may include pay stubs from up to the last six months, tax returns for up to three years, and statements showing any Salt Lake City liquid assets.
If there are multiple liens against the property, all lien holders will have to be involved in the negotiation process, not just the first lien holder. In many cases the primary lien holder will only consider a short sale if the second lien holder discounts first. Communication and patience are essential components of a short sale. It becomes essential to have the help of a experienced real estate agent and mortgage professional to aid in the Utah short-sale process in SLC.
