Short Sales
Short sales occur when the proceeds of a real estate sale fall short of the mortgage balance owed on the property. To facilitate a short sale, the lender agrees to discount an outstanding loan balance, usually due to an economic or financial hardship on the part of the mortgagor to allow a sale to occur. The borrower sells the mortgaged property for less than the outstanding balance of the loan, gives the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the mortgage debt. The lender must approve a proposed sale in advance for the sale to occur.
Short sales generally occur to prevent a foreclosure. Often the bank will agree to a short sale if they believe that it will result in a smaller financial loss than going through the lengthy and expensive foreclosure process.
Utah’s Short Sale Process
Each lender has their own guidelines that they follow when they take a short sell in to consideration, but here are some general guidelines for who might qualify for a short sale.
* The borrower must have a financial hardship (loss of income, reduction of income, death in family, divorce, job transfer, excessive debt, etc.)
* Borrower must be behind on payments
* The home must be listed for sale with a licensed Utah real estate agent.
* The borrower must be willing to provide a full financial disclosure to the lender (paystubs, bank statements, tax returns, financial statement, and hardship letter).
Benefits of Doing a Short Sale
* Minimize credit damage
* Minimize deficiency balance
* Minimize tax liability
* Opportunity for borrower to negotiate best possible terms with the lender
Repercussions of Short Sales
* You may receive a 1099 or deficiency judgment from your lender for the difference between the amount owed and the amount paid on the loan (this varies by situation).
* Negative reports to the credit bureaus from each lender.
Utah’s Foreclosure Experts
If you are falling behind on your mortgage payments, or experiencing financial hardships, please contact us. We have dealt extensively with helping clients avoid foreclosure and minimize the emotional and financial distress that can come with falling behind on mortgage payments.
