Why Would a Lender Do a Short Sale on a Home in Utah County?

There are many ways to lose a home but signing away ownership in a manner that destroys credit, embarrasses the family and strips an owner of dignity is one of the hardest.  For owners who can no longer afford to keep mortgage payments current, there are alternatives to bankruptcy or foreclosure proceedings.  One of those options is called a "short sale."



When lenders agree to do a short sale in real estate, it means the lender is accepting less than the total amount due. Not all lenders will accept short sales or discounted payoffs, especially if it would make more financial sense to foreclose; moreover, not all sellers nor all properties qualify for short sales.

If you are considering buying a short sale, Team Teasdale will assist you in the location of a short sale and purchase.  Complete our online request or view our tips to finding a short sale in Utah County.

Although all lenders have varying requirements and may demand that a borrower submit a wide array of documentation, the following steps will give you a pretty good idea of what to expect.

Call the Lender
You may need to make a half dozen phone calls before you find the person responsible for handling short sales.  You do not want to talk to the "real estate short sale" or "work out" department, you want the supervisor's name, the name of the individual capable of making a decision.  This is usually a difficult task locating the decision maker and may sometimes not be possible.

Submit Letter of Authorization
Lenders typically do not want to disclose any of your personal information without written authorization to do so.  If you are working with a real estate agent in Utah County, closing agent, title company or lawyer, you will receive better cooperation if you write a letter to the lender giving the lender permission to talk with those specific interested parties about your loan.  Your agent must be put on this letter or they can not discuss the loan.  Your Realtor will often need your social security number or the last four digits to verify access of your bank data in working on the short sale.  You must contact the bank to make sure they have received the complete packet.  They will usually not contact you for anything.  You must be very proactive and checking everything if you do a short sale.  The letter you should write to the bank may include the following:

• Property Address
• Loan Number
• Your Social Security Number
• Your Contact Information
• Names on the Loan 
• The Date
• Your Agent's Name & Contact Information

HUD1 Net Sheet
This is an estimated HUD1 closing statement that shows the sales price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions, unpaid taxes, if any.  Your real estate broker will prepare this for you.  This needs to be on the proper documentation provided by a Utah title company.

Hardship Letter
The sadder, the better.  This statement of facts describes how you got into this financial bind and makes a plea to the lender to accept less than full payment.  Lenders are not completely inhumane and sometimes understand if you lost your job or were hospitalized.  If the lender does not feel that you are experiencing a hardship your request will usually be denied. 

Disclosure of Income and Assets
Lenders will want to know if you have savings accounts, money market accounts, stocks or bonds, negotiable instruments, cars, cash or other real estate or anything of tangible value.  Lenders are not in the charity business and often require assurance that the debtor cannot pay back any of the debt that it is forgiving.  Basically everything you tell them about your assets may work against you.  If you have too much wealth forget about trying to get a short sale.  For example, if you tell them you have $10,000 worth of gold in a safety deposit box they will say sell it first. 

Copies of Bank Statements
If your bank statements reflect unaccountable deposits, large cash withdrawals or an unusual number of checks, it's probably a good idea to explain each of those line items to the lender.  In addition, the lender might want you to account for each and every deposit so it can determine whether deposits will continue.

CMA - Comparative Market Analysis
Sometimes markets decline and property values fall.  If this is part of the reason that you cannot sell your home for enough to pay off the lender, this fact should be substantiated for the lender through a comparative market analysis (CMA).  Team Teasdale will prepare a CMA for you, which will show prices of similar homes:

• Active homes on the market in your neighborhood. 
• Pending sales of homes in your neighborhood. 
• Recent homes solds in your Utah County city.  

Real Estate Purchase Contract - REPC 
Once you have received a Real Estate Purchase Contract (REPC) from your broker, the lender will want a copy of the offer.  Be prepared for the lender try and renegotiate the price and some of the items.  Just because they get and offer does not mean they will accept the offer.  Some lenders will often not even consider a short sale until you have a purchase contract.  This means your home may be stuck as a unapproved short sale on the Wasatch Front MLS (multiple listing service).

Realtors Listing Agreement
The lender will want a copy of the fully active listing agreement and often a copy of the Realtors MLS datasheet.

Now, if everything goes well, the lender will approve your short sale.  Approved short sales for sale on the multiple listing service are what Realtors and buyers want.  Unapproved short sales on the multiple listing service are intents to sell without authorization.  I persoanlly avoid unapproved short sales and will not write offers on these properties for my buyers.  This is because the length of time for an approval (between several weeks to months).  Most buyers can't wait several months for a short approval.  As part of the negotiation, you might ask that the lender not report adverse credit to the credit reporting agencies, but realize that the lender is under no obligation to accommodate this request. 

Contact Associate Broker Paul Teasdale of Remax Results Realty at 801-491-7653 to discuss your short sale options.  I am sorry if you are experiencing a short sale.  A short sale can be stressful.  Time will pass and your short sale problem will soon be a distant forgetable memory.