Short Sales will become easier to Obtain in Utah.

The Treasury Department unveiled rules this week to help financially troubled homeowners who need to sell but can't get a price high enough to pay off their mortgages.  Homeowners will even get $1,500 to help cover their moving costs.

The plan is designed to help homeowners who don't have enough income or debt to qualify for a loan modification under the Obama administration's $75 billion Making Home Affordable program.  The plan establishes timetables, a standard process and documents, and cash incentives for participation.

Short sales, as these deals are called, reduce the damage to the borrowers' credit record and save the lenders the cost of foreclosure. Short sales also help neighboring property values because the sales price is usually higher than what the house would fetch in a foreclosure auction. In my experience it is much better for a seller to go thru a short sale compared to a bank foreclosure.

About one in 10 home sales this year was a short sale, or an estimated 500,000 sales, according to the National Association of Realtors. In areas such as Las Vegas, southern Florida, Utah and California, the ratio is far higher.  In fact, about 25% of the homes currently for sale in Utah County are short sales.  The short sale market is increasing.  In my opinion only about 33% of the homes that choose to go the short sale direction are actually sold during the short sale process.  I have sold homes in the short sale process between 4 weeeks to 2 years.  The average time to complete a short sale in Utah County is probably about four months.

To qualify under the new guidelines the Utah property must be the homeowner's principal residence.  It will be disqualified if it is a rental unit.  The homeowner is delinquent on the mortgage, or default looks likely.  If it looks like you can make the payment you will not qualify.  The loan was made before Jan. 1 of 2010  and is less than $729,750.  The borrowers' total monthly mortgage payment exceeds 31 percent of their before-tax income. 

The plan is designed to accelerate the necessary agreements between lenders, real estate agents, buyers and sellers. But the Treasury Department's plan might have some shortcomings. 

Mortgage companies don't have to launch the program until April 5, which is no help for homebuyers, sellers and real estate agents mired in deals now. The program is also voluntary for lenders who hold second mortgages, such as home equity loans. The Treasury Department has estimated that about half of homeowners in default have more than one loan on their properties.  The loan can often get complicated when dealing with more than one lender on a short sale.

Although those other secondary debt holders can get up to $3,000 to release their claims on the property, that may not be enough to satisfy larger creditors who would rather go after the borrower.  Banks are finding it is often better to take $3,000 rather than go after a broke borrower. 

Nevertheless, the new guidelines should reduce paperwork by requiring mortgage companies to use the financial and hardship documents submitted by borrowers seeking a loan modification. To speed up the approval process, mortgage companies will have to approve short-sale terms, including the minimum listing price, before the house is put on the market.  This would be the best news ever for our industy.  The bank actually approving the short sale price instead of a phony price.  We need this so much.  This would help stabalize the prices in Utah County.  I was talking to a seller in Provo, Utah the other day and all the comparisons were short sales.  None of the prices have been approved by the bank.  The seller was frustrated because the prices do not reflect the actual price the bank will take.  In many cases not even close to what the bank will take.  However, the buyers don't know this they just look at the short sale prices and dump a lowball on the seller.  If we make the banks come up with a listing price this will be a good step in the right direction.  If you would like a list of the short sales in Utah County visit our website.


Welcome to my Utah County Real Estate blog!  We are located  in Mapleton, Utah.  Our team combines proven traditional real estate practices and represents the leading edge in the future of real estate marketing by merging internet technologies, service, communication, information and analysis with those traditional practices to provide our clients with an exceptional real estate experience and superior marketing.

Paul Teasdale, Principal Broker
ABR, CRS, e-PRO, QSC, Finance  BYU
15 Years Experience, 800+ Homes Sold
Team Teasdale Realty, Utah County Real Estate
Phone: 801-491-7653