Short Sale Questions to Think About

By
Real Estate Agent with Team One - The Franklin Group

I don't know about other states, but in Utah our real estate market is still pretty stong and has been.  I see short sales popping up and have one qauestion on my mind.  Why, if someone bought a home one, two, three, or more years ago, and now they can not make the house payments for whatever reason, is the home worth less money.  I have had two people come to me and said they were behind on their mortgage payments and wanted to sell their house.  We put the house on the market, sold it, and paid off the mortgage company and put money in the seller's pocket.  The only reason I can think that someone would do a short sale is if the house was over priced  when they bought it or they are in an area where prices have dropped way down.  Since this isn't the case in Utah, I just can't understand short sales. 

2nd question:  If the seller wants to do a short sale and they have submitted the correct package to their lender for approval of the short sale, why do all the short sales say, "Subject to price approval of a third party"?   I've done two short sales, and both time I had the seller submit the required documents to the mortgage company, they sent out an appraiser, gave us a price to list the house at and we sold them both within 15 days of getting the price approval from the mortgage company.  We have one house in Syracuse that has been sitting on the market for over a year and they had a full price offer on it because I wrote it for one of my clients, but we didn't get the home, and it is still active on the MLS. 

I just seem to have a problem with both of these questions and wonder what is going on.

Comments (3)

Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate

Gerald: Every market and situation is different. The short sales I work with are mostly with homeowners who purchased in a peek market … most qualified (that is a term I use lightly) with stated income and 100% financing … literally not one penny down! The loan structures on most of these scenarios were high interest adjustable loans that over one-two-three years were no longer manageable. Add to that prices began to drop. For example: Homeowner paid $650,000 for a home. Market Value today is $400,000. They can no longer make the payments because they keep adjusting. They cannot refinance because there is no equity and they do not have the cash to throw into it. Many people with conventional financing took out HELOCs …and as values decreased … it caused them to go under too.

Truth is … many people can make the payments and they just want out from the debt they created. I know people who financed businesses with the equity in their home. The sold short and walked away because they can turn around and have a family member effectively buy the same home for nearly half the price.

Aug 29, 2009 03:41 AM
Debbie Aldrich
The Watts Group Real Estate - Cottonwood Heights, UT
Salt Lake City Realtor - Salt Lake County, Cottonwood Heights

Gerald, Nice to meet you. Please subscribe to my blog. Thank you for your great comment on my blog this morning. It is always great to have a contact in Ogden.. My dad was at Hill many years ago that's how I ended up in Utah.  They lived in shadow mountain.

Aug 29, 2009 04:04 AM
Richard Dolbeare, R(B)
eXp Realty - Wailuku, HI
R(B), ABR, CRS...Hawaii Multi-Island Specialist

Hi Gerald.  Clearly your market is in better shape than most.  It sounds like short sales details are not something that needs to be a high priority to you.  Congrats.

Aug 29, 2009 04:41 AM