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I want to share with you some Salt Lake Housing numbers that are hot off the press for May 2018.

In 2017 in May, the sales comparison: We had 1,781 homes in May of last year. This year, we’re down 6% to 1,680. We have low surplus, or we have a shortage of homes on the market. Because of that, the next number is an increase in the price. The median home price went from 300,000 in May 2017 to 320,000 in May of this year, and our median days on market reduced a little bit as well from 11% from 28 days last year in May, and now 25 days this year.

Because of an increase in, well, low supply and high demand, we’ve got lower days on market as well. Pending sales, now this is homes that are in escrow or under contract. It went from 1,772 in May to 1,792, so a slight increase. We’ll probably see that in June, the numbers are a little bit up from May, and comparatively speaking as well. Those are our numbers, and I’m going to be sharing this with you, I hope, on a monthly basis or as often as I possibly can as I get these numbers in.

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What is a short sale and should I consider buying a home listed as one

Today we’re going to explore this a little bit as this is a common question that we receive from investors, from first time home buyers or even repeat home buyers that are looking at short sales. They see these listings. They hear maybe even some of the hype about buying a short sale because they understand they might get a better deal. And while that may be the case, it’s not always the case.

First, I just want to explain what a short sale is. A short sale in essence is when the homeowner owes so much on their mortgage. Let’s just for simple math, let’s say it’s $200,000 that they owe. But the value of the property is let’s say 175. So we are short in terms of value and the principal balance of the loan. It could also not just be value, but essentially what they may be trying to sell the home for. If they have an offer that’s 175 and/or they need to sell it quickly and the buyer’s an investor, wanting to get a deal, they’re wanting to go short on the mortgage, that’s essentially what it is.

And so what would happen, that seller receives an offer that’s short of their mortgage, then they could accept that, and then it has to get submitted to the bank for approval. For the bank to look at it, typically they’re going to look at comparables. They’re going to run what’s called broker priced opinions of value to see if the value really is short of the loan balance. Most of the time, the seller is in a position of default, or they’re behind on their mortgage, so the bank can see that it’s either going to be accepting a short offer on a loan or potentially going to foreclosure. So they’re going to weigh out their options.

Now here’s the kicker when we’re deciding if we should consider. If you are a buyer that needs a timeline laid out … for example, it goes under contract, we have two weeks to do our due diligence, we have two weeks to get financing and so forth, and we have an expected close date, and you’re planning on having all the moving pieces fall in line, if you need to be in by a certain timeframe, don’t consider it.
Because what can happen with a short sale is it can get accepted by the seller and the bank can sit on it for two months, three months, six months, a year. We’ve seen it up to two and a half years that the bank is sitting on these offers and they’re not approving the process of the short sale, and oftentimes, they’ll just look at the value of what they can sell it for if it does foreclose, and they’ll decide to go down that road instead.

And so for investors, where you don’t have to get into the home, you don’t need to live there, you’re not planning on moving from somewhere to somewhere else, it could be a good option, because you can be more patient. You can allow for that process to take its course. If it works out, great. If it doesn’t, that’s okay, too. But for a homeowner, if you have a timeline, I don’t recommend considering short sales just because if you have that need to get in by a certain time, it could be challenging for you.

I hope this is helpful, just giving you a general overview of what a short sale is, as well as helping you understand if it might be a good fit for you. If you have any questions or if you’d like to discuss this even further, feel free to reach out to our team. We’re always here to help