A short sale follows ten steps: confirm who owns your loan, apply with your servicer, list the home, accept an offer subject to approval, then wait for the lender's valuation and written approval before closing. For Fannie Mae loans, the servicer answers within 30 calendar days of a complete package and offer, and the sale must close within 60 days of approval. In Utah the foreclosure clock keeps running: at least three months from the notice of default to the notice of sale.
At a glance
| Fannie Mae minimum MLS listing | 5 consecutive days incl. a Saturday and Sunday |
|---|---|
| Fannie Mae answer to offer | 30 calendar days after complete package and offer |
| Fannie Mae closing after approval | 60 calendar days |
| Utah notice of default to notice of sale | At least 3 months (Utah Code 57-1-24) |
| Utah short sale deficiency deadline | 3 months after reconveyance (Utah Code 78B-2-313) |
Short sale steps at a glance
A short sale is a regular home sale with one extra party: the lender that holds your loan, which must agree to accept less than the payoff. If the idea is new, start with the short sale meaning and why lenders agree. The process below assumes a Utah home with a trust deed loan.
- Find out who owns or insures your loan.
- Tell the servicer you want a short sale and ask for its application.
- Gather the short sale package.
- List the home with a licensed agent.
- Accept an offer subject to lender approval.
- Submit the offer and package to the servicer.
- The lender orders a BPO or appraisal.
- Answer counteroffers and requests for documents.
- Receive the written approval letter.
- Close by the deadline and confirm the lien release is recorded.
The short sale process, step by step
Step 1: Find out who owns or insures your loan
Your servicer collects payments, but the rules usually come from the investor or insurer behind the loan: Fannie Mae, Freddie Mac, FHA, VA, USDA or a private lender. Ask the servicer directly. The answer sets the listing rules, the minimum price, how much a second lender can be paid and whether relocation money is available.
Step 2: Ask the servicer for a short sale review
Call or write to the servicer's loss mitigation department and ask for its application. Federal servicing rules require servicers to try to reach a delinquent borrower by day 36 of a delinquency and to send written information about loss mitigation options by day 45. You do not have to wait for that contact. Fannie Mae and Freddie Mac consider borrowers who are current or behind, as long as their other conditions are met.
Step 3: Gather the short sale package
The package is the set of documents the lender uses to decide whether you qualify. Its contents are covered in the next section. Send it complete, keep copies and keep proof of the date it was received.
Step 4: List the home with a licensed agent
Investor rules require real marketing. Fannie Mae requires an active MLS listing with a licensed agent who is not a borrower for at least five consecutive calendar days, including a Saturday and a Sunday, before the servicer recommends the sale. Freddie Mac requires an MLS listing of at least five consecutive days including a weekend. For FHA loans, the home must be on the MLS for at least 15 days before offers are evaluated. A Herriman owner weighing a listed sale against a cash buyer can compare them on ways to sell a Herriman home.
Step 5: Accept an offer subject to lender approval
You sign a purchase contract with the buyer, and the contract or an addendum makes the sale contingent on the lender's approval. Freddie Mac requires an arm's length sale, meaning the buyer is not a relative or business associate who could pass the home back to you. The buyer's side of this step is on how buying a short sale home works.
Step 6: Submit the offer and package
Your agent sends the signed contract, the estimated settlement figures and your package to the servicer. Fannie Mae's guide has the servicer acknowledge an initial short sale offer within five business days and, if the offer arrives incomplete, give the borrower a checklist of what is missing.
Step 7: The lender orders a BPO or appraisal
The lender values the home independently, usually through a broker price opinion (BPO) or an appraisal. That value, not the contract price, drives the decision. The valuation section below explains how it works by loan type.
Step 8: Answer counteroffers and document requests
The lender can approve, counter or decline. Fannie Mae's guide gives the servicer 30 calendar days from receiving a complete package and the initial offer to send its answer, and ten business days to answer a revised offer. A counter may ask for a higher price, lower costs or a contribution from you.
Step 9: Receive the written approval letter
The approval letter states the terms the lender will accept. Read every line before closing, especially the parts about the remaining balance.
Step 10: Close and confirm the lien release
Fannie Mae requires an approved short sale to close within 60 calendar days of approval unless the servicer gets written approval for more time, and all parties sign a Short Sale Affidavit (Form 191) at closing. After closing, check that the release or reconveyance is recorded with the Salt Lake County Recorder, whose document index can be searched free online. In Utah, that recording date matters for the deficiency rule below.
What goes in a short sale package?
Lenders call it a loss mitigation application or, at Fannie Mae, a Borrower Response Package. A package is complete only when every required form and document is attached.
Mortgage assistance application
Fannie Mae's complete package starts with Form 710, the Mortgage Assistance Application, completed in its entirety. Other investors use the same form or their own version.
Income documentation
Pay stubs, benefit letters or other proof of income, by income type. Fannie Mae requires standard income documentation to be no more than 90 days old, so documents may need refreshing if the sale drags on. In limited cases the servicer may also ask for a signed IRS Form 4506-C so it can check tax return data.
Hardship documentation and letter
The lender wants to know what changed and why the loan cannot be kept. Fannie Mae requires hardship documentation based on the type of hardship, and most packages include a written explanation. How to write one honestly is covered on the short sale hardship letter guide.
Sale documents
The listing agreement, the signed purchase contract with any addendum, the buyer's proof of funds or loan preapproval, and an estimated settlement statement showing commission, title charges, liens and the net to the lender.
How the lender values the home (BPO and appraisal)
A BPO is a price opinion from a real estate broker; an appraisal is a formal valuation by a licensed appraiser. Fannie Mae has the servicer place the valuation order directly with Fannie Mae, so neither the seller nor the agent chooses the valuer.
FHA appraisal and minimum net proceeds
For an FHA Pre-Foreclosure Sale, an FHA roster appraiser does an as-is appraisal valid for 180 days. The offer must net at least 88% of that value in the first 30 days of marketing, 86% in days 31 to 60 and 84% in days 61 to 120. If the as-is value is $75,000 or more below the unpaid principal balance, or under half of it, the servicer also needs a BPO or automated valuation and a HUD variance. Details are on FHA short sale rules.
When the valuation comes in high
If the lender's value is well above the contract price, it may counter at a higher figure. Your agent can send recent comparable sales, repair bids and photos of condition to support the contract price. Utah is a non-disclosure state, so sale prices are not public record and comparable sales usually come from the MLS.
What to check in a short sale approval letter
Utah agents may not disclose or use a short sale demand or approval letter outside the purchase it was issued for (Utah Admin. Code R162-2f-401b), so it stays between the parties. Read it for:
- The approved price and the minimum net the lender must receive.
- The closing deadline and whether an extension is possible.
- Approved costs. Fannie Mae allows a customary commission of no more than 6% of the price and seller title and settlement charges, and bars non-customary third-party fees.
- Any cash contribution or promissory note the lender wants from you. Freddie Mac will not pursue a good-faith borrower for the balance on an approved short sale unless the borrower signed a promissory note as part of a contribution.
- Whether the remaining balance is waived, released or kept.
- What the second lender is paid and whether it forgives its balance, not just releases its lien.
Utah's short sale deficiency deadline
Under Utah Code 78B-2-313, a lender's lawsuit to collect the shortfall after a short sale of a single-family home is barred unless filed within three months after the release or reconveyance is recorded. The three-month bar does not apply if the owner committed fraud in the short sale, or if the borrower signed an agreement with the lender to pay some or all of the deficiency. A signed contribution agreement in the approval paperwork can fall in that second exception, so have it reviewed before you sign.
How long does a short sale take?
There is no fixed total. It depends on the investor, how complete the package is, how many liens there are and whether a foreclosure date is set. These are the deadlines that are written down.
| Stage | Written deadline | Source |
|---|---|---|
| Servicer says whether your application is complete | 5 business days (application 45+ days before a sale) | 12 CFR 1024.41 |
| Decision on a complete application | 30 days (received 37+ days before a sale) | 12 CFR 1024.41 |
| Fannie Mae acknowledges initial offer | 5 business days | Fannie Mae D2-3.3-01 |
| Fannie Mae answer to offer and complete package | 30 calendar days | Fannie Mae D2-3.3-01 |
| Fannie Mae closing after approval | 60 calendar days | Fannie Mae D2-3.3-01 |
| FHA time to get a contract | 4 months from approval to participate, plus 2 months if signed but not closed | HUD ML 2025-12 |
The Utah foreclosure clock runs alongside
A short sale review does not automatically pause foreclosure. Federal rules generally keep a servicer from recording the notice of default until the loan is more than 120 days delinquent. Once it is recorded, Utah Code 57-1-24 requires at least three months before the trustee gives notice of sale, and the sale notice must be posted at least 20 days before the sale. The full sequence is on the Utah foreclosure timeline.
Protection for a complete application
If a complete loss mitigation application arrives after foreclosure has started but more than 37 days before the sale, the servicer may not conduct the sale until the application is resolved. A trustee can also postpone a sale by announcement, and a postponement of more than 45 days past the original date needs a new notice. If time is short, other routes are compared on options to stop foreclosure in Utah.
What if the lender declines the short sale?
A decline is not always the end. Ask the servicer for the reason in writing. Common fixes are a price closer to the lender's valuation, a corrected or refreshed document, or a new buyer if the first one has walked away. If the value gap or a second lien cannot be solved, the remaining routes are usually a deed in lieu or letting the trustee sale go ahead.
Some investors expect a short sale attempt before a deed in lieu. FHA's Standard deed in lieu, for example, requires the borrower to have attempted a Pre-Foreclosure Sale first. The two are compared on deed in lieu vs short sale, and the outcome of doing nothing is set out on how a short sale compares with foreclosure. There is no right of redemption after a Utah trustee sale, so a decline late in the foreclosure clock leaves little room.
Who negotiates the short sale?
Usually the listing agent, sometimes with a short sale negotiator or processor who handles the paperwork and follow-up with the servicer. The servicer's decision follows investor rules, so the job is mostly getting a complete file in on time and answering every request.
Fees and licensing in Utah
Utah rules bar a real estate licensee from charging a fee equal to the gap between the lender-approved price and the amount needed to close, and from having a short sale seller sign a document allowing the licensee to lien the property. Paid foreclosure rescue that involves transferring title is licensed real estate activity in Utah, and paid loan modification help falls under the mortgage licensing act. Whether a third-party negotiator needs a license has not been settled in a statute or rule found for this site, so ask any negotiator which Utah license they hold and check it. For FHA loans, the servicer cannot charge a fee to take part in a Pre-Foreclosure Sale.
How to spot a rescue scam
Be careful with anyone who asks for money up front, tells you to stop talking to your servicer, or asks you to sign over the deed. A HUD-approved housing counselor, found through the CFPB's counselor search, can review your options without charge. The agent who works with this site is introduced on our recommended short sale realtor.
Example: a short sale on a Herriman home worth $601,499
This is an illustration, not a real sale. A Herriman owner with an FHA loan owes $640,000 after a job loss. Zillow's typical home value for Herriman was $601,499 in August 2026, and the FHA as-is appraisal comes in at that figure.
- In the first 30 days of marketing, the offer must net at least 88% of $601,499, or about $529,319.
- A contract at $585,000 with $40,000 of approved commission and closing costs nets $545,000, which clears the 88% tier.
- FHA's Standard Pre-Foreclosure Sale requires the owner to be at least 61 days behind, so the notice of default may already be recorded. The three-month minimum under Utah Code 57-1-24 is the window to get the file approved.
- If the sale closes, an owner-occupant acting in good faith can receive up to $3,000 under FHA's rules, and FHA's definition of the sale includes forgiving the deficiency.
Herriman values, HOAs and property tax are on Herriman home values.
Before you sign anything
A short sale affects your debt, credit and taxes. Waiting periods to buy again are on short sale credit and waiting periods, and forgiven-debt rules for 2026 are on short sale tax consequences. Have a Utah attorney read the approval letter and any deficiency or contribution agreement, ask a CPA about the tax result, and talk to a HUD-approved housing counselor about options your servicer offers.
Frequently asked questions
What happens when you short sale?
You list and sell the home, but the sale can only close after your lender agrees to accept less than the payoff. The lender reviews your hardship and finances, values the home, then approves, counters or declines the buyer's offer. At closing the lender takes the net proceeds and releases its lien. The approval letter says what happens to the remaining balance.
Can a buyer back out of a short sale?
Usually yes before the lender approves, because the contract is contingent on that approval. After approval, the buyer is bound by the contract's other terms, such as inspection, financing and appraisal contingencies. Long waits are the common reason buyers walk away, so a complete package sent early helps keep a buyer in the deal.
Does a short sale hurt your credit?
Yes. Experian says a short sale typically appears as a settled account for seven years, and missed payments before it are reported too. FHA requires servicers to tell borrowers in writing that a Pre-Foreclosure Sale is reported to the credit bureaus and will likely affect future credit. How long you wait to buy again depends on the loan type.
What is a common requirement for a short sale to proceed?
A financial hardship and a sale price the lender will accept. Most investors want documented hardship and income, an arm's length buyer and an MLS listing for a minimum period. Fannie Mae requires at least five consecutive days on the MLS, including a Saturday and a Sunday. The lender also needs every other lien holder to agree.
Who loses money in a short sale?
The lender or investor takes the main loss by accepting less than the balance. A second lender usually accepts a capped payment; Fannie Mae and Freddie Mac limit it to $6,000 in total. The seller loses any down payment and equity, and could owe the shortfall unless it is waived or the lender misses Utah's three-month deadline.
What is the downside of buying a short sale?
The wait and the uncertainty. The seller's lender sets the timeline, may counter at a higher price and may decline. The home is usually sold as is, and lenders often refuse to pay for repairs. Buyers need a flexible rate lock and moving plan.
How long does a short sale take?
There is no fixed total. Fannie Mae's guide gives the servicer 30 calendar days to answer after a complete package and offer, then 60 calendar days to close after approval. Missing documents, second liens and counteroffers add time, so starting before a Utah notice of sale is recorded leaves the most room.
Sources
- Fannie Mae Servicing Guide: D2-3.3-01, Fannie Mae Short Sale
- Fannie Mae Servicing Guide: D2-2-05, Receiving a Borrower Response Package
- Freddie Mac Seller/Servicer Guide: Section 9208.1
- Freddie Mac: Standard Short Sale FAQ
- Freddie Mac Seller/Servicer Guide: Section 9208.2
- HUD: Mortgagee Letter 2025-12
- eCFR: 12 CFR 1024.41 Loss mitigation procedures
- eCFR: 12 CFR 1024.39 Early intervention requirements
- Utah Legislature: Utah Code 57-1-24
- Utah Legislature: Utah Code 57-1-25
- Utah Legislature: Utah Code 57-1-27
- Utah Legislature: Utah Code 57-1-28
- Utah Legislature: Utah Code 78B-2-313
- Cornell LII (Utah Admin. Code): R162-2f-401b
- Utah Legislature: Utah Code 61-2f-102
- Utah Legislature: Utah Code 61-2c-102
- Salt Lake County Recorder: Property Search - Data Services
- Deseret News: Are you entitled to know what your neighbor paid for his house?
- Experian: Short Sale vs. Foreclosure: What's the Difference?
- Zillow Research: Home Value Index (Herriman city)
- CFPB: Find a housing counselor