In a short sale you sell the home yourself, with your lender's approval, for less than you owe; in a foreclosure the trustee sells it at a public auction. In Utah a lender must sue for any shortfall within three months after a short sale's release or reconveyance is recorded (Utah Code 78B-2-313), or within three months after a trustee sale (57-1-32). Fannie Mae's wait to buy again is 4 years after a short sale and 7 years after a foreclosure.
At a glance
| Short sale deficiency deadline | 3 months after the release or reconveyance is recorded (Utah Code 78B-2-313) |
|---|---|
| Trustee sale deficiency deadline | 3 months after the sale, capped by fair market value (57-1-32) |
| Redemption after a trustee sale | None (57-1-28) |
| Fannie Mae wait to buy again | 4 years after a short sale, 7 after a foreclosure |
| Herriman typical value | $601,499, Zillow, August 2026 |
What is the difference between a short sale and a foreclosure?
A short sale is a sale you arrange: you list the home, accept an offer, and your lender agrees to take less than the loan balance and release its lien. The full definition is in what a short sale is and who approves it.
A foreclosure is a sale the lender's trustee runs. Most Utah home loans use a trust deed, so the trustee records a notice of default, waits at least three months, gives notice of sale, and sells the home at a public auction to the highest bidder (Utah Code 57-1-24 and 57-1-27). Every stage is laid out in the Utah foreclosure timeline.
If your home is worth more than you owe, the CFPB says selling it is typically better for your finances and credit than either, and your options for selling a Herriman home compare a listed sale, a short sale and a cash sale.
For the rest of the statewide rules, from reinstatement to the deficiency deadline, see how Utah foreclosure and short sale law works.
Short sale vs foreclosure side by side
The table uses the rules for loans owned or insured by the major investors. Private and portfolio lenders set their own terms, so ask your servicer who owns your loan.
| Question | Short sale | Foreclosure (Utah trustee sale) |
|---|---|---|
| Credit report | Shows as a settled account for seven years (Experian) | Stays seven years from the first missed payment that led to it (Experian) |
| Deficiency in Utah | Suit barred unless filed within 3 months after the release or reconveyance is recorded, unless fraud or a signed deficiency agreement (78B-2-313) | Suit allowed within 3 months after the sale; judgment capped at the debt minus fair market value on the sale date (57-1-32) |
| Timing | Set by the buyer and lender approval; must close before the trustee sale | First notice usually not until more than 120 days delinquent (12 CFR 1024.41), then at least 3 months before notice of sale (57-1-24) |
| Taxes | Forgiven balance is generally taxable unless an exclusion applies (IRS) | Treated as a sale; forgiven recourse debt above the home's value may be ordinary income (IRS) |
| Fannie Mae wait to buy again | 4 years (2 with extenuating circumstances) | 7 years (3 with extenuating circumstances) |
| FHA wait to buy again | Generally 3 years, with an exception if you were current for the 12 months before | Generally 3 years |
| Relocation money | Up to $7,500 (Fannie Mae, Freddie Mac) or up to $3,000 (FHA), with conditions | None in the sale; FHA servicers may offer up to $3,000 cash for keys after foreclosure |
How each one unfolds, step by step
A short sale
- You ask your servicer for a short sale review and send its loss mitigation application, called a Borrower Response Package on Fannie Mae and Freddie Mac loans, usually with a hardship letter.
- You list the home with a licensed agent. Fannie Mae and Freddie Mac want it on the MLS for at least five consecutive days, including a weekend; FHA wants at least 15 days before offers are evaluated.
- A buyer signs a contract that depends on the lender's approval.
- The lender values the home (FHA uses an as-is appraisal) and approves, counters or declines.
- You close by the date in the approval letter, and the lender releases its lien.
A Utah trustee foreclosure
- The servicer tries to reach you by day 36 of delinquency and sends written options by day 45 (12 CFR 1024.39).
- On bank and credit union loans for owner-occupied homes, Utah requires a notice giving at least 30 days to cure (Utah Code 57-1-24.3).
- After more than 120 days of delinquency, the trustee records a notice of default (57-1-24).
- You have three months to reinstate (57-1-31), then the notice of sale is published, posted and mailed (57-1-25, 57-1-26).
- The home is auctioned, the trustee's deed issues without redemption, and the lender has three months to sue for any deficiency (57-1-28, 57-1-32).
Who controls the timing
In a short sale the dates come from your listing, the buyer's contract and the lender's approval. In a foreclosure they come from the recorded notices and the trustee, and the levers you hold are reinstating within three months, sending a complete loss mitigation application more than 37 days before the sale, or closing a sale first. Each foreclosure stage, including what happens after the auction, is in the full Utah foreclosure process.
How Utah law treats each one
The foreclosure clock in Utah
Federal rule 12 CFR 1024.41(f) generally bars the first foreclosure notice until the loan is more than 120 days delinquent. In Utah that first step is the recorded notice of default, and at least three months must pass before notice of sale (57-1-24). Within those three months you can pay the past-due amount plus costs and fees and reinstate the loan (57-1-31). After the auction there is no right of redemption (57-1-28).
Deficiency after a trustee sale
The lender has three months after the sale to sue for the balance. The court must find the home's fair market value on the sale date and cannot award more than the debt, interest, costs and fees minus that value (57-1-32). A low auction bid does not set the size of the judgment.
Deficiency after a short sale
A lender's suit to recover 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 (78B-2-313). The bar does not apply if the owner committed fraud or signed an agreement to pay some of the deficiency. Fannie Mae, Freddie Mac and FHA short sales also release or forgive the deficiency when their rules are met, so read the approval letter for any repayment terms.
Can you still choose a short sale after a notice of default?
Often yes, because the home is not sold until the trustee sale. If your servicer receives a complete loss mitigation application more than 37 days before a scheduled sale, it must evaluate you for every available option and answer in writing within 30 days, and it may not hold the sale until the application is resolved (12 CFR 1024.41). That is not a guarantee of approval. The earlier stage is covered in what pre-foreclosure means in Utah.
Do lenders prefer a short sale or a foreclosure?
Lenders decide case by case, but the major investors' rules treat a short sale as a standard way to avoid foreclosure. Fannie Mae and Freddie Mac consider short sales for borrowers who are current or behind, and both offer a streamlined path for some borrowers 90 days to 18 months behind with a credit score of 620 or below. FHA will not accept a deed in lieu until the owner has tried a short sale.
What the lender receives in each
In a short sale the lender receives the net proceeds of an open-market sale, measured against its own valuation; FHA, for example, sets a floor of 84% to 88% of the as-is appraised value. At a Utah trustee sale anyone may bid, but the lender can credit bid up to what it is owed (57-1-28), and Utah Courts notes the highest bidder is usually the foreclosing bank. When the lender's credit bid wins, the lender becomes the owner of the home.
Who loses money in a short sale?
The loan's owner absorbs the gap between the payoff and the net proceeds, unless the approval letter keeps part of it owed. Second-lien holders usually take a capped payment to release their lien: Fannie Mae and Freddie Mac allow $6,000 in total, and Freddie Mac requires those holders to waive any deficiency claim. The seller generally receives no sale proceeds; VA's rules, for example, say the owner receives none, though several programs pay relocation money instead.
Example: a Herriman home worth $601,499
Zillow's typical home value for Herriman city was $601,499 in August 2026. This example is an illustration, not a real sale: the owner owes $660,000 on a home worth that typical value.
- Short sale. A buyer pays $601,499 and the lender approves. The shortfall is $58,501 before selling costs. If the approval letter does not release it, the lender has three months after the reconveyance is recorded to sue (78B-2-313).
- Foreclosure. The auction's high bid is $540,000, a $120,000 gap. If the court finds the home was worth $601,499 on the sale date, the judgment is capped at $58,501 plus interest, costs and fees (57-1-32).
The dollar gap can end up similar. The differences are the credit label, the wait to buy again, relocation money and who controls the timing. Selling with negative equity covers the numbers further.
Credit, taxes and buying again
Credit reporting
Experian says a short sale shows as a settled account for seven years and is less harmful than a foreclosure when there were no missed payments. See how a short sale affects your credit.
Taxes on forgiven debt
Forgiven mortgage debt is generally taxable unless an exclusion applies, and the federal main-home exclusion covers only debt discharged before January 1, 2026, or under a written arrangement made before then. See short sale taxes and the 1099-C.
How long until you can buy again?
The wait to qualify for a new mortgage is set by the loan program, not by the credit bureaus, and it is shorter after a short sale for most programs.
| Program | After a short sale | After a foreclosure |
|---|---|---|
| Fannie Mae | 4 years (2 with extenuating circumstances) | 7 years (3 with extenuating circumstances, with limits) |
| Freddie Mac, manual underwriting | 48 months (24 with extenuating circumstances) | 84 months (36 with extenuating circumstances) |
| FHA | Generally 3 years; an exception if you were current for the 12 months before the sale | Generally 3 years |
| VA | No set waiting period; late payments are reviewed | 2 years (1 with reestablished credit and circumstances beyond your control) |
Fannie Mae counts from the date the short sale or foreclosure was completed, and FHA from the date title transferred. The VA row comes from VA lender training material, and individual lenders can add stricter rules of their own. A VA loan that ends in a short sale or foreclosure can also reduce your future VA entitlement until VA's loss is repaid. The rules for rebuilding credit are in the short sale credit guide.
Who pays the costs, and how long can a short sale take?
Closing costs in a short sale
The seller's usual closing costs are normally paid from the sale price, because the lender approves the settlement figures and takes what is left. FHA, for example, allows commission up to 6%, prorated property taxes, customary seller closing costs and the owner-occupant's $3,000 compensation, and does not allow repair allowances, home warranty fees or third-party short sale negotiation fees. Utah charges no real estate transfer tax on a home sale. Read the approved closing figures before you sign.
Costs in a foreclosure
The trustee's costs, including trustee's and attorney fees actually incurred, are paid first from the auction proceeds, before the debt (Utah Code 57-1-29). The same costs are added to the amount you must pay if you reinstate within three months of the notice of default (57-1-31), so the price of catching up rises as the process goes on.
How long a short sale can take
FHA gives a seller four months from its approval to sign a contract, and a signed contract adds an automatic two-month extension to the deadline for starting foreclosure. On other loans the approval letter sets the closing date. Whatever the program, the sale has to close before the trustee sale, and a postponed sale can be held up to 45 days past the original date without a new notice (57-1-27).
Short sale vs foreclosure for a buyer
The ranking guides for this search also compare the two from the buyer's side, and the rules differ more than the price does.
Buying a short sale
You buy from the owner through a normal listing, with inspections and financing, but the contract waits on the lender's approval and the lender can counter the price. If you use an FHA loan, FHA lets up to 1% of your first mortgage count as an allowable seller cost in an FHA short sale. Our guide to buying a short sale home in Utah covers offers, timing and inspections.
Buying at a Utah trustee sale
The trustee sale is a public auction between 8 a.m. and 5 p.m. at a courthouse serving the county, and anyone may bid (Utah Code 57-1-25 and 57-1-27). A bid is an irrevocable offer, and the trustee may require a deposit stated in the notice of sale. The trustee's deed carries no right of redemption. If the former owner stays, the buyer must serve a notice to quit and may need a court eviction (78B-6-802.5), and bona fide tenants are entitled to at least 90 days' notice under the federal Protecting Tenants at Foreclosure Act.
Which option fits your situation?
A short sale tends to fit when the home is worth less than the loan, you cannot catch up, and there is time to close before the trustee sale. Before deciding, check the date your notice of default was recorded (the Salt Lake County Recorder's index search is free), who owns your loan, and whether a second mortgage or HOA lien also needs a release.
Neither outcome is guaranteed: the lender decides on a short sale, and a foreclosure can still lead to a deficiency suit within Utah's deadlines. Confirm your deadlines and deficiency exposure with a Utah attorney (the Utah State Bar's LicensedLawyer.org directory lists them) and talk with a HUD-approved housing counselor before you choose.
Frequently asked questions
Is a short sale as bad as a foreclosure?
Usually not as bad, though both hurt. Experian says a short sale shows as a settled account for seven years and is less harmful than a foreclosure when there were no missed payments. FICO research from 2011 found little difference in score impact when payments had been missed. Fannie Mae's wait to buy again is 4 years after a short sale versus 7 after a foreclosure.
How long does a foreclosure stay on your credit?
Experian says a foreclosure stays on your credit reports for seven years from the date of the first missed payment that led to it. The CFPB says most negative information can generally be reported for seven years. The waiting period to qualify for a new mortgage is a separate rule set by each loan program, and Fannie Mae's is 7 years after a foreclosure.
How long does a short sale usually take?
There is no fixed length, because it depends on finding a buyer and on lender review. Once a servicer has a complete loss mitigation application more than 37 days before a sale, it must answer in writing within 30 days. FHA gives a seller four months from approval to get a contract. Each step is covered on the short sale process page.
Can the lender sue me after a short sale in Utah?
Only within a short window. Utah Code 78B-2-313 bars a deficiency suit after a short sale of a single-family home unless it is filed within three months after the release or reconveyance is recorded. The bar does not apply if there was fraud or you signed an agreement to pay some of the shortfall, so read the approval letter before you sign.
Can a buyer back out of a short sale?
That depends on the purchase contract and its contingencies, including any terms tied to lender approval. Utah's list of state-approved real estate forms does not include a short sale addendum, so the contract language matters. Buyers and sellers should read those terms with their agents before signing; the buyer side is explained on the page about buying a short sale home.
How much less should you offer on a short sale?
The lender, not the seller, decides what price it will accept, usually measured against an appraisal or broker opinion. FHA, for example, requires a short sale to net at least 88%, 86% or 84% of the as-is appraised value, depending on how long the home has been marketed. An offer far below value is likely to be rejected or countered.
What are the disadvantages of a short sale?
It needs the lender's approval, which takes time and can be refused. It still lowers your credit, usually shows as a settled account for seven years, and can leave forgiven debt that is taxable unless an exclusion applies. You generally receive no sale proceeds. In Utah the lender keeps three months after the reconveyance is recorded to sue for any shortfall unless the approval letter releases it.
Do banks prefer a short sale or a foreclosure?
There is no single answer, because each lender weighs its own numbers. The major investors' rules make short sales a standard option: Fannie Mae and Freddie Mac review borrowers who are current or behind, and FHA requires an attempted short sale before it accepts a deed in lieu. A short sale offer still has to meet the lender's valuation, such as FHA's 84% to 88% of the as-is appraised value.
Who pays closing costs in a short sale?
Usually they come out of the sale price, as approved by the lender. FHA, for example, allows commission up to 6%, prorated taxes and customary seller closing costs, but not repair allowances, home warranty fees or third-party negotiation fees. Buyers pay their own usual costs. The lender's approval letter and settlement statement show exactly what it will pay.
Sources
- Utah Legislature: Utah Code 57-1-24
- Utah Legislature: Utah Code 57-1-27
- Utah Legislature: Utah Code 57-1-28
- Utah Legislature: Utah Code 57-1-31
- Utah Legislature: Utah Code 57-1-32
- Utah Legislature: Utah Code 78B-2-313, Action to recover deficiency after short sale
- eCFR: 12 CFR 1024.41 Loss mitigation procedures
- CFPB: Avoid foreclosure
- Experian: Short Sale vs. Foreclosure: What's the Difference?
- CFPB: How long does negative information remain on my credit report?
- FICO: Research Looks at How Mortgage Delinquencies Affect Scores
- Fannie Mae Selling Guide: B3-5.3-07, Waiting Periods and Re-establishing Credit
- Freddie Mac Seller/Servicer Guide: Section 5202.1, Credit reputation
- HUD: Handbook 4000.1 (May 20, 2024)
- HUD: Mortgagee Letter 2025-12
- Fannie Mae Servicing Guide: D2-3.3-01, Fannie Mae Short Sale
- Freddie Mac Seller/Servicer Guide: Section 9208.1
- Freddie Mac: Standard Short Sale FAQ
- IRS: Topic no. 431, Canceled debt
- IRS: Publication 4681 (2025)
- Utah Department of Commerce: State Approved Forms
- Salt Lake County Recorder: Property Search - Data Services
- Utah State Bar: Tips on Finding a Utah Attorney
- CFPB: Find a housing counselor
- Zillow Research: Home Value Index, cities (August 2026)
- Utah Legislature: Utah Code 57-1-24.3
- Utah Legislature: Utah Code 57-1-25
- Utah Legislature: Utah Code 57-1-26
- Utah Legislature: Utah Code 57-1-29
- eCFR: 12 CFR 1024.39 Early intervention requirements
- Utah Courts: Foreclosure (self-help)
- Freddie Mac Seller/Servicer Guide: Section 9208.2, Short sale subordinate liens
- VA: Loan Guaranty Conference 2023, Credit Underwriting
- VA: M26-4 Chapter 5, Loss Mitigation (draft)
- VA.gov: VA help to avoid foreclosure
- Utah Legislature: Utah Code 78B-6-802.5
- Cornell LII: 12 U.S.C. 5220 note, Protecting Tenants at Foreclosure Act
