"I've never seen this many short sales, and I've been doing them for 11 years," said Mindy Mason, a Realtor with Prudential Utah Real Estate.

Mason said in years past, banks would often accept the loss on a property and forgive the deficiency from the seller, but times have changed.

"A lot of banks are requiring that the deficiency be paid over time or at least a portion of it be paid," she said. "They used to forgive, but there's just so much of it."

Mason said a "huge amount" of investor speculation, subprime lending and home construction contributed to the dramatic inflation of home prices and put many buyers in homes they eventually were unable to afford when the market turned downward.

She said those factors put a significant number of property owners in financial peril, so much so that today, about half her business involves short sales.

Quick action urged

Eric, who asked that his last name not be disclosed, found himself unable to afford his home and ended up turning to a short sale. He and his wife purchased a new home in Orem in 2005 and lived there for three years before separating.

"I couldn't afford the payments on my own," he said.

The couple bought the house for $480,000, and it jumped in value just two years later. He refinanced the home after it was appraised for $619,000 to finish the basement.

His choices were to "short-sell" the house or risk losing it to foreclosure. He said he chose the short-sale option rather than allowing the house to go into foreclosure because the long-term impact on his credit would have been much worse with a foreclosure.

He eventually sold the house for the original purchase price in February of this year, although the mortgage was for the higher, refinanced amount. "The note on it was $619,000, and then it sold for $480,000," he said.

With delinquency so pervasive in the current mortgage market, lenders warn borrowers to take immediate action to avoid losing their homes.

Knight said if homeowners finds themselves in dire financial straits with their mortgage, they should contact their lender as soon as possible to explain the situation. He said the loan servicer would begin to examine all options in an attempt to keep the homeowner in the property. But if that proves unfeasible, then other alternatives would be considered, including short-selling.

Knight said a bank would look at the current value of the home to determine what a reasonable sales price would be for the property. "We will help them list it appropriately for the market," he said.

Short sales typically take some time to complete, due to the extensive paperwork involved and approvals needed, he said. The timeline for a short sale would be approximately 35 to 40 business days before the bank would make a decision.

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E-mail: jlee@desnews.com HOUSING CRISIS

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