Sarah's dad is an unseen, unknown NPC that Sarah believes is dead.
However, according to her mother, her father is still alive, as [her mother] has not seen him on the other side yet. This revelation causes a brief burst of rage in Sarah, who feels abandoned. Ghost Mom explains that she can't assume the worst, when he loved Sarah as much as she did.
Whether he lives in the town or somewhere else is unknown. It's also unknown why he left Sarah, if he is alive.