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If you haven't heard of a real estate short sale up until now, you probably will in the very near future. So in this article, I'll explain how the short sale process works in Utah and what it has to do with you.
Why Are Short Sales Popular Lately?
Chances are, you've heard about the record numbers of home foreclosures across the United States. After all, you see it just about every time you turn on the evening news or read the paper. This rise in foreclosures directly corresponds to a rise in the number of short sales, because the two things are closely related.
Let's start with a definition:
Short sale -- The sale of a home (by its owner) for less than the amount owed on the property.
Here is the first question most people have: "Why would somebody sell their home for less than market value? And why would the mortgage lender accept less than what is owed by the homeowner?" These are both excellent questions. So to properly understand the process of Utah short sales we must answer them both.
When homeowners can no longer afford the mortgage payments on a home, they face a possible foreclosure. The lender will foreclose on the property and sell it as quickly as possible, typically at an auction.
But in most cases, the lender does not want to pursue the full foreclosure process any more than the homeowner wants to be foreclosed upon. It can be very expensive for the lender to foreclose on the home. They have to pay an attorney to handle the foreclosure, as well as the real estate action process.
Many times the property will not sell at auction and the lender will have to take the property back, make any necessary repairs, hire a real estate agent and then market the property until it resells, usually at a discount.
Obviously, the homeowner wants to avoid the process too. Having a foreclosure can destroy your credit. Also, whatever loss the lender takes when the property finally sells could come back to haunt the homeowner in the form of a 1099 or a deficiency judgment. However, until Dec. 31, 2012, many deficiency judgements are being postponed.
The Utah Short Sale to the Rescue
This is where short sales come into the picture. Through this process, the mortgage lender will often grant the homeowner time to sell the home prior to foreclosure, and will usually even agree to accept less than what is owed on the mortgage.
Yes, the lender does lose money in this process. But they stand to lose even more by keeping the non-performing loan on their books, and by going through the foreclosure process, and by maintaining and marketing the property, etc. So a short sale is a way for them to cut their losses sooner rather than later.
You can think of the short sale as the closest thing to a win-win situation as possible, given the circumstances. The homeowner avoids foreclosure and the credit-damaging effects of such a process and minimizes future repercussions. The lender gets some of their money back and avoids further losses.
In a perfect world, there would be no home foreclosures in Utah or anywhere else. All homeowners would make their mortgage payments, and they would never find themselves in dire financial straights. But we don't live in a perfect world. Foreclosures do happen, and lately they've been happening a lot. So the Utah short sale process performs a necessary function that benefits the economy in troubled times.
If you have questions about the short sale process in Utah from either a buying or selling perspective, I would be happy to help you. Please contact me at your convenience.
How to Avoid Utah Bankruptcy Due to Foreclosure
Also click on "Foreclosures" on the top of the page tab bar for more detailed information!
Bankruptcy can be very damaging to your credit, and thus it can haunt you financially for a long time to come. So a Utah bankruptcy should never be viewed as an "easy way out," as some bankruptcy lawyers make it seem.
In fact, many of the people who declare bankruptcy in Utah each year could have had options for avoiding it. Often, they just didn't realize these options existed. That's the entire purpose of this article — to educate you on the ways a Utah resident can avoid declaring bankruptcy.
Specifically, I'm talking to those of you who feel bankruptcy is a "must" because you are behind on your mortgage and facing possible foreclosure.
Declaring Bankruptcy Because of Foreclosure
A lot of the folks who declare bankruptcy in Utah each year do so because they are going into foreclosure on their home. Sometimes even, this is the primary reason for bankruptcy declarations. But what many people don't realize is that there are many options for avoiding foreclosure on a home, so a foreclosure alone is rarely a good reason for declaring bankruptcy.
In fact, helping Utah homeowners avoid foreclosure is one of the primary services we offer. We do this through several methods, but mostly through what is known as a short sale.
Introducing the Short Sale
If you haven't heard the term short sale in the past, you probably will in the future. As more and more people face foreclosure on their Utah homes (largely due to the subprime mortgage crisis that began in 2007), the short sale will become more popular as a foreclosure-avoidance technique.
Note: The short sale is one of my real estate specialties. So if you if you find yourself in a potential foreclosure situation and would like to learn about my Utah short sale services, please contact me for assistance.
If your mortgage is the number-one financial obligation that's "dragging" you toward possible bankruptcy, you could sell your home through a short sale and relieve that particular financial burden. Then you would be in a better position to shore up your finances in general, and possibly avoid bankruptcy altogether.
The point here is that you almost always have options, other than simply declaring bankruptcy. So before you become another Utah bankruptcy statistic because of a mortgage you can no longer afford, contact us to learn more about your real estate options.
Frequently Asked Questions - Utah Home Foreclosures
What is a short sale?
Within our context, a short sale is the sale of a Utah home for less than the amount owed on the property. For Example: If you owed $100,000 on your Utah home, but the current market value of the home is only $85,000, your lender may agree to accept $85,000 to release their lien against the property. This is known as a short sale because the lender is releasing their lien $15,000 short of the amount owed. This is a commonly used technique to avoid foreclosure on homes in Utah.
What is a Pre-foreclosure Sale?
A Pre-Foreclosure sale takes place after the formal foreclosure proceedings have started but before the foreclosure auction and the Utah home is sold to payoff the loan in full. This option can be utilized when the market value of the home is at or more than the amount owed. Many Utah lenders will put the foreclosure on hold to give you an opportunity to sell your home.
Can anyone do a short sale?
In Utah, most lenders will only accept a short sale if the homeowner has fallen behind on payments and is facing foreclosure.
Why do a short sale?
If you owe more on your Utah home than it is currently worth and cannot afford the monthly mortgage payment, a short sale could be a great option. It will help you to (A) avoid a nasty foreclosure on your Utah home, (B) possibly avoid a deficiency judgment and (C) clear out any other liens or judgments that may have been recorded against your home.
Does it matter what type of loan I have?
A short sale or pre-foreclosure sale can be attempted on any loan but each type of loan is handled differently.
What is a "Notice of Default" or "NoD"?
A "Notice of Default" is a document that is recorded with the county recorder's office by a trustee and formally starts the Utah foreclosure process. A copy of the "Notice of Default" us usually mailed out the defaulting party.
What is a "Notice of Trustees Sale"?
A "Notice of Trustee´s Sale" is a document that is recorded with the county recorder's office and placed on the property which states the date time and location that the property will be put up for auction.
How much will a Short Sale cost me?
Usually there will be no out-of-pocket cost with a Utah short sale. The lender that is doing the short sale generally pays the commissions and closing costs.
How much will a Pre-Foreclosure sale cost me?
Generally you will need to pay a commission along with your own closing costs.
I have a Utah Real Estate Agent that I have used in the past, can I use them to do a Pre-foreclosure Sale or Short Sale?
You could, but you would want to make sure they have experience with these types of sales. Pre-foreclosure and Short sales are difficult and complex and to be done "right" will require more experience and understanding than a normal Real Estate Agent would have. Would you use a family physician if you needed heart surgery? Just make sure that you are in good hands.
What are the repercussions of doing a short sale?
You may receive a 1099 or a deficiency judgment from your lender for the difference between the amount owed and the amount paid on the loan. This is not always the case and depends on the lender and the situation. Also each lender will report to the credit bureaus the status of the loan. This could be a negative mark on your credit. Our goal is to negotiate with your lender for a release of their lien as payment in full without them seeking a deficiency judgment. It is important that when dealing with a short sale you are working with a competent professional that will aggressively negotiate the best possible scenario for you.
Can I do a short sale if I have already filed Bankruptcy?
Yes, it takes a little longer and is more complex but we are very experienced in working with Utah homeowners who have already filed bankruptcy.
What is a deficiency judgment?
A judgment filed against the borrower for the difference between the amount owed on the home and the amount paid to the lender. Example: You owe $100,000 on your Utah home and your lender agrees to release their lien for $90,000. You could be liable for a $10,000 deficiency. Also, if you owe $100,000 and your Utah home is foreclosed on and sold at auction for $90,000, you could be liable for a $10,000 deficiency.
How long does a short sale take?
There is no specific time frame since every situation is different. But generally you can expect it to take a minimum of two to three months and as long as a year.
Do I get any money back from a short sale?
Usually the answer is no. If a lender is taking less than the amount owed to them, they will make sure that you do not get anything from the sale. If you have an FHA loan and do not have any other liens or judgments against your home you may qualify to receive up to $1000 from the sale.
Utah Real Estate Auctions 101
Utah foreclosures and real estate auctions usually go hand in hand. When a lender forecloses on a home, there's a good chance the home will eventually reach the auction stage and go up for public sale.
Note: If you are a homeowner facing possible foreclosure, you obviously want to avoid having your home foreclosed upon and auctioned off to the public. So if you fall into this category, please see our page that explains how to avoid Utah foreclosure altogether, or email@example.com for assistance.
This guide to real estate auctions in Utah will give you a better understanding of how the basic auction process works. Let's start with the events that normally take place leading up to a Utah real estate auction:
Leading Up to the Auction
From a legal standpoint, there are basically two types of foreclosures in Utah -- the judicial foreclosure (also known as "in-court" foreclosure) and the non-judicial foreclosure (referred to as an "out-of-court" process). In Utah, most real estate foreclosures are non-judicial / out-of-court procedures.
The overall foreclosure process on a home can take about five months. It is a lengthy process for several reasons. One reason is to give the homeowner a chance to avoid foreclosure through reinstatement, refinancing, repayment, etc. There's also a high-priced item involved with foreclosure (the home itself), so as you would imagine there is a lot of paperwork and legal requirements at every step of the process.
During the pre-foreclosure stage, the homeowners have several options to prevent the actual foreclosure of their home. As a Utah real estate agent specializing in foreclosure, this is one of the services I provide to homeowners -- helping them to avoid foreclosure by way of the "short sale" and other useful techniques.
Sometimes, however, the homeowners simply cannot afford their home anymore. In these unfortunate situations, the lender will foreclose on the home and the property will start down the path to a real estate auction / public sale.
Announcement of a Utah Real Estate Auction
After a lender files a notice of default against a homeowner (meaning that the homeowner is no longer making mortgage payments), there is typically a three-month period leading up to the notification of real estate auction.
As mentioned above, the homeowner can try to rectify the situation to avoid foreclosure and public auction altogether. If that does not happen, then the home will typically move into the Utah real estate auction phase. After the three-month process, and normally at least 20 days before the date of auction, a notice of sale will be posted in view of the public. The lender obviously wants to get the word out as much as possible, because a better turnout at the real estate auction increases the chance for a quick sale.
Remember, lenders are not in the business of managing and selling real estate. So they want to sell the home as quickly as possible, while recouping the amount owed on the mortgage. The first step to achieving this is to get the word out about the forthcoming auction sale. So the lender will put a sign on the property to announce the auction, publish a notification in the newspaper, etc.
In most cases, the public auction for the foreclosure sale will take place at the county courthouse, within the county where the foreclosed home is located. As with any other type of auction, the property will go to the highest bidder. Profits made from the sale (above and beyond what is owed to the lender) will typically go toward paying off lien holders, if there are any, and to the original borrower.
After the real estate auction, a Trustee's Deed will be prepared and presented to the successful bidder. This completes the transfer of ownership from the lender to the new owner.
Questions or Comments?
Obviously, this is a somewhat simplified analysis of the real estate auction process in Utah. The purpose of this tutorial is not to make you an expert in Utah real estate law, but to help you understand how the basic auction process works in this state. If you have specific questions about public auctions, home foreclosures, or anything else related to these topics, please contact me
Hardship (Click on Hardship letter for Details on what IS a Hardship and HOW TO write the letter)
Life can be unpredictable and circumstances arise that prevent homeowner’s from making their mortgage payments on time. Thousands of hard-working people face the possibility of losing their home each day in the United States. In most cases, many of the circumstances that have led to delinquency are out of the homeowners’s control. Many issues contributing to delinquency include job loss, medical illness or injury, marital difficulties, unforeseen repairs or tenant problems, or even a death in the family. Just one of these situations can impact a person’s ability to pay. If you have experienced a temporary set back, don’t panic there are solutions.
Utah is a Non-Judicial and a Lien Theory State
The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. A "power of sale" clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of the their default. In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the Trustee. The Homeowner has title to their property and the lender has a lien against the home.
Utah Foreclosure Time Line
From the time the Notice of Default (NOD) is filed to the day that the Lender has the right to foreclose is approximately four mouths. Time is broken down has followed.
Redemption Period: The redemption period is the beginning of the time line and it will last for 90 days. This is when the borrower has the right to redeem their loan by either bringing all past due payments, including late fees, attorney fees, current or by paying the loan off in full.
Notice of Trustee Sale: This will come at the end of the 90 day redemption, where the Notice of Trustee Sale must be published once a week for three (3) consecutive weeks in a newspaper of general circulation in the county where the property is to be sold. The last publication must be at least ten (10) days before the date of sale is scheduled. The Notice of Trustee Sale must also be posted in a conspicuous place on the property.
10 Days Before the Sale: This is a minium time after the last publication of the Notice of Trustee Sale. Although, in this time the Lender does not have to take redemption money from the borrower like they do in the 90 day period, but almost always they will.
Three Ways To Remedy the Defaulted Loan
Realistically there are three ways to stop the foreclosure, the manner in which they are done can vary. Listed below are the three ways which to do so.
Reinstating the Loan: This can be done by simply paying the delinquent amount including all back interest, principle, late fees and Attorney fees.
Replace the Defaulted Loan With a New Loan: This can be done by possibly Re-finance, temporary replace the loan with a new loan from a third party and do a buy back.
Re-Modify the Current Loan: Not all lenders will do this, but if your lender will you may be able to have them re-due your current loan with new terms, incorporating portion of the past due amount back into the loan.
There are several options available to the Homeowner that they may not be aware of go to Foreclosure Prevention.
Strategic Options For A Defaulted Loan
Here are 7 Options that you can do it facing foreclosure.
So a legal action has been filed against your property and your lender is demanding payment. If this is the case, I urge you to contact your lender, to clear this issue promptly. Your property is at risk.
Perhaps I can help; I have helped many families in the same situation that you are in. Allow my skills and knowledge to assist you in this difficult time.
You’ll get a quick response with no hassles, no pressure, and your worries will be behind you.
Don’t wait until it’s too late! You deserve a fresh start! We can help keep this off your credit records.
You have a RIGHT to know ALL of your OPTIONS
Option 1: Loan Forbearance or Modification – A strategy worth pursuing is called a loan forbearance. The loss mitigation department of your mortgage company may make arrangements with you to pay some of the back payments now and the balance within a certain time period. A typical example – You owe $9,000 in back payments, attorneys’ fees, etc. Your mortgage company may accept $4,500 now and $750 per month for the next 6 months. Of course, you would have to resume making your normal monthly payments. A loan modification is a permanent change to your mortgage that may lower your payments and the delinquent payments may be added to the mortgage balance.
Option 2: Reinstate Your Mortgage – You have up to and including the morning of the auction to catch up your payments, also know as “Reinstate”. Perhaps you could borrow from friends or family, credit cards or retirement program. You may be able to arrange a second mortgage to catch up the back payments and fees. Check in the Yellow Pages under “Mortgages”. There are a number of companies listed that claim they can help in these situations.
Option 3: Refinance – You’ve probably received letters from mortgage brokers and lenders saying you are already pre-approved for a new mortgage. The fact is that it is very difficult to arrange new financing when you’re already in default on your existing mortgage. Be very cautious about sending advanced fees of $300.00 to $600.00 to lenders or mortgage brokers. Usually it’s a ploy to take advantage of your financial situation.
Arranging new financing will depend on your income, credit report, value of your home and the amount of your equity. If you’re not sure of the value of your home, give me a call. Usually I can give you a fairly accurate estimate of value within a ½ hour and tell you your chances of qualifying for a new loan. I would be glad to help and of course, there’s no obligation. If you attempt to refinance, you should always have a backup plan available to you. Many times, I have had homeowners call days before the auction saying their financing did not go through, and then it’s too late!
Option 4: Chapter 13 Bankruptcy – A viable alternative if your financial situation has improved, filing bankruptcy prior to the auction will stop the sale. Unfortunately for most people, it only postpones the sale for one or 2 months. Immediately after filing a Chapter 13 Bankruptcy, you will have to file a repayment plan with the courts. This plan has to show that you have sufficient monthly income to pay basic living expenses such as food and utilities and other monthly payments such as credit cards, car payments etc. In addition, your income must be sufficient to resume making your monthly mortgage payments. All past due amounts are usually spread out between 24 and 60 months i.e. If you owe $9,000 in missed payments, attorneys fees, etc. if spread out over 48 months would be an additional $187.50 due each month to the court appointed trustee. If you feel as though you have the income to immediately begin repayment of all your debts and the courts agree, this may be a good choice for you to save your home.
Over the years, I’ve spoken with many individuals who filed for bankruptcy protection only to have their cases dismissed. Not only were they out their attorney’s fees (usually $1,000 – $2,000) but now had a bankruptcy and foreclosure on their credit report. Bankruptcy is considered an action of last resort.
Option 5: Sell Your Home on the Open Market – This is probably the most under utilized option available to you. The fact is selling your home will give you the most money in your pocket. The market is very active and we’ve all experienced significant appreciation in the past few years. Your home may be worth a lot more than you think!
If you have recently been served with a legal action lawsuit you still have enough time to sell your home which will provide you and your family the greatest amount of money to help provide a fresh start for you and your family.
Don’t procrastinate; explore all the options available to you. If saving your house seems unlikely, you should call me as soon as possible! I have a 29 Day Guarantee of selling your home and it may be done for less than what you owe. But, placing your home on the market a few weeks or a month from now may not give us enough time to find the buyer, arrange financing, and schedule the closing. Because of the time sensitive nature of your situation, this is not a time to go it alone as a “for sale by owner” or list your home with a friend or friend of a friend.
A quick solution offers the following benefits:
Option 7: Let Your Home Be Sold on the Courthouse Steps – By far, the worst option available to you! Many people feel “I have no equity, let the bank take it”, but homes that are sold on the courthouse steps typically sell between 50% and 70% of their fair market value. Moreover, if a bank suffers a loss due to the pending foreclosure action against you, they also have an option. They can file a deficiency judgment against you and pursue you for the amount of their loss.
Typically one day after the foreclosure auction, a certificate of title will be issued by the courts to the new owner. If you have not voluntarily vacated your house at this time, you could be forced to move out within 24 hours.
TIME IS OF THE ESSENCE! Call me at 801-867-2829, your call is completely confidential and there is no obligation.
Also, you may qualify for the new HUD loan program that just came out that helps people who are facing foreclosure an option to refinance there current loan or loans. Call Terrilee at 801-867-2829 to see if your situation will qualify for this new program.
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