Beautifully updated & maintained move-in ready home on large fully fenced lot with mountain views. Flowing layout moves from living room to dining & kitchen. Large covered deck off dining room for indoor/outdoor entertaining. Private master with balcony overlooking spacious & well-maintained yard. Never pay for water with your own private well. Two septic systems & two power meters, zoning allows tons of potential opportunities. Close to shopping, hiking/fishing around Mt. Rainier & JBLM.
Skyline Properties Inc
If you are a real estate broker interested in negotiating short sales, here are a list of Frequently Asked Questions:
Short Sale Frequently Asked Questions (FAQs)
Does my existing mortgage loan originator license allow me to conduct loan modification activities and short sale negotiations in a third party representative capacity with a homeowner’s lender or the lender’s agent?
Yes. Third-party loan modification activities and short sale negotiations are mortgage transaction activities regulated under the MBPA and the CLA. A company that has obtained a license as a mortgage broker or a consumer loan company has the necessary licensure to engage in these activities and its licensed loan originators may conduct the activities on the company’s behalf.
If I have an inactive loan originator license, may I conduct short sale negotiations with a lender or the lender’s agent on behalf of a homeowner/seller even though I am not employed by a mortgage broker?
No. A mortgage loan originator licensee must be sponsored by a licensed mortgage broker, a consumer loan company or an exempt entity.
Must a real estate broker obtain a license from DFI to negotiate with a lender to obtain a short sale approval on behalf of a seller?
Not unless the real estate broker is paid separately for such negotiation services (in addition to receiving a commission on the real estate transaction) or the commission is increased to pay for the negotiations. A real estate broker, whether directly representing a homeowner in a real estate transaction or representing other parties in a real estate transaction, is excluded from licensure by DFI for the activities of negotiating a short sale approval with a lender or the lender’s agent on behalf of a homeowner. However, a real estate broker should consider whether such negotiations and related activities could be considered the unauthorized practice of law.
If a real estate managing broker forms a company that conducts negotiations with a lender on behalf of a borrower for a fee, is the company also excluded from licensing by DFI based on the real estate broker’s exclusion?
No. If a real estate managing broker forms a company whose services include negotiating, in a third-party representative capacity, compromises or adjustments of homeowners’ residential loans for compensation or gain, the company is subject to licensure as a mortgage broker or consumer loan company under the MBPA or the CLA, respectively.
I am a licensed real estate broker who buys short sale properties. If I also negotiate the short sale approval with the lender or the lender’s agent on behalf of the homeowner/seller, is a license required from DFI?
No. DFI recognizes that when a licensed real estate broker is a party to a real estate transaction and negotiating an adjustment or compromise to a homeowner’s residential mortgage loan and the broker is excluded from the licensing requirements of DFI. However, a real estate broker should consider whether such negotiations and related activities could be considered the unauthorized practice of law. A real estate licensee who performs brokerage service on their own behalf is still subject to the real estate licensing laws.
I am a real estate broker who negotiates short sale approvals with lenders or their agents on behalf of my clients and I do not charge a separate fee other than my real estate commission for my services. My assistant does much of my clerical work, faxing documents or making document submissions on my behalf. Does he or she need a license from DFI?
No. As long as an assistant performs only clerical or administrative functions, and does not engage directly or indirectly in negotiations with a lender, or lender’s agent, no license is required from DFI.
I am a real estate broker who negotiates short sale approvals with lenders or their agents on behalf of my clients. I also want to offer assistance to consumers for obtaining modifications to the repayment terms of their existing loans without the modification resulting in a real estate transaction such as a short sale. Do I need a license from DFI?
Yes, if such loan modification activity is conducted for compensation or gain. However, a real estate broker, or anyone else, may offer mortgage loan modification services without the need for licensure if such services are provided for no direct or indirect compensation or gain.
I am a real estate broker who negotiates short sales and am paid by the buyer who receives a seller’s closing cost concession in addition to my normal commission. Is this legal?
No. You are not allowed to charge any amount in excess of the normal and customary commission applicable to the transaction notwithstanding the short sale negotiation services. The arrangement is also deceptive to the lender if not fully disclosed.
I am a Designated Broker. I know one of my brokers just went through a messy divorce, and she is trying to sell the house as part of the divorce process. She needs to get her lender to agree to a short sale. She referred herself to another broker in the office who is now her listing broker. The listing broker asked me to pay a referral fee to the seller. Is this okay?
Probably not. Lenders typically prohibit a seller from receiving any proceeds from a short sale transaction.
I work for an escrow company. I have been asked to help a borrower negotiate with their lender for either a loan modification or a short sale for a fee. Is that legal?
No. You must be a licensed mortgage loan originator.
Here is a PDF with all the information above from the Department of Financial Institutions (https://dfi.wa.gov/sites/default/files/publications/short-sale-guidance.pdf)
We wrote about what a Short Sale even is in our article about Washington State short sales.
FIRST, Understand that a Short Sale May not Discharge the Debt.
You should know whether you will still owe your lender money (a deficiency) after the short sale. You should know this BEFORE you close the sale of your home. Even if a lender agrees to a short sale, the lender and any junior lien holders may not agree to forgive the debt entirely and may require you to pay the difference as a personal obligation. This outstanding personal obligation could result in a subsequent collection action against you. For example, a lender may accept the short sale purchase price to “release the lien” on the property but still require you to pay the full amount of the original debt. You must be certain of the terms of any short sale before making a decision. All agreements between you and the lender must be in writing. Consult an attorney regarding whether the lender is entitled to pursue collection of any deficiency. Obtain any debt forgiveness agreements with the lender in writing but be aware that the language used in these agreements can be extremely confusing and even misleading. Seek the advice of legal counsel before accepting the lender’s terms.
SECOND, Understand that a short sale may result in a higher tax debt
A short sale in which the debt is forgiven is considered a relief of debt and may be treated as income for tax purposes. The Mortgage Forgiveness Debt Relief Act of 2007 created a limited exemption to allow homeowners to pay no taxes on debt forgiveness; however, only cancelled debt used to buy, build or improve a principal residence or refinance debt incurred for those purposes qualifies for this tax exemption. For more information on the tax consequences of debt relief, seek professional tax advice and go to www.irs.gov and conduct a search regarding the Tax Relief Act.
If you decide to pursue a short sale, understand that the process will likely take several months or more to complete. Consider taking the following actions.
Contact a Qualified Real Estate Professional
Interview several real estate professionals and ask about their experience in short sales, the number of short sale transactions they have handled, their education and training in short sales and inquire about any past or pending lawsuits or disciplinary actions.
Investigate Documentation and Eligibility
Documentation and eligibility criteria for short sales vary depending on specific lender and investor guidelines. Generally, you must prove that you are financially incapable of paying the loan. The lender will consider this when determining the costs of accepting the short sale versus foreclosing. You will have to document your financial situation. If you have funds to pay the Short Sale deficiency, a lender will not necessarily allow a short sale. However, some lenders will not require you to dip into retirement accounts to fund the deficiency. These issues will have to be negotiated with your lender.
Determine the Amount Owed on the Property
All debt and costs must be factored in before a lender can determine whether a short sale is more economical for them. The analysis will include the delinquent loan, all other recorded debt (past due homeowner’s association fees, unpaid property taxes), and the costs of a sale (closing costs, brokerage commissions, and necessary repairs). If you have more than one loan on the property, a short sale will require the approval of all lenders.
Determine the Estimated Fair Market Value of the Property
You must prove to the lender that the home is worth less than the unpaid loan balance plus closing costs. Consult a real estate professional or an appraiser for assistance in estimating the value of the property.
Consult Legal Counsel
Legal counsel can help you determine whether a short sale is the best option and can advise you during the short sale process. A short sale is a complex transaction.
Be Aware of the Impact on Your Credit Score
The impact of a short sale on your credit score depends upon a variety of factors, including late or missed payments. A short sale may appear on your credit report as “pre-foreclosure redemption,” “paid in full for less than full balance” or other similar term. It is possible that a short sale will have a different impact on your credit than a foreclosure or deed in lieu of foreclosure (or any other outcome). But, beware that once you miss mortgage payments, your credit rating will be severely impacted. Some lenders will tell you that they will not consider you as a short sale candidate unless you are behind on payments. Do not intentionally withhold mortgage payments, solely for short sale consideration, without first consulting legal counsel.
Understand There May Be a Waiting Period Before You Can Buy another Home
Your ability to qualify for a loan to purchase another home after a short sale will likely be impacted because of the impact on your credit score. It may be some time before a lender will loan you the money to purchase another home.
Home Affordable Foreclosure Alternative (HAFA) Program
The HAFA program was designed to give homeowners alternatives to a foreclosure, which include incentives for completing a short sale. If your home sale can close as a HAFA transaction, you will emerge owing no deficiency. However, it can be very difficult to qualify as a HAFA transaction. For more information on the options available, visit the HAFA program website www.makinghomeaffordable.gov/hafa.html
To find the option for which you may be eligible. See www.makinghomeaffordable.gov/eligibility.html
To find out if your mortgage servicer participates in the HAFA program go to www.makinghomeaffordable.com/contact_servicer.html
For More Information, Visit: The Washington Department of Financial Institutions website: www.dfi.wa.gov
The Department of Financial Institutions released a handy PDF you can find following this link (https://dfi.wa.gov/sites/default/files/publications/short-sale-advisory.pdf).
If you would like to know what free resources are available to you, check out our post.
If are interested in speaking with one of our short sale specialists to learn more, make an appointment.
Consider All Options
A short sale may not be your best course of action. Consider all your options before making a decision.
The lender may agree to change the terms of the original loan to make the payments more affordable. For example, missed payments can be added to the existing loan balance, the interest rate may be modified or the loan term extended. Lenders may use government program modifications or may use their own criteria. Loan modifications may be temporary or permanent. Loan modification resources include:
Making Homes Affordable: www.makinghomeaffordable.gov
National Foreclosure Mitigation Counseling Program: http://findaforeclosurecounselor.org/network/home.asp
Homeownership Preservation Foundation: www.995hope.org 1-888-995-HOPE™ Hotline
If the lender will not agree to a loan workout or modification, the homeowner may be able to refinance the loan with another lender. The HOPE for Homeowners program will refinance mortgages for homeowners that can afford a new loan insured by HUD's Federal Housing Administration. Learn more at https://hud.gov/.
Deed-in-Lieu of Foreclosure
The lender may allow a homeowner to “give back” the property. This option may not be available if there are other liens recorded against the property. If a lender accepts title to property in Washington State through a deed in lieu of foreclosure, the owner’s debt owing to that lender is likely forgiven but sellers should have their paperwork reviewed by legal counsel to insure that outcome.
Work Out Sale
The lender may allow a specific amount of time for the home to be sold and the loan to be paid off. The lender may also allow a buyer to assume the loan as a method to purchase the property even if the original loan was non-assumable.
If you are considering bankruptcy as an option, consult with an attorney that specializes in bankruptcy law.
Allowing the lender to foreclose is another option. With a foreclosure, the foreclosing lender may be prohibited from seeking any additional payment from you. However, other creditors with debt secured by the real property may still be able to claim the amounts owing to them. There are other pros and cons to allowing foreclosure. Ultimately, only you and an attorney can decide if foreclosure is the best option for you. Ask an attorney about the possibility of owing money to any of your creditors after foreclosure, the impact on your credit rating, and tax consequences. Also, seek professional tax advice about the tax consequences of a foreclosure and review the IRS information at https://www.irs.gov/newsroom/home-foreclosure-and-debt-cancellation.
If you have not seen our post about free resources to explore before a short sale, take a look at our article.
Before Proceeding with a Short Sale
If you are falling behind on mortgage payments, there might be some options you can take. We've accumulated a list of resources provided by the DFI below.
Understand a Lender’s creditors Options upon Loan Default
There are many types of liens and other obligations that are secured by real estate. These may be purchase loans, refinance loans, home equity lines of credit, contractor liens, IRS tax liens, DSHS liens for unpaid child support, or other obligations. The type of debt and type of property will determine what remedies a lender may have if you fail to make the required payments. The lender’s policies regarding forgiveness of debt, the tax consequences, your overall current or potential future financial strength, the lender’s willingness and procedure for processing a short sale request, and the number and nature of other recorded encumbrances (second mortgages for Short Sale example) on the property are some of the many factors a seller should consider in deciding whether to pursue a short sale.
Be Aware of Predatory “Rescue” Scams & Short Sale Fraud
Homeowners worried about foreclosure may be susceptible to predatory “rescue” scams which may cost money with no results, result in the loss of the home entirely, or involve the seller in a fraudulent scheme. For more info, visit www.efanniemae.com/utility/legal/pdf/fraudnews/mortgagefraudnews0709.pdf.
“Red Flags” of fraudulent schemes include:
Report suspected scams to the Department of Financial Institutions at: www.dfi.wa.gov or 1-877-RINGDFI (746-4334).
Contact a Free HUD-Approved Housing Counselor or Contact Your Lender Directly
Utilize Free Services Available to Washington Residents
Non profit counseling to try to avoid foreclosure: 1-877-894-HOME (4663). If legal advice is needed, callers will be referred to a pro bono attorney through the Washington State Bar Association.
More help and resources are available at www.WAHomeowners.com.
Obtain Legal Advice
Obtain Tax Advice
For Mortgage Forgiveness Debt Relief Act and Debt Cancellation tax information, go to www.irs.gov/individuals/article/0,,id=179414,00.html
Be Aware of the Consequences of Committing “Waste”
Damaging the property or removing fixtures such as sinks, toilets, cabinets, air conditioners, and water heaters may result in liability to the lender for “waste.” In other words, the lender may be able to sue you for damages if you have physically abused, damaged or destroyed any part of the property.
The Department of Financial Institutions released a handy PDF you can find following this link (https://dfi.wa.gov/sites/default/files/publications/short-sale-advisory.pdf).
To find out more about the short sale process, check out our post going over what is a short sale.
What is a Short Sale?
A short sale in Washington state is “a real estate transaction where the proceeds of the sale will not generate sufficient funds to pay the debt(s) secured by the property (and the seller is unable to pay the difference) and therefore, any creditor(s) with a security interest in the property must consent to receiving less than they are owed in return for releasing any lien on the property. The fact that a creditor may release its lien to allow the property to be sold does not mean that the creditor has or will forgive the deficiency.
In layman's terms, a short sale occurs when the value of the property is less than the debt that is owed on the property (being “upside down”).
Who can Negotiate a Short Sale?
Under law, a person negotiating a short sale must have either a mortgage loan originator license, a real estate license, or be an attorney licensed to practice law in Washington.
What a Lender Doesn’t Tell You for When Participating in a Short Sale
A property owner may consider a short sale when they are “upside down” on their mortgage or cannot make the current loan payments. Unfortunately, the property owner may not have sufficient information to make a good decision about selling the property.
Here are five hidden truths behind a short sale:
What Happens After a Lender Approves a Short Sale?
When a lender approves a short sale and receives a “short payoff,” that approval is often conditioned on certain requirements and the seller may be required to sign affidavits or other documents verifying these requirements are met..
Watch out for these common conditions:
If you are interested in how long it takes a property to foreclosure, take a look at our Foreclosure Timeline article.
What are the requirements for a Foreclosure in Washington State?
The foreclosure process in each state differs based on the state. In Washington state according to the Washington State Legislature, a foreclosure needs to follow strict requirements with specified dates for each state in the foreclosure process.
You can see the exact foreclosure details following this link to the Washington State Legislature (https://app.leg.wa.gov/RCW/default.aspx?cite=61.24.040).
If you want to see this in a timeline view, we wrote about that in our article Foreclosure Timeline.
For your convenience, we have copied the entire code below. It is not a short read...
A deed of trust foreclosed under this chapter shall be foreclosed as follows:
(1) At least ninety days before the sale, or if a letter under RCW 61.24.031 is required, at least one hundred twenty days before the sale, the trustee shall:
(a) Record a notice in the form described in subsection (2) of this section in the office of the auditor in each county in which the deed of trust is recorded;
(b) To the extent the trustee elects to foreclose its lien or interest, or the beneficiary elects to preserve its right to seek a deficiency judgment against a borrower or grantor under RCW 61.24.100(3)(a), and if their addresses are stated in a recorded instrument evidencing their interest, lien, or claim of lien, or an amendment thereto, or are otherwise known to the trustee, cause a copy of the notice of sale described in subsection (2) of this section to be transmitted by both first-class and either certified or registered mail, return receipt requested, to the following persons or their legal representatives, if any, at such address:
(i)(A) The borrower and grantor;
(B) In the case where the borrower or grantor is deceased, to any successors in interest. If no successor in interest has been established, then to any spouse, child, or parent of the borrower or grantor, at the addresses discovered by the trustee pursuant to RCW 61.24.030(10);
(ii) The beneficiary of any deed of trust or mortgagee of any mortgage, or any person who has a lien or claim of lien against the property, that was recorded subsequent to the recordation of the deed of trust being foreclosed and before the recordation of the notice of sale;
(iii) The vendee in any real estate contract, the lessee in any lease, or the holder of any conveyances of any interest or estate in any portion or all of the property described in such notice, if that contract, lease, or conveyance of such interest or estate, or a memorandum or other notice thereof, was recorded after the recordation of the deed of trust being foreclosed and before the recordation of the notice of sale;
(iv) The last holder of record of any other lien against or interest in the property that is subject to a subordination to the deed of trust being foreclosed that was recorded before the recordation of the notice of sale;
(v) The last holder of record of the lien of any judgment subordinate to the deed of trust being foreclosed; and
(vi) The occupants of property consisting solely of a single-family residence, or a condominium, cooperative, or other dwelling unit in a multiplex or other building containing fewer than five residential units, whether or not the occupant's rental agreement is recorded, which notice may be a single notice addressed to "occupants" for each unit known to the trustee or beneficiary;
(c) Cause a copy of the notice of sale described in subsection (2) of this section to be transmitted by both first-class and either certified or registered mail, return receipt requested, to the plaintiff or the plaintiff's attorney of record, in any court action to foreclose a lien or other encumbrance on all or any part of the property, provided a court action is pending and a lis pendens in connection therewith is recorded in the office of the auditor of any county in which all or part of the property is located on the date the notice is recorded;
(d) Cause a copy of the notice of sale described in subsection (2) of this section to be transmitted by both first-class and either certified or registered mail, return receipt requested, to any person who has recorded a request for notice in accordance with RCW 61.24.045, at the address specified in such person's most recently recorded request for notice;
(e) Cause a copy of the notice of sale described in subsection (2) of this section to be posted in a conspicuous place on the property, or in lieu of posting, cause a copy of said notice to be served upon any occupant of the property.
(2)(a) If foreclosing on a commercial loan under RCW 61.24.005(4), the title of the document must be "Notice of Trustee's Sale of Commercial Loan(s)";
(b) In addition to all other indexing requirements, the notice required in subsection (1) of this section must clearly indicate on the first page the following information, which the auditor will index:
(i) The document number or numbers given to the deed of trust upon recording;
(ii) The parcel number(s);
(iii) The grantor;
(iv) The current beneficiary of the deed of trust;
(v) The current trustee of the deed of trust; and
(vi) The current loan mortgage servicer of the deed of trust;
(c) Nothing in this section:
(i) Requires a trustee or beneficiary to cause to be recorded any new notice of trustee's sale upon transfer of the beneficial interest in a deed of trust or the servicing rights for the associated mortgage loan;
(ii) Relieves a mortgage loan servicer of any obligation to provide the borrower with notice of a transfer of servicing rights or other legal obligations related to the transfer; or
(iii) Prevents the trustee from disclosing the beneficiary's identity to the borrower and to county and municipal officials seeking to abate nuisance and abandoned property in foreclosure pursuant to chapter 35.21 RCW.
(d) The notice must be in substantially the following form:
NOTICE OF TRUSTEE'S SALE
Current beneficiary of the deed of trust: ...............
Current trustee of the deed of trust: ...............
Current mortgage servicer of the deed of trust: ...............
Reference number of the deed of trust: ...............
Parcel number(s): ...............
NOTICE IS HEREBY GIVEN that the undersigned Trustee will on the . . . . day of . . . . . ., . . ., at the hour of . . . . o'clock . . . . M. at . . . . . . . . . . . . . . . . . . . . . . . . . . . . [street address and location if inside a building] in the City of . . . . . ., State of Washington, sell at public auction to the highest and best bidder, payable at the time of sale, the following described real property, situated in the County(ies) of . . . . . ., State of Washington, to-wit:
[If any personal property is to be included in the trustee's sale, include a description that reasonably identifies such personal property]
which is subject to that certain Deed of Trust dated . . . . . ., . . ., recorded . . . . . ., . . ., under Auditor's File No. . . . ., records of . . . . . . County, Washington, from . . . . . . . . ., as Grantor, to . . . . . . . . ., as Trustee, to secure an obligation in favor of . . . . . . . . ., as Beneficiary, the beneficial interest in which was assigned by . . . . . . . . ., under an Assignment recorded under Auditor's File No. . . . . [Include recording information for all counties if the Deed of Trust is recorded in more than one county.]
No action commenced by the Beneficiary of the Deed of Trust is now pending to seek satisfaction of the obligation in any Court by reason of the Borrower's or Grantor's default on the obligation secured by the Deed of Trust.
[If there is another action pending to foreclose other security for all or part of the same debt, qualify the statement and identify the action.]
The default(s) for which this foreclosure is made is/are as follows:
[If default is for other than payment of money, set forth the particulars]
Failure to pay when due the following amounts which are now in arrears:
The sum owing on the obligation secured by the Deed of Trust is: Principal $ . . . . . ., together with interest as provided in the note or other instrument secured from the . . . . day of . . . . . ., . . ., and such other costs and fees as are due under the note or other instrument secured, and as are provided by statute.
The above-described real property will be sold to satisfy the expense of sale and the obligation secured by the Deed of Trust as provided by statute. The sale will be made without warranty, express or implied, regarding title, possession, or encumbrances on the . . . . day of . . . . . ., . . . The default(s) referred to in paragraph III must be cured by the . . . . day of . . . . . ., . . . (11 days before the sale date), to cause a discontinuance of the sale. The sale will be discontinued and terminated if at any time on or before the . . . . day of . . . . . ., . . ., (11 days before the sale date), the default(s) as set forth in paragraph III is/are cured and the Trustee's fees and costs are paid. The sale may be terminated any time after the . . . . day of . . . . . ., . . . (11 days before the sale date), and before the sale by the Borrower, Grantor, any Guarantor, or the holder of any recorded junior lien or encumbrance paying the entire principal and interest secured by the Deed of Trust, plus costs, fees, and advances, if any, made pursuant to the terms of the obligation and/or Deed of Trust, and curing all other defaults.
A written notice of default was transmitted by the Beneficiary or Trustee to the Borrower and Grantor at the following addresses:
by both first-class and certified mail on the . . . . day of . . . . . ., . . ., proof of which is in the possession of the Trustee; and the Borrower and Grantor were personally served on the . . . . day of . . . . . ., . . ., with said written notice of default or the written notice of default was posted in a conspicuous place on the real property described in paragraph I above, and the Trustee has possession of proof of such service or posting.
The Trustee whose name and address are set forth below will provide in writing to anyone requesting it, a statement of all costs and fees due at any time prior to the sale.
The effect of the sale will be to deprive the Grantor and all those who hold by, through or under the Grantor of all their interest in the above-described property.
Anyone having any objection to the sale on any grounds whatsoever will be afforded an opportunity to be heard as to those objections if they bring a lawsuit to restrain the sale pursuant to RCW 61.24.130. Failure to bring such a lawsuit may result in a waiver of any proper grounds for invalidating the Trustee's sale.
[Add Part X to this notice if applicable under RCW 61.24.040(11)]
(3) If the borrower received a letter under RCW 61.24.031, the notice specified in subsection (2)(d) of this section shall also include the following additional language:
"THIS NOTICE IS THE FINAL STEP BEFORE THE FORECLOSURE SALE OF YOUR HOME.
You have only 20 DAYS from the recording date on this notice to pursue mediation.
DO NOT DELAY. CONTACT A HOUSING COUNSELOR OR AN ATTORNEY LICENSED IN WASHINGTON NOW to assess your situation and refer you to mediation if you are eligible and it may help you save your home. See below for safe sources of help.
Housing counselors and legal assistance may be available at little or no cost to you. If you would like assistance in determining your rights and opportunities to keep your house, you may contact the following:
The statewide foreclosure hotline for assistance and referral to housing counselors recommended by the Housing Finance Commission
Telephone: . . . . . . . . Web site: . . . . . . . .
The United States Department of Housing and Urban Development
Telephone: . . . . . . . . Web site: . . . . . . . .
The statewide civil legal aid hotline for assistance and referrals to other housing counselors and attorneys
Telephone: . . . . . . . . Web site: . . . . . . . ."
The beneficiary or trustee shall obtain the toll-free numbers and web site information from the department for inclusion in the notice;
(4) In addition to providing the borrower and grantor the notice of sale described in subsection (2) of this section, the trustee shall include with the copy of the notice which is mailed to the grantor, a statement to the grantor in substantially the following form:
NOTICE OF FORECLOSURE
Pursuant to the Revised Code of Washington,
Chapter 61.24 RCW
The attached Notice of Trustee's Sale is a consequence of default(s) in the obligation to . . . . . ., the Beneficiary of your Deed of Trust and holder of the obligation secured thereby. Unless the default(s) is/are cured, your property will be sold at auction on the . . . . day of . . . . . ., . . .
To cure the default(s), you must bring the payments current, cure any other defaults, and pay accrued late charges and other costs, advances, and attorneys' fees as set forth below by the . . . . day of . . . . . ., . . . [11 days before the sale date]. To date, these arrears and costs are as follows:
To pay off the entire obligation secured by your Deed of Trust as of the . . . . . day of . . . . . . you must pay a total of $. . . . . in principal, $. . . . . in interest, plus other costs and advances estimated to date in the amount of $. . . . . . From and after the date of this notice you must submit a written request to the Trustee to obtain the total amount to pay off the entire obligation secured by your Deed of Trust as of the payoff date.
As to the defaults which do not involve payment of money to the Beneficiary of your Deed of Trust, you must cure each such default. Listed below are the defaults which do not involve payment of money to the Beneficiary of your Deed of Trust. Opposite each such listed default is a brief description of the action necessary to cure the default and a description of the documentation necessary to show that the default has been cured.
You may reinstate your Deed of Trust and the obligation secured thereby at any time up to and including the . . . . day of . . . . . ., . . . [11 days before the sale date], by paying the amount set forth or estimated above and by curing any other defaults described above. Of course, as time passes other payments may become due, and any further payments coming due and any additional late charges must be added to your reinstating payment. Any new defaults not involving payment of money that occur after the date of this notice must also be cured in order to effect reinstatement. In addition, because some of the charges can only be estimated at this time, and because the amount necessary to reinstate or to pay off the entire indebtedness may include presently unknown expenditures required to preserve the property or to comply with state or local law, it will be necessary for you to contact the Trustee before the time you tender reinstatement or the payoff amount so that you may be advised of the exact amount you will be required to pay. Tender of payment or performance must be made to: . . . . . ., whose address is . . . . . ., telephone ( ) . . . . . . AFTER THE . . . . DAY OF . . . . . ., . . ., YOU MAY NOT REINSTATE YOUR DEED OF TRUST BY PAYING THE BACK PAYMENTS AND COSTS AND FEES AND CURING THE OTHER DEFAULTS AS OUTLINED ABOVE. The Trustee will respond to any written request for current payoff or reinstatement amounts within ten days of receipt of your written request. In such a case, you will only be able to stop the sale by paying, before the sale, the total principal balance ($ . . . . . .) plus accrued interest, costs and advances, if any, made pursuant to the terms of the documents and by curing the other defaults as outlined above.
You may contest this default by initiating court action in the Superior Court of the county in which the sale is to be held. In such action, you may raise any legitimate defenses you have to this default. A copy of your Deed of Trust and documents evidencing the obligation secured thereby are enclosed. You may wish to consult a lawyer. Legal action on your part may prevent or restrain the sale, but only if you persuade the court of the merits of your defense. You may contact the Department of Financial Institutions or the statewide civil legal aid hotline for possible assistance or referrals.
The court may grant a restraining order or injunction to restrain a trustee's sale pursuant to RCW 61.24.130 upon five days notice to the trustee of the time when, place where, and the judge before whom the application for the restraining order or injunction is to be made. This notice shall include copies of all pleadings and related documents to be given to the judge. Notice and other process may be served on the trustee at:
If you do not reinstate the secured obligation and your Deed of Trust in the manner set forth above, or if you do not succeed in restraining the sale by court action, your property will be sold. The effect of such sale will be to deprive you and all those who hold by, through or under you of all interest in the property;
(5) In addition, the trustee shall cause a copy of the notice of sale described in subsection (2)(d) of this section (excluding the acknowledgment) to be published in a legal newspaper in each county in which the property or any part thereof is situated, once on or between the thirty-fifth and twenty-eighth day before the date of sale, and once on or between the fourteenth and seventh day before the date of sale;
(6) In the case where no successor in interest has been established, and neither the beneficiary nor the trustee are able to ascertain the name and address of any spouse, child, or parent of the borrower or grantor in the manner described in RCW 61.24.030(10), then the trustee may, in addition to mailing notice to the property addressed to the unknown heirs and devisees of the grantor, serve the notice of sale by publication in a newspaper of general circulation in the county or city where the property is located once per week for three consecutive weeks. Upon this service by publication, to be completed not less than thirty days prior to the date the sale is conducted, all unknown heirs shall be deemed served with the notice of sale;
(7)(a) If a servicer or trustee receives notification by someone claiming to be a successor in interest to the borrower or grantor, as under RCW 61.24.030(11), after the recording of the notice of sale, the trustee or servicer must request written documentation within five days demonstrating the ownership interest, provided that, the trustee may, but is not required to, postpone a trustee's sale upon receipt of such notification by someone claiming to be a successor in interest.
(b) Upon receipt of documentation establishing a claimant as a successor in interest, the servicer must provide the information in RCW 61.24.030(11)(c). Only if the servicer or trustee receives the documentation confirming someone as successor in interest more than forty-five days before the scheduled sale must the servicer then provide the information in RCW 61.24.030(11)(c) to the claimant not less than twenty days prior to the sale.
(8) On the date and at the time designated in the notice of sale, the trustee or its authorized agent shall sell the property at public auction to the highest bidder. The trustee may sell the property in gross or in parcels as the trustee shall deem most advantageous;
(9) The place of sale shall be at any designated public place within the county where the property is located and if the property is in more than one county, the sale may be in any of the counties where the property is located. The sale shall be on Friday, or if Friday is a legal holiday on the following Monday, and during the hours set by statute for the conduct of sales of real estate at execution;
(10) The trustee has no obligation to, but may, for any cause the trustee deems advantageous, continue the sale for a period or periods not exceeding a total of one hundred twenty days by (a) a public proclamation at the time and place fixed for sale in the notice of sale and if the continuance is beyond the date of sale, by giving notice of the new time and place of the sale by both first class and either certified or registered mail, return receipt requested, to the persons specified in subsection (1)(b)(i) and (ii) of this section to be deposited in the mail (i) not less than four days before the new date fixed for the sale if the sale is continued for up to seven days; or (ii) not more than three days after the date of the continuance by oral proclamation if the sale is continued for more than seven days, or, alternatively, (b) by giving notice of the time and place of the postponed sale in the manner and to the persons specified in subsection (1)(b), (c), (d), and (e) of this section and publishing a copy of such notice once in the newspaper(s) described in subsection (5) of this section, more than seven days before the date fixed for sale in the notice of sale. No other notice of the postponed sale need be given;
(11) The purchaser shall forthwith pay the price bid and on payment the trustee shall execute to the purchaser its deed; the deed shall recite the facts showing that the sale was conducted in compliance with all of the requirements of this chapter and of the deed of trust, which recital shall be prima facie evidence of such compliance and conclusive evidence thereof in favor of bona fide purchasers and encumbrancers for value, except that these recitals shall not affect the lien or interest of any person entitled to notice under subsection (1) of this section, if the trustee fails to give the required notice to such person. In such case, the lien or interest of such omitted person shall not be affected by the sale and such omitted person shall be treated as if such person was the holder of the same lien or interest and was omitted as a party defendant in a judicial foreclosure proceeding;
(12) The sale as authorized under this chapter shall not take place less than one hundred ninety days from the date of default in any of the obligations secured;
(13) If the trustee elects to foreclose the interest of any occupant or tenant of property comprised solely of a single-family residence, or a condominium, cooperative, or other dwelling unit in a multiplex or other building containing fewer than five residential units, the following notice shall be included as Part X of the Notice of Trustee's Sale:
X. NOTICE TO OCCUPANTS OR TENANTS
The purchaser at the trustee's sale is entitled to possession of the property on the 20th day following the sale, as against the grantor under the deed of trust (the owner) and anyone having an interest junior to the deed of trust, including occupants who are not tenants. After the 20th day following the sale the purchaser has the right to evict occupants who are not tenants by summary proceedings under chapter 59.12 RCW. For tenant-occupied property, the purchaser shall provide a tenant with written notice in accordance with RCW 61.24.060;
(14) Only one copy of all notices required by this chapter need be given to a person who is both the borrower and the grantor. All notices required by this chapter that are given to a general partnership are deemed given to each of its general partners, unless otherwise agreed by the parties.
Foreclosure Timeline in Washington State
At Alliance Properties, we have spoken with many homeowners or home purchasers and know the foreclosure process is pretty confusing. Many people are unaware of how the foreclosure timeline works. Due to the complexity and specificity of each stage in the foreclosure process, we want to simply lay out the foreclosure timeline in Washington State.
Minimum Foreclosure Timeline in Washington State
Minimum Foreclosure Timeline in Washington State as a Table
Foreclosure Timeline Terminology
(Taken from the Seattle Bubble)
Technically a home has not actually been foreclosed until Day 210 in the process above, but the word “foreclosure” is often used broadly to describe any home at some point in the process between the Notice of Default at Day 60 and whenever the bank sells the home. On Seattle Bubble when we provide stats on the number of foreclosures that are happening in the Seattle metro area we’re referring to homes that have reached the Notice of Trustee Sale stage.
“REO” / “Bank Owned”
Any home that has been sold back to the bank at the courthouse auction (Day 210) and not yet sold to a new buyer is bank owned, also known as real estate owned (REO).
In its broadest sense, the term “shadow inventory” can mean any home where the borrower is not current on the loan, but the home is not yet listed on the market for sale. Note that when it is used this broadly, many homes that are considered to be shadow inventory will never end up as normal inventory due to the borrower getting current on their loan or working out a loan modification plan with the bank that holds the mortgage.
It is also worth noting that even in the fastest scenario outlined above, all foreclosed homes that at least get to the notice of trustee sale stage will pass through a period of at least 161 days as “shadow inventory,” even if they are moving along the process at a normal rate. In other words, about five months worth of homes in the foreclosure pipeline would be considered “shadow inventory” at any given time.
Based on the latest Trustee Deed stats for King County that’s a minimum of 1,724 homes in recent months. That sounds like a lot of shadow inventory compared to the ~5,000 homes on the market right now, but it just represents the normal process playing out. The vast majority of so-called “shadow inventory” is made up of homes just moving through the normal foreclosure timeline, not some massive store of homes sitting in some unsold cache, waiting to flood the market any day now.
Ways to Extend and Delay the Foreclosure Timeline
Note that what I have described above is the minimum foreclosure timeline. In Washington state, there are a number of ways to drag it out (some ethical, some not), should a borrower be so inclined.
Notice of Pre-Foreclosure Options
Thirty days before the official Notice of Default, the lender must send the borrower a letter detailing their pre-foreclosure options, as described in RCW 61.24.031. If the borrower responds to the letter asking for a meeting with a representative of the lender, an additional sixty days are added to the process.
The HAMPster Wheel
Some borrowers have taken to abusing the federal government’s Home Affordable Modification Program (HAMP) to drag out the foreclosure process by months or even years. The “HAMPster Wheel” name for this “game” comes from a lengthy thread on the LoanSafe forums in which various borrowers share their tactics for living for free in their mortgaged home for as long as possible.
Filing bankruptcy any point before the actual Trustee Sale will delay or even cancel the process, pending the outcome of the bankruptcy. Chapter 13 bankruptcy could cancel the foreclosure completely, while Chapter 7 will generally just delay the process by about 60 days.
Filing a Motion to Restrain Sale
Up until five days before the courthouse steps foreclosure auction, the homeowner may file a motion with the court to restrain the sale. If you have no legal grounds to restrain the sale this delay tactic will not buy you much time, but if there is a valid legal argument (e.g. predatory lending, illegal foreclosure process, MERS issues etc.), the court may approve a restraint of the sale.
Forcing a Sheriff’s Eviction
As early as 20 days after the Trustee Sale, the bank can take possession of the home. However, if the borrower decides not to move out willingly, they can force the bank to evict them. The sheriff’s eviction process can delay the final move out of the house by about two weeks.