Understanding the foreclosure process in Washington is critical to navigating your own home foreclosure.
Before we dive in…
Foreclosure is no fun. It’s stressful, frustrating, and a negative experience. It results in detrimental credit consequences, preventing you from borrowing money going forward. Your credit can be impacted for as long as 7 to 10 years, ruling out lending for a new house or college. If the bank’s foreclosure action is successful, it will look to evict you as soon as it can. You may have no place to go.
However, foreclosure is not the end of the world. You are not the only person going through this. There are currently 3,254 foreclosure home sales in Washington. In February 2020, 1 in every 2,610 housing units had received a foreclosure filing.
Focus on understanding how foreclosure works. Armed with that knowledge, you can help reach the best possible solution.
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What is foreclosure?
In laymen’s terms, foreclosure is when the banks comes to re-possess your home.
More formally, foreclosure occurs when an owner of property cannot make principal and interest payments on their mortgage. This let’s the lender (usually a bank) seize the property, remove the occupants, and sell the house. The house is sold to pay off unpaid debt.
Missing a single mortgage payment will not result in foreclosure in Washington. Rather, a few delinquent payments will be subject to a minor penalty of around 5% of the overdue amount. However, in accordance with the Consumer Financial Protection Bureau rules, once 120 days of delinquency occurs pass, the bank can institute foreclosure proceedings in Washington.
Under Power of Sale (or Non Judicial Foreclosure):
In Washington, “power of sale” or “nonjudicial foreclosure” is the norm. Non–judicial foreclosures happen when a mortgage agreement has a “power of sale” clause that gives the lender the right to foreclose on a property by itself. Without that clause, the lender has to take the borrower to court in order to foreclose; hence the term. Many states require judicial foreclosures.
In this scenario, parties with an interest in the property must be notified (as well as judicial foreclosure). Parties with an interest typically include contractors, other bank lending, city liens.
Here is some info on “under power of sale” foreclosures:
- The bank serves you papers demanding payment, and the courts are not required – although the process may be subject to judicial review.
- After the waiting period ends, a “deed of trust” is written and control of the property is transferred to a trustee. drawn up and control of your property is transferred to a trustee.
- The trustee sells the property on behalf the lender at a public auction on notice.
Kind House Buyers takes pride in buying difficult to sell property. One of our specialties is helping homeowners stop foreclosure. We will make a fair cash offer for foreclosure houses. In many cases, the amount can cover the debt and you walk away with cash in your pocket. We also help clients with legal fees associated with hiring an attorney to request an extension of the final judgement.
Give us a call (253) 216-2497 to discuss options. Besides selling to Kind House Buyers options include load modification (“foreclosure workout”), short sale, deed in lieu of foreclosure, and renting.
(Outside of Washington) Under Judicial Foreclosure:
Judicial foreclosure occurs when the bank files litigation in the county where the property is seated and asks the court to enter a judgment permitting the home to be sold to satisfy the debt.
Here is some more detail on judicial foreclosure:
- Your mortgage lender must file suit in the court system.
- You’ll get a letter from the court demanding payment.
- Assuming the loan is valid, you’ll have 30 days to bring payment to court to avoid foreclosure (and sometimes that can be extended).
- If you don’t pay during the payment period, a judgment will be entered and the lender can request the sale of your property – usually through an auction.
- Once the property is sold, the sheriff serves an eviction notice and forces you to immediately vacate the property.
What Happens After A Foreclosure Auction?
When foreclosure finishes, the loan is paid off with the sale proceeds. In some cases, if the sale of the property at auction doesn’t cover the loan, a deficiency judgment can be issued against the borrower.
A deficiency judgment is where the bank gets a judgment against you, the borrower, for the remaining funds owed to the bank on the loan amount after the foreclosure sale.
Some states limit the amount owed in a deficiency judgment to the fair value of the property at the time of sale, while other states will allow the full loan amount to be assessed against the borrower.
Here’s a great resource that lists the state by state deficiency judgment laws, since every state is different.
Undoubtedly, you should avoid a foreclosure at all costs. Call up the bank to put together a solution. You can also reach out to a trustworthy real estate investor like Kind House Buyers to rid yourself a Washington house before a judgment is issued.
Experienced investors help negotiating with banks to lower the amount you owe in a sale, make a short sale offer, connect you with a short sale negotiator and foreclosure attorney.
Be wary of foreclosure scams. Offers and advice that are “too good to be true” probably are. Companies often try to charge a fee for “counseling services”, or may ask you to sign over title to your property, re-direct mortgage payments. An unethical company might ask to you make payments to them directly to pay the mortgage – but then keep the payments for themselves. Here are some tips from Fannie Mae to identify potential scams.
If you need to sell a property in Washington, we are here to help.
We buy houses in Seattle Washington like yours from people who need to sell fast.