Bret and Kelly Welty, Welty Real Estate Group
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What is an Idaho Foreclosure and How Does it Work?1) Idaho Pre-Foreclosures. A home that’s for sale before it actually goes to the foreclosure auction is known as a pre-foreclosure. Most short sales are pre-foreclosures- they have usually missed payments and are trying to get it sold before the auction to mitigate the damage done to their credit. Please understand, a home is a short sale when it is being offered for sale for less than what is owed and asking the lender to take the loss. It’s called a “short sale” because the sale price does not cover the loan amount, not because it’s being purchased before the auction.
2) Idaho Foreclosure Auction (i.e. Trustee Sale). Under a Deed of Trust in Idaho, the earliest the lender can have a foreclosure auction is 120 days after filing the Notice of Default (NOD) (the formal start of the foreclosure process). Purchasing at foreclosure auctions is very difficult for a number of reasons: starting bids too high, auction delays, having to pay cash, no inspection or other contingencies, property evictions, etc.
3) Idaho Bank Foreclosures (i.e. REOs or Bank-Owned). When a home is not purchased at the foreclosure auction by a third party it becomes bank-owned real estate, also known as “real estate owned” (REO). The Bank’s REO department then hires a Realtor to list the property.
Foreclosure By Notice of Sale Notice Requirements:
- Prior to initiating a foreclosure, the lender must record a notice of default in the county in which the property is located and the defaulting borrower must be personally served with such notice at least 120 days before the sale date. A copy of the notice of default must be published date at least 4 consecutive weeks in a newspaper of general circulation in the county in which the property is located with the last notice published at least 30 days before the proposed sale.
- When the property being foreclosed upon is occupied at least three (3) good faith attempts must be made to serve the Notice of Sale on different days during a seven (7) day period on the adult occupants of the property. These service attempts must be made at least 30 days before the date of the sale.
- Foreclosure sales must take place on a day other at the time, place and date designated in thenotice of sale as part of a public auction. The trustee will auction the property to the highest bidder. The foreclosure sale may be postponed for 30 days from the original sale date if at least 20 days written notice is provided to the original recipient of the notice of default.
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What is a Short Sale?
A “short sale” occurs when the net sale proceeds (sale price less closing costs) are not sufficient to satisfy the outstanding mortgage(s) on the property, and the seller does not have the financial ability to make up the difference. The lender is asked to take less than the full amount owed in order for the sale to be completed. If you are in a difficult financial situation, a short sale may be the only alternative to foreclosure.
Short Sale Information:
A short sale provides you with an opportunity to sell your home, while attempting to preserve your credit rating. A foreclosure can have a devastating impact on someone’s credit report that has a lasting effect for years to come. A short sale is typically reported on a credit report as a debt that is “settled for an amount less than what is due”. While this may still cause a significant dip in credit score, it will likely be less significant as the reporting of a foreclosure.
Why would a lender want to agree to a Short Sale?
The answer is very simple: Lenders do not want to own houses. Lenders are in the business of loaning money, not in the business of stockpiling real estate. There have been numerous reports that banks can face fees of up to $50,000.00-$60,000.00 in actually foreclosing on a property. From a business standpoint, the lender will make out better if the property is put on the market and given an opportunity to attract a buyer through private sale.
Estimated timing:
The short sale process typically takes 90 - 120 business days to complete, but may take longer. The primary stages in a short sale are:
- Seller completes lender’s approval package
- Determination of value
- Negotiation and approval of offer
- Transaction approval (receipt of approval letter)
- Escrow closing
An attempt at a Short Sale may fail if:
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No hardship -- Lenders will not accept short sale offers or requests for short sales if the borrower has the ability (not the willingness) to make their payments. |
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Bankruptcy -- Few, if any, lenders will consider a short sale when the seller has filed for bankruptcy, because negotiating a short sale is considered a collection activity and collection activities are prohibited in bankruptcies. |
Will there be tax consequences?
A short sale may have tax implications. In December 2007 the Mortgage Forgiveness Debt Relief Act was signed into law by President Bush. This law eliminates potential tax liability associated with a short sale depending on the specifics of your particular situation. Please talk with a tax advisor or financial advisor for additional details.
Do I have to have an offer on my home to begin a short sale?
No. All documentation to begin facilitating a short sale discussion with your lender may be submitted in advance of receiving an offer. It is not until a signed purchase and sale agreement (with a bonafied buyer) is submitted however, that the lender will be in a position to process and provide final approval your short sale. Most parties find it beneficial to submit all documentation when an offer is received.
Do I have to move out of my home?
If your lender(s) approve a short sale, you do not need to vacate your home until the close of escrow.
If I provide the information as requested, will I have to provide any additional information/documentation?
Probably. Most short sales take 90 days or more to complete. If the information you have provided has become outdated (over 30 days old), the short sale lender may need you to provide additional information (bank statements, paystubs) to make sure the information they are working with is still valid.
Who can I call if I have additional questions?
You can call Welty Real Estate Group at 208-841-4868 for a short sale specialist.
When you're looking for a partner to help you negotiate the complexities of selling a home, you've come to the right place. The experience, dedication and strong communication you'll receive here will help ensure the successful and profitable sale of your home:
1. The Local Advantage - Take advantage of a broad spectrum of technologies and tools to support the sale of your home from start to close.
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Home Listing Syndication
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