How Does Utah Foreclosure Work?

Man wearing a suit
Sam Dodd

Home with a foreclosure sign in frontIf you’re looking for a great deal on a foreclosure property in Cedar City, Utah, join the club! Who isn’t out to save (and maybe make) a little money?

Now, slow down there! Before you set out to find the deal of the century, it’s important to understand the Utah foreclosure process. There are some inherent risks to buying foreclosures at a public auction and if you’re not experienced, get educated. Many people buy bank-owned properties or homes that have already been through the entire foreclosure process. Right now, Utah’s economy is strong and the unemployment rate is low. The housing market is still pretty strong and that means fewer people are at risk of losing their homes than there were in the middle of the housing crisis.

Utah’s Non-Judicial Foreclosure Process

While some states rely primarily on a judicial foreclosure process, most Utah lenders use the non-judicial foreclosure process.

Step 1: Legally, the lender can file a “Notice of Default” after the first missed payment. Traditionally, lenders in Utah wait until three payments are missed before they file this legal document warning the borrower that foreclosure is imminent if they do not redeem the missed payments. This is a frightening position to be in.

I should note that this part of the process is known as “pre-foreclosure.” Because it involves a public record, you might see pre-foreclosure property listings on major national websites. These websites mine information and publish it online. During the pre-foreclosure process, at this stage the home is not for sale and the home owner still has time to work with the lender.

Step 2: Once the Notice of Default is served, the home owner enters into what is known as the “Reinstatement Period.” This gives the borrower time to make up the payments, work out an agreement with the lender and, in some cases, pay off the loan entirely.  If satisfactory arrangements are made, this can be the end of the process.

Did you know when the bank and borrower come to an agreement no public document is generated to note the home owner is no longer in trouble? That’s why on some websites that list pre-foreclosures, you will see a home owner was served a Notice of Default six months ago, with no further foreclosure action noted. When you see that, it’s pretty safe to assume the home won’t come on the market as a distress-sale property.

Step 3: If no agreement can be reached (and, unfortunately that happens sometimes) the foreclosure trustee or attorney will begin the sale process. The home owner will be served with a “Notice of Sale” and the property will be listed in a local newspaper for three consecutive weeks before the actual sale. The last notice has to be finished 10 days before the property or home is sold. Occasionally, the home owners will find a way to save the home during this period.

A Notice of Sale is a public document. National real estate websites generally pick up the update when a Notice of Sale is recorded so you should see it reflected in their public information listings.

Step 4: Unfortunately, once the issue reaches this stage it’s too late for the home owner to save the home. An auction will be held at a courthouse. These auctions are held in the same county in which the property is located. Anybody can attend. It’s a good idea to watch a few of these sales if you’re really interested in understanding how the process works.

Such a sale can be cancelled if the homeowner suddenly files bankruptcy. Be sure to check with the listed trustee or attorney to make sure the sale is on before you go.  Once a home is sold and the deed is filed, there is no turning back. Utah doesn’t allow for a redemption period (as is the case with all non-judicial foreclosures).

Bank-Owned: Sometimes a representative of the lender will attend the auction and out-bid everyone! In that case, the property becomes a “Bank-Owned” property. The bank will determine the right time to sell the home. This is a good time to buy a foreclosed property because banks generally research the title and sometimes make improvements to the property and take on the task of evicting anyone still living in the property. There usually isn’t as much savings to be realized at this point, but it’s a much safer option for inexperienced buyers.

Beware: When a foreclosure attorney or trustee sells a property at auction, there are no guarantees about the title, the legal description or the condition of the home. Sometimes you can inspect the property before the sale, but not always. Be sure you know what you’re buying! If you buy a property and people are still living in the property, it will be your job to legally evict them.

I hope this clarifies the Utah foreclosure process for you! There are many great ways to purchase Cedar City or Brian Head homes for sale and I would love to sit down with you and review the options. Give me a call today for help buying your new Cedar City home.

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