Judicial vs. Non-Judicial Foreclosures
Each state in the U.S. handles it's real estate
foreclosures differently, it's important to understand those differences and know your
specific state's procedures. The terms used and timeframes vary greatly from state
to state, but the following information provides a general overview of the different
processes and considerations. If you haven't done so yet, you can review our guide
to each state's procedures by clicking here.
Judicial Foreclosures
Judicial foreclosures are processed through the courts, beginning
with the lender filing a complaint and recording a notice of Lis Pendens. The
complaint will state what the debt is, and why the default should allow the lender to
foreclose and take the property given as security. The homeowner will be served
notice of the complaint, either by mailing, direct service, or publication of the notice,
and will have the opportunity to be heard before the court. If the court finds the
debt valid, and in default, it will issue a judgment for the total amount owed,
including the costs of the foreclosure process. After the judgment has been entered,
a writ will be issued by the court authorizing a sheriff's sale. The sheriff's sale
is an auction, open to anyone, and is held in a public place, which can range from in
front of the courthouse steps, to in front of the property being auctioned.
Sheriff's sales will require either cash to be paid at the time of sale, or a substantial
deposit, with the balance paid from later that same day up to 30 days after the
sale. Check your local procedures carefully. At the end of the auction, the
highest bidder will be the owner of the property, subject to the court's confirmation of
the sale. After the court has confirmed the sale, a sheriff's deed will be prepared
and delivered to the highest bidder, when that deed is recorded, the highest bidder is the
owner of the property.
Non-Judicial Foreclosures
Non-judicial foreclosures are processed without
court intervention, with the requirements for the foreclosure established by state
statutes. When a loan default occurs, the homeowner will be mailed a default letter,
and in many states, a Notice of Default will be recorded at approximately the same time.
If the homeowner does not cure the default, a Notice of Sale will be mailed to the
homeowner, posted in public places, recorded at the county recorder's office, and
published in area legal publications. After the legally required time period has
expired, a public auction will be held, with the highest bidder becoming the owner of the
property, subject to their receipt and recordation of the deed. Auctions of
non-judicial foreclosures will generally require cash, or cash equivalent either at the
sale, or very shortly thereafter.
It is important to note that each non-judicial foreclosure state has different procedures.
Some do not require a Notice of Default, but start with a Notice of Sale.
Others require only the publication of the Notice of Sale to announce the sale, with no
direct owner notification required. You need to know the specific procedure for your
state.
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