what happens if you get a sale date on your foreclosure
There are two different types of foreclosures. One are mortgage foreclosures which usually go through a court process. The other are called non-judicial foreclosure and these foreclosures end with a public sale done by a private party, called a trustee. So now let's talk about what happens if you get a sale date on your forclosure.
California for example is a state where most foreclosures are done through a trustee sale. Technically when you borrow from a mortgage lender in California, you actually don't sign a mortgage. You sign a note and a deed of trust. The deed of trust can be foreclosed through a fairly short process.
On the other hand, Illinois is a state that uses judicial foreclosure. Judicial foreclosure is done by a court process.
In the case of a deed of trust foreclosure, the process begins with a Notice of Default. In California this starts a 90 day clock running. You can still reinstate your loan by paying all the delinquent payments and fees.
At the 90 day mark the lender can serve you with a Notice of Trustee Sale. This announces to the world that there will be a public sale, done by a trustee, of your property, and sets out the date and time of the trustee sale. The sale date is set three weeks from the date of the Notice of Trustee Sale. There is often a publication of the sale and notice to the public in order to bring in bidders.
In California, you can still bring your loan current up until five days before the trustee sale. At that point, five days from the sale date, the lender can require that you pay all the loan proceeds off, including the full balance and the delinquent amounts.
Sometimes the lender will postpone the sale date. They will do this for various reasons. You may be working things out with them, such as working out a short sale. Or you may file a petition for bankruptcy which temporarily postpones the sale. Or sometimes they just postpone the sale for their own reasons.
At the sale, bidders are required to bid over and above the amount of the loan including all delinquent balances and fees. If there are no bids, then the lender automatically gets your property back. The trustee signs a trustee's deed and the property is transferred to the lender.
Three differences exist between this trustee's sale process, and the process of judicial foreclosure such as in Illinois: The right of redemption, the deficiency due, and the difficulty in completing the foreclosure process.
Redemption gives the homeowner a period of time in which to buy back their house for all cash. All cash can mean getting a loan from somone else, but the homeowner has to pay for the entire amount of the loan including all fees and delinquent amounts. Only judicial foreclosure has a right of redemption, and this right can be limited or non-existent in certain circumstances. In actual fact the right is rarely exercised.
The deficiency due is the ability of the court to award a judgment in favor of the lender against you for what amounts to the lender's financial loss — the deficiency between what they get for your house, and what you owe. A deficiency judgment is typically available only in judicial foreclosures, even in California. And certain loans cannot ever result in a deficiency judgment, such as purchase money loans, or the mortgage you used to purchase your primary residence. Remember that the lender has to pursue judicial foreclosure in general, to get a deficiency judgment. And if they do get one, you could probably file for bankruptcy as a deficiency judgment is an unsecured debt that can be worked out in bankruptcy. Find out more about mortgage and bankruptcy.
The third difference between a trustee's sale and a judicial foreclosure is that the judicial foreclosure process is generally lengthier. That means it is more expensive. A deed in lieu of foreclosure is often a realistic option if you are in a state where there are only judicial foreclosures. Get your deed in lieu of foreclosure questions answered.
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