Foreclosure occurs when a homeowner is unable to make their monthly mortgage payments. Because of this, they are evicted from the home by the lender. The lender holds the authority to do so because of the contract signed by the buyer of the home, as well as the seller or lender. The house being foreclosed on serves as a type of collateral, as stipulated in the contract.

Some lenders allow for a grace period in which the payment can be made before pursuing foreclosure. However, this period generally will only last a couple of months before the property is foreclosed upon. Of course, if the borrower is considerably behind on payments, it will be harder to catch up because of late fees applied by the lender.

Foreclosure by judicial sale refers to a legal action in which the mortgaged property is sold under court supervision. This allows all parties to be notified of the foreclosure proceedings. The debtor is generally allowed to participate in some proceedings, which are followed by a judicial decision. Sale of the property can only proceed once the court decision has been finalized. Foreclosure by judicial sale is available in all states. Additionally, it is the preferred foreclosure method in most jurisdictions.

Strict foreclosure refers to a specific type of foreclosure by judicial sale. Under these proceedings, the court orders the mortgagor to repay their mortgage debt within a specified time period. If they are unable, the mortgage holder is allowed to automatically gain title to the property. Additionally, the mortgage holder has no obligation to sell the real estate being foreclosed upon. Strict foreclosure is only available in a limited number of jurisdictions, namely in New Hampshire and Vermont.

Foreclosure by power of sale occurs without court supervision. Foreclosing without court involvement can often result in a much more efficient and quicker process. However, even though the court is not supervising the sale, all necessary parties should still be notified. Foreclosure by power of sale is not available in all states, although a majority of states do allow for the use of this foreclosure method. 

What Are Foreclosures for Sale? What Are Some Legal Issues to Be Aware of with Foreclosure Sales?

Homes that have been acquired through foreclosure and are put up for sale are known as foreclosures for sale. These homes are sold in order to recover the debt attached to the property. The bank or lending institution reclaims title to the home and puts it up for sale, with the proceeds from the sale compensating for the borrower’s missing payments.

A foreclosure for sale may be an ideal property for a person who is looking to buy a home, due to the fact that this type of property is generally offered at a reduced price. However, there are many legal issues to consider when shopping for a foreclosed home. Some of the most common examples of such legal issues include:

  • Title Disputes: It is imperative to be certain of who is the true owner of the home. In many foreclosure cases, the previous owner may not be aware of the foreclosure proceedings. An example of this would be if they have been away, or have relocated out of state. Should there be any dispute regarding ownership, a quiet title proceeding could be necessary;
  • Unpaid Property Taxes: Foreclosed homes often go through extended periods of time in which no one is living in the house. This can further complicate matters such as unpaid taxes and unpaid utilities;
  • Appraisal Disputes: Property valuation disputes arise especially regarding necessary home repairs, structural defects, or zoning violations with the house; and
  • Filing Deadlines: Because there could be strict filing deadlines for foreclosures, it is imperative that you file all necessary papers in a timely manner.

Various other issues can arise involving foreclosure fraud. These issues most commonly include scams, such as cases in which the deed to the property was obtained through deceitful means. This can cause problems when the property title is being transferred from one party to another.

How Are Legal Issues Involving Foreclosure Resolved?

Legal disputes involving foreclosure can be resolved in a number of ways. The most commonly available remedies generally include:

  • Monetary damages for losses caused by a fraudulent transaction;
  • Court injunctions to evict a person or transfer title, especially if a former resident will not vacate the property; and/or
  • A court order requiring the parties to rewrite some or all of the real estate contract for the sale of the home.

Each state maintains their own rules and regulations regarding the foreclosure process. There are several steps that occur before the actual final step of when the lender seizes the property through foreclosure. Twenty-two states implement judicial foreclosure as the primary method of dealing with home foreclosures, as previously mentioned. What this means is that the lender must go through the courts in order to show that the borrower has failed to make their monthly mortgage payments.

Should the courts approve the foreclosure, the local sheriff will auction the property to the highest bidder in order to recoup what the bank is owed. Alternatively, the bank becomes the property’s owner in order to resell the property.

What Are the Consequences of a Foreclosure? How Can I Avoid a Foreclosure?

Because the foreclosure process is complicated and overwhelming, it is imperative to be aware of what your rights are and what the bank cannot legally do. Each state has their own set of regulations regarding the foreclosure process.

Some states require banks to determine if the homeowner qualifies for either a loan modification or some other form of help, before they may foreclose on the home. If the bank decides to do both at the same time, it is an illegal act also known as dual tracking. If the homeowner applies for some form of assistance or loan modification, the bank cannot legally start the foreclosure process.

The bank must obtain a court order, as well as file for an eviction, before foreclosing the home. Additionally, the bank cannot legally padlock your home if you are still living in it. Should you reinstate your mortgage prior to the sheriff sale, the bank must halt the foreclosure process.

However, there are some things that the bank is allowed to do during the foreclosure process. Generally speaking, this includes:

  • Padlocking the home if it is empty; 
  • Seeking alternative judgments if they are unable to sell the home at auction for the amount owed on the mortgage; and
  • Requesting either a non-judicial foreclosure or a judicial foreclosure.

If you are currently failing to make mortgage payments, it is absolutely crucial that you seek help early in the process in order to ensure that you have a path forward. Some practical tips to consider when trying to avoid a foreclosure include:

  • Be timely with loan payments and not ignoring the problem;  
  • Contact your lender at the first sign of trouble in order to determine where other financial options are available; 
  • Ensure you are receiving the notices from your lender and responding accordingly;
  • Understand your rights through your loan documents to ensure you know what the lender can and cannot do if you miss a payment;
  • Seek additional help from the U.S Department of Housing and Urban Development (“HUD”);
  • Utilize your assets in order to reinstate your loans;
  • Avoid foreclosure prevention companies; and 
  • Be aware of foreclosure fraud and scams requiring a signature on one, singular document for your foreclosure to be resolved.

Should I Hire a Lawyer for Assistance with Foreclosures for Sale?

Foreclosures for sale can involve various specific legal issues, which may need to be resolved before the sales transaction can be completed. You should consult with an experienced local foreclosure lawyer if you need assistance with a foreclosure issue. 

An experienced foreclosure attorney can inform you of your legal rights and obligations, as well as represent you in court, as needed.