As a real estate closing attorney, one situation that is becoming more and more prevalent are homeowners trying to sell their home when a foreclosure proceeding has been threatened or filed. This article looks at selling real estate under foreclosure.
Should homeowners just give up and let their property be foreclosed on or should homeowners try to sell their real estate by private sale? The answer truly depends on the circumstances. Owners who are under foreclosure often have other problems such as judgments, which will make it impossible to clear title for a private sale. A foreclosure, however, “cuts off” subsequent judgments and allows title to be conveyed by the trustee free of the judgments. I always recommend a title search before trying to sell real estate under foreclosure to be sure the foreclosure is not the only problem.
Many homeowners will tell you their house is in foreclosure when all they have received is a letter threatening foreclosure. In such a case, the real estate can be bought or sold with no problem. However, even if a foreclosure is not pending, alert the closing attorney so he can be sure a foreclosure proceeding is not filed just before closing. A foreclosure results in more expense to the seller at closing because the expenses incurred in the foreclosure must be paid in order to cancel the mortgage.
Even if a foreclosure proceeding has been filed, you can still bring about a private sale. The foreclosure procedure usually takes longer than 45 days. After filing the petition, the trustee must give notice of hearing to the owner. A hearing is then held before the Clerk of Court who decides whether there is authority to proceed with the foreclosure sale. The trustee must then post notice of the sale at the courthouse for 20 days and run the notice in a newspaper once a week for 2 weeks. After the sale, there is a 10 day upset bid period. If no upset bid is filed, the sale then becomes final.
However, for good cause, the foreclosure trustee is allowed to postpone a foreclosure sale. So, if you convince the trustee to postpone, you will gain time for the private sale. State law allows the owner to terminate the foreclosure all the way until expiration of the time for upset bids if the owner pays the mortgage debt and the foreclosure expenses (which includes the trustee’s fee). Therefore, if there is enough money on the seller’s side at closing, the closing can take place any time before the expiration of the 10 day upset bid period.
When dealing with “troubled” real estate, let the attorney supply the legal advice. The attorneys at Ferguson, Hayes, Hawkins & DeMay, PLLC are familiar with foreclosure procedures and can assist with any questions you may have about selling “troubled” real estate.
Ryan C. Hawkins is a partner at Ferguson, Hayes, Hawkins & DeMay, PLLC and a member of the Real Property Section of the North Carolina Bar Association.