The power of the power of sale clause

We are finding out the hard way on a deed we bought in Alabama about the Power of Sale Clause. The power of sale clause is one of many clauses written in most mortgages that will allow the lender or mortgage owner the power to sell the property in the event of a default by the owner, in order to pay the mortgage debt. It is for all intents and purposes equivalent to a foreclosure, without the need for judicial foreclosure in non-judicial States.

In our case, the power of sale clause was not included in the deed, so we cannot easily “evict” the occupants non-judicially as we had hoped. You are making us file for judicial foreclosure, resulting in more time and money to evict non-paying occupants. We are offering you a “Cash for Keys” option to help motivate you to leave quickly.

The clause preauthorizes the sale of the property when the owner defaults, and each State has its own procedures for this. They typically ask for a limited foreclosure notice, such as mailing, posting the notice on the property, or posting it in the newspaper. The trustee can then sell the property at a foreclosure sale. The process must follow the schedule and waiting periods established by the State upon completion of the foreclosure of the Power of Sale.

As of today, 30 states allow foreclosure by Power of Sale, and for borrowers, it has some advantages. The first is that a deficiency judgment cannot be sought in some states. This means that if they owe $100,000.00 and the house sells for $80,000.00, they still owe $20,000.00.

Lenders usually file a deficiency judgment against the person, which is an unsecured lien that must be settled before they can finance something in the future, like a car or a new house. In addition, if the borrower files a lawsuit, it must be reviewed judicially or in court.

The downside for the homeowner is that the process is much quicker and less costly to the lender than foreclosure on the property. So they can lose their house faster. Foreclosures in NY or NJ could be 5-7 years and reach $5,000.00 to $10,000.00+.

Also, there is no judicial review unless they file a lawsuit. They cannot plead their case in court unless they file a lawsuit, which includes paying court and attorney fees. Difficult if you are not even able to repay the loan.

And even with the Power of Sale Clause, some lenders decide to pursue a judicial foreclosure if there are some title issues, like document flaws, as we found out, or if they want to go ahead with the deficiency judgment since some states won’t allow it. . they have a deficiency judgment unless they are judicially executed.

When shopping for mortgages and delinquent deeds, always remember to check the documents for the power of sale clause, as we’ve found, it’s a very important clause that needs to be there.