Judicial Foreclosure and How to Avoid Them!

A judicial foreclosure is a foreclosure that results from a court action rather than from the power of sale given to a trustee. Judicial type foreclosures happen when a deed of trust or mortgage deed does not have a power of sale clause, thus forcing the lender to take the debtor to court. This is opposite of a non-judicial foreclosure, in which a foreclosure can be completed outside the court system.

Each state in the United States handles real estate foreclosures differently. It's crucial to understand those differences and to know the specific procedures within your state. The terms that are used and timeframes of the proceedings may vary greatly from state to state, but the following is a simple overview of the different processes and considerations.

Judicial foreclosures are handled through the courts, starting with the lender filing a complaint and recording a notice of Lis Pendens. The accusation will state how much is owed (the debt), and why the lender should be able to foreclose and take the property given as security.

The homeowner will be served a notice of the complaint, either by mailing, in person by the local sheriff, or by publication of the notice. The homeowner will also have an opportunity to be heard by the court. If the court finds the loan 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, the court will issue a a writ authorizing a public auction. An auction is known as the sheriff's sale and is generally open to anyone, held in a public place, and can range from in front of the courthouse steps, to in front of the property being auctioned.

Foreclosures can be avoided or stopped with a loss mitigation process if there is enough time between today and the sale date. Only the lender can officially stop a judicial foreclosure proceeding once it's started, but only if they agree to specific terms.

The winner of the auction will sometimes have to pay cash at the time they are awarded the sale or within thirty days of the sale. Again, this varies state to state so check how your state processes foreclosure auctions. Once the auction is complete, the winning bidder will now own of the property upon the court's confirmation of the sale. Once the court has confirmed the sale, a sheriff's deed is prepared and delivered to the winning bidder, the deed is recorded with the county clerk, and the winning bidder is the owner of the property.

A judicial foreclosure can take anywhere from two months to four months from start to finish depending on the complexity of the case, the state in which the foreclosure is governed, and the legal process.

Now that you understand judicial foreclosure a little better, now see what a non-judicial foreclosure is.