When a homeowner defaults on a loan and their home ends up in foreclosure, the way that the lender takes back the home is typically through a judicial sale. Basically, this means that the sale of the mortgage property is supervised by the court. There are specific processes involved in this action. Let’s take a closer look.
How Does Foreclosure by Judicial Sale Work?
The process starts when the homeowner defaults on a loan and the mortgage lender decides that it wants to take the property back. At this point, the lender puts the property on the auction block – or puts it up for judicial sale – where they can try to sell it to another buyer to recoup the money lost from the original buyer’s default. If there are other parties involved, those who will receive money from the sale include the mortgage lenders, lien holders, and if there are funds remaining, the mortgager.
Who Are Generally the Parties Involved?
What’s unique about the process of foreclosure by judicial sale is that the homeowner and mortgage lender are not the only parties always involved in the process. What are called “necessary parties” in the process can include those who’ve acquired easements, leases, or liens after the mortgage was executed. If their interests in the property isn’t settled when the property is sold then the primary mortgager will have to make sure their interests are paid off before they can begin requesting payments from the new buyer.
You may also find that “proper parties” are involved in the case. These individuals or businesses had an interest in the property before the mortgage was executed. An example of a proper party may be someone who stood to inherit the property after the owner died.
What are Deficiency Judgments?
Deficiency judgments occur when the amount required to pay off the loan to the lender is not received in the sale of the home. So, for instance, if the amount owed was $20,000 and $18,000 was received, the lender can sue the original owner for the difference.
The judicial sale offers the mortgage lender a way to make a financial gain on a foreclosure after the homeowner defaults on a loan. If you find yourself in danger of this process, it’s good to work with your lending company to ensure your home is not sold and taken from your possession.