We’re finding it the hard way in a deed we bought in Alabama on the power of attorney clause. The power of sale clause is one of the many clauses written in most mortgages that will allow the lender or mortgage owner the power to sell the property in the event of default by the owner, in order to pay off the debt. mortgage. It is for all purposes the equivalent of a foreclosure, without having to execute judicially 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 expected. It’s causing us to file for judicial foreclosure, which translates into more time and money to remove non-paying occupants. We offer them a “Cash for Keys” option to help motivate them to leave quickly.
The clause pre-authorizes the sale of the property when the owner defaults, and each state has its own procedures for this. They usually ask for a limited notice of foreclosure, such as mailing it, posting the notice on the property, or publishing it in the newspaper. The trustee can then sell the property in a foreclosure sale. The process must follow the schedule and waiting periods established by the state when completing the foreclosure of the power of sale.
As of today, 30 states allow a Power of Sale foreclosure, and for borrowers, it has some advantages. The first is that you cannot request a deficiency judgment in some states. This means that if you owe $ 100,000.00 and the house sells for $ 80,000.00, they still owe you $ 20,000.00.
Lenders often enter a deficiency judgment against the person, which is an unsecured bond that must be fixed before they can finance something in the future, like a car or new home. Also, if the borrower files a claim, it must be reviewed in court or in court.
The downside to the homeowner is that the process is much faster and less expensive for the lender than foreclosing the property. So they can lose their home faster. Foreclosures in New York or New Jersey can last 5 to 7 years and reach $ 5,000.00 to $ 10,000.00 +.
Also, there is no judicial review unless they file a lawsuit. They cannot present their case to a judge unless they file a lawsuit, which includes payment of court and attorney fees. Difficult if they can’t even 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, such as document flaws, as we found out, or if they want to pursue the deficiency judgment, as some states do not. They will allow them to have the judgment of deficiency unless they execute judicially.
When buying delinquent mortgages and deeds, always remember to review the documents for the Power of Sale clause, as we have discovered, it is a very important clause that should be there.