Major Differences Between the Judicial and non-Judicial Foreclosures
Posted on January 29, 2010
Filed Under Foreclosures | Leave a Comment
The most important advantage of the owner finance home sale is the chance to work with the buyer in the case of financial hardships. If a solution has been created that is suitable for both the parties, then the homeowner will be able to save his house. He can continue staying in the house and the lender will get the monthly payments regularly. However, if the solution has not been created then it is sure that the homeowner will get into the foreclosure process. Therefore, it is very much essential to understand different methods for preventing a foreclosure situation.
There are certain states which follow both judicial and non-judicial foreclosures. The beneficiary of such states can go for either judicial or non-judicial foreclosures. Suppose the beneficiary choose to follow judicial foreclosure. Then the beneficiary will file a complaint against the homeowner in order to foreclose on the property in the Superior Court. This case will be then put for trial. Suppose that the court hearings are in favor of the beneficiary. Then it will be ordered that property has to be sold off in a public sale. Now, suppose that the beneficiary choose to follow non-judicial foreclosure. From the name itself it can be understood that in non-judicial foreclosure, there is no involvement of a court system in it. In order to foreclose a property non-judicially, it is essential that the deed of trust or mortgage must have a power of sale clause. According to this power of sale clause, the trustee has the right to start the foreclosure process without going to the court. It is not required to have an exact form or language in order to have a power of sale clause.
However, if the power of clause is not provided by the security instrument, then the beneficiary has got only one option to choose. Then the beneficiary has to go for judicial foreclosure. This is the only way to obtain the property.
There are many differences between the judicial and non judicial foreclosure. Any of these methods selected by the beneficiary will have noteworthy consequences for the homeowner. As compared to judicial foreclosure, the non-judicial foreclosure is quite faster. The reason is that it does have the involvement of the court system. The non-judicial foreclosure takes a minimum of four months after the unsuccessful trial of the homeowner to meet the obligations. However, this is not the situation as far as judicial foreclosures are concerned. This type of foreclosures may take up to many years.
However, the major difference between these foreclosures is the beneficiary’s right to deficiency judgment. The deficiency judgment is nothing but the court’s order to the homeowner. According to this judgment, the homeowner will have to owe money to the beneficiary if the amount obtained by property’s sale is not sufficient to pay off the complete debt. There are some states which do not permit deficiency judgment in non-judicial foreclosures on the residential purchase money loans. These two foreclosures also differ as far as the homeowner’s right of redemption after the foreclosure property sale is concerned. Thus, there are many differences between these two foreclosures.