Real Estate Law: What Happens After the Notice of Trustee’s Sale Is Filed?
The Notice of Trustee’s Sale (NOTS) is a critical document in the foreclosure process, indicating that the property is scheduled to be sold at a public auction. After the NOTS is filed, several important steps follow, leading up to the actual foreclosure sale. Understanding the sequence of events after the NOTS is filed can help homeowners and other parties involved in the foreclosure process prepare for what lies ahead. In this article, we will explore what happens after the Notice of Trustee’s Sale is filed and the key milestones leading up to the foreclosure auction.
1. Notice of Trustee’s Sale (NOTS)
The foreclosure process typically commences when the lender files a Notice of Default (NOD) after the borrower defaults on their mortgage payments. If the borrower fails to cure the default during the pre-foreclosure period, the lender proceeds with filing the Notice of Trustee’s Sale (NOTS).
The NOTS officially sets the date, time, and location of the foreclosure sale. It must be published in newspapers and posted on the property and at public places in the county where the property is located. In most states, including those with non-judicial foreclosure processes, the foreclosure sale cannot occur earlier than 21 days after the NOTS is recorded.
2. Pre-Foreclosure Period
Between the filing of the NOTS and the actual foreclosure sale, there is a waiting period known as the pre-foreclosure period. This period allows the borrower and other interested parties to take specific actions to address the foreclosure or prepare for the sale.
3. Borrower’s Options During Pre-Foreclosure
During the pre-foreclosure period, the borrower has several options to address the impending foreclosure:
a. Loan Repayment: The borrower can bring the loan current by paying the delinquent amount along with any associated fees and costs.
b. Loan Modification: The borrower may request a loan modification from the lender, which involves modifying the terms of the loan to make it more affordable. This can include adjusting the interest rate, extending the loan term, or adding the defaulted amount to the loan balance.
c. Short Sale: In some cases, the borrower may opt for a short sale, wherein the property is sold for less than the outstanding loan amount with the lender’s approval. This allows the borrower to avoid foreclosure and mitigate the impact on their credit.
d. Deed in Lieu of Foreclosure: The borrower can voluntarily transfer ownership of the property to the lender through a deed in lieu of foreclosure. This option can be less damaging to the borrower’s credit than a foreclosure.
4. Public Auction
After the pre-foreclosure period has elapsed, the property proceeds to a public auction, where it is sold to the highest bidder. The trustee, who is typically a neutral third party, conducts the auction. The auction is held at the location specified in the NOTS, often at the county courthouse or another public venue.
5. Foreclosure Sale Process
On the day of the foreclosure sale, the trustee opens the bidding process by announcing the starting bid for the property. Bidders are then invited to submit higher bids until the highest bid is reached, at which point the auction concludes.
6. Winning Bid and Payment
The highest bidder is deemed the winning bidder, and they must pay the bid price in cash or with a cashier’s check immediately following the auction. In some states, the winning bidder may be required to pay a percentage of the bid amount at the time of the auction, with the balance due within a specified timeframe.
7. Trustee’s Deed Upon Sale
Once the winning bidder has paid the bid price in full, the trustee issues a Trustee’s Deed Upon Sale to the winning bidder. This deed transfers ownership of the property to the new owner, effectively completing the foreclosure process.
8. Redemption Period (If Applicable)
In some states, borrowers have a statutory right of redemption after the foreclosure sale. The redemption period allows the borrower to reclaim the property by reimbursing the winning bidder for the full bid price plus interest and other costs incurred during the foreclosure process. It is essential to note that not all states provide for a statutory right of redemption, and the length of the redemption period can vary.
9. Post-Foreclosure Eviction (If Necessary)
If the borrower does not redeem the property during the redemption period, and there are no other legal obstacles, the winning bidder assumes full ownership and possession of the property. In cases where the former homeowner refuses to vacate the property voluntarily, the winning bidder may need to initiate eviction proceedings to take possession legally.
The foreclosure process is a challenging and time-sensitive ordeal for homeowners facing the loss of their property. After the Notice of Trustee’s Sale is filed, borrowers have a limited window of opportunity to explore foreclosure alternatives and negotiate with the lender to avoid the foreclosure sale. However, if the borrower is unable to address the default or find a resolution during the pre-foreclosure period, the property proceeds to a public auction. The highest bidder at the auction acquires ownership of the property, and the foreclosure process concludes with the issuance of a Trustee’s Deed Upon Sale.
For homeowners facing foreclosure, seeking legal advice from an experienced real estate attorney can be instrumental in navigating the complexities of the foreclosure process and exploring available options to preserve homeownership or mitigate the impact of foreclosure on their financial future.
Disclaimer: The information provided in this article is for general informational purposes only and should not be construed as legal advice. Consult with a qualified attorney for personalized guidance pertaining to foreclosure, the Notice of Trustee’s Sale, and real estate matters.