Judicial foreclosure is when a court authorizes the sale of a homeowner’s property to satisfy outstanding mortgage debt. The creditor files a claim and notice of Lis Pendens, and if the debt remains unpaid, the court issues a judgment in favor of the lender. The property is sold at auction to the highest bidder, who must pay cash or a large deposit. Properties sold through judicial foreclosure are often less risky to purchase than those foreclosed out of court.
When a homeowner is unable to make mortgage payments, the lender generally has a contractual right to seize and reclaim the owner’s property. This phenomenon is known as foreclosure. When foreclosure is processed through a judicial action, it is referred to as judicial foreclosure. Essentially, during a judicial foreclosure proceeding, a court issues a judgment in favor of the lender and authorizes a sheriff to sell the home. The proceeds from the sale go to satisfy the outstanding mortgage debt.
During a typical judicial foreclosure process, the creditor files a claim and notice of Lis Pendens with the court. In general, these documents describe the outstanding debt and explain why the creditor should be allowed to foreclose on the property. Homeowners usually need to be notified of the complaint. Typically, notification is by direct service, by mail or publication in a newspaper. Homeowners generally have the right to appear in court to tell their side of the story.
If the court determines that the debt is legitimate and remains unpaid, contrary to the terms of the loan agreement between the homeowner and the lender, the court will likely issue a judgment in favor of the lender for the total amount owed on the home. This generally includes all costs associated with the judicial foreclosure process. The court will then issue a writ, allowing the sheriff to sell the property. Sheriff’s sales are usually held in the form of auctions that are open to any member of the public and held in a public place.
At an auction, the highest bidder is commonly awarded the property, subject to the court’s approval of the sale. In general, a bidder must pay cash upon sale or hand over a large deposit on the home, with the remaining balance payable shortly after the sale. Once approved, a document called a sheriff’s deed is given to the new homeowner. The mortgage deed is then registered, with the highest bidder registered as the owner of the property.
Properties that are seized and resold through judicial foreclosures are often less risky to purchase than properties that have been foreclosed out of court. A non-judicial foreclosure usually adheres to the foreclosure requirements established by law. With a judicial foreclosure, because one court ordered the foreclosure of the property, the order can only be reversed by another court.
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