A sale of trust deed is a non-court foreclosure where a servicer handles the sale of a property, occurring approximately four months after a notice of default. A deed of trust sale is similar, with a trustee holding legal title to the property and being able to sell it in the event of default. The sale is not supervised by courts, but is public and requires notice to be posted in the newspaper. The property is sold in an auction format, with a risk of future title litigation.
A sale of trust deed is a type of foreclosure that is not overseen by the court system. The sale of the property is handled by a servicer, to whom the mortgage lender grants the power of sale. The administrator is considered an impartial third party. Sales of receivables generally occur approximately four months after a notice of default is filed.
Some local jurisdictions use a deed of trust instead of a traditional mortgage. Deeds of trust are an agreement between a borrower, a lender, and a trustee. When borrowers receive money from lenders to buy a home, they give legal title to the property to an impartial trustee. To protect the interests of the lender, the title is held by the trustee, who is named as the beneficiary.
The borrower will retain ownership and legal rights to their title if the debt is paid in a timely manner. In the event of a borrower’s default, the trustee can sell the property in a deed of trust sale. Similar to a judicial foreclosure, proceeds from the sale are first paid to the lender to satisfy the outstanding debt, with the borrower receiving any excess funds.
A deed of trust sale is not supervised or registered in court. The administrator files a notice of default with the county or municipality where the property is located. The borrower has 90 days to respond and satisfy the outstanding debt. If the borrower pays the debt, the servicer cannot proceed with the sale.
After 90 days, a deed of trust sale is scheduled. The sale generally occurs in the county or municipality where the notice of default was filed. Although foreclosures of deeds of trust are not confirmed by courts, they do take place in a public setting. The manager must list the property at least 20 days before the sale.
In addition to posting a notice that the property is in foreclosure, the trustee must also post a notice of the upcoming sale of the deed of trust in the newspaper 30 days in advance. To meet the minimum requirements, the notice of sale must be published in the newspaper at least once a week for three consecutive weeks.
During the sale, the property is sold in an auction format. Due to the absence of court approval, there is a risk of future title litigation. If at any time during the foreclosure proceedings the borrower files for bankruptcy, the sale of the deed of trust is not permitted.
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