Any buyer who is considering purchasing a property at a foreclosure sale must understand the process. It can be quite daunting and rather complicated. So, buyer beware.
Under Virginia law, there are two types of foreclosures, judicial and non-judicial. Judicial foreclosures, which require court approval before they are finalized and can take as long as a year, are not as common as non-judicial foreclosures.
A non-judicial foreclosure is authorized whenever a lender has included a “power of sale” clause in the deed of trust signed by the borrower at closing. The power of sale clause essentially gives the borrower notice that the lender can move forward with foreclosure proceedings upon the borrower's default after giving the borrower the notice required by law. The power of sale clause gives the lender or its representative, usually a trustee, the authority to move forward with a non-judicial foreclosure sale.
Virginia law requires that the foreclosure sale be advertised in a particular manner. If the deed of trust specifies the procedures for advertising and conducting the sale, those procedures must be followed. Even if the deed of trust specifies the procedure for advertising the sale, Virginia law requires the lender to advertise the sale once a day for three days which may be consecutive days. This is in addition to any advertising requirement set forth in the deed of trust.
If the deed of trust does not specify the procedure for advertising the sale, the lender must advertise the sale once a week for the four weeks immediately before the sale. If the property being foreclosed is near a city, the lender may advertise the sale for five consecutive days. If for some reason, the sale is postponed, the postponement must be advertised in the same manner as the foreclosure sale.
The foreclosure sale can take place no earlier than eight days after the first advertisement is published. Nor can it take place more than thirty days after the last advertisement is published. The foreclosure sale is an auction style sale where the highest bidder wins. Anyone other than the trustee may bid at the foreclosure sale, including written, one-price bidders. The trustee must announce all written, one-price bids at the foreclosure sale and anyone in attendance at the sale as the right to inspect written, one-price bids. The trustee can require the highest bidder at the foreclosure sale to make a cash deposit of 10% of the bid. If the deed of trust specifies a deposit of more or less than 10% of the bid, the trustee must collect a deposit in that amount.
The lender must serve the defaulted borrower with notice of the sale at least fourteen days before the scheduled date of the foreclosure sale. The lender can serve the defaulted borrower with a copy of the advertisement or a notice that contains the same information as the advertisement.
The foreclosure sale advertisement must include any information required by the deed of trust and may include the property address, the tax identification number, and the legal description. Additionally, it must include the date, time, and place of the foreclosure sale as well as the terms of the sale. The name, address, and telephone number of the trustee and the person who can answer questions about the sale must be included in the advertisement.
At any time prior to the sale, a defaulted borrower may stop the foreclosure by curing the default (bringing the loan current) and by paying costs and reasonable attorney's fees. Once a non-judicial foreclosure sale has taken place, the defaulted borrower doesn't have a right to redeem the property.
Virginia law requires that the proceeds from a foreclosure sale be applied as follows:
n To the expenses of executing the trust
n To pay all taxes, levies, and assessments, including costs and interest if they have priority over the foreclosed deed of trust
n To pay, in their order of priority, the remaining debts and obligations secured by the deed and any inferior liens of records, such as second trust deeds
n To the defaulted borrower
Virginia law does not set any limits on a lender's right or ability to obtain a deficiency judgment. This means that if highest bid at the foreclosure sale is not enough to payoff the deed of trust, the lender can attempt to collect the difference from the defaulted borrower.
This article is meant to be an general overview of the non-judicial foreclosure process in Virginia. Anyone considering bidding on a property at a foreclosure sale is encouraged to seek the advice of an experienced real estate attorney before doing so.
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