Foreclosure Laws in North Carolina

By: Kathy Swift

Both judicial and non-judicial processes are followed in North Carolina. Judicial foreclosure means that the court system must be employed to begin the foreclosure process. The bank must file a lawsuit against the homeowner having trouble making his house payment before a sale date for the home can be set.

Non-judicial foreclosure does not require the courts permission to proceed with the sale of the property. This of course save the bank both time and money, so it is the process most commonly used.

The determining factor as to which process which process will be chosen by the bank, is whether or not the mortgage or deed of trust contains a power of sale clause. If it does, then this enables the bank to sell the house without pleading their cause before the court to begin. Most mortgages and deeds of trust due contain a power of sale clause, so most foreclosures proceed non-judicially.

In the absence of a power of sale clause, judicial or in court foreclosure must be followed. After the bank has received a court order to foreclose the process of moving forward with the auction on the house is the same in both processes. The only exception to this rule is that some power of sale clauses state specifically how, when, where and by what terms the sale of the home will take place. This can be different than the usual proceedings. In such a case where the power of sale clause is so specific, the instructions laid out in that clause must be followed.

In all other instances, this is how the next steps in the foreclosure process will occur: Whether a power of sale clause exists, a preliminary hearing must take place. Notices must be sent to all parties attached to the property. Following this, a court clerk will conduct a hearing to determine if a foreclosure sale will take place or not. If the clerk issues a notice of sale, then the process continues on to the trustee's sale or auction of the house.

The next step is, that the notice of sale must be sent by first class mail to the homeowner no less then 20 days prior to the sale. This notice of sale must also be advertised in a local newspaper. This newspaper must have circulation in the county where the home is located. This ad must be placed a minimum of once a week for two weeks. The last of these two adds, must be run no sooner than ten days in front of the scheduled auction date. This same notice of sale must be posted on the door of the court house for the county in which the home is located. This posting must be done less than twenty days before the scheduled sale date.

This notice must contain the homeowner's name, the bank's name, a description of the property and the place and time and date of the auction.

The sale is always conducted at the court house where the notice was posted on the door. The sale is always between 10:00am and 4:00. On the day of the auction, the highest bidder is sold the home, however higher bids or upset bids can be placed by filing them with the court clerk for 10 days following the sale. So if the winning bidder wants to be sure they are indeed the new owner of the home, they must be sure to keep close tabs on the new bids that have been turned into the court clerk over those next ten days. The would want to know if other upset bids have been placed on the home, so that they can respond with and upset bid of their own, to ensure that at the end of the ten days following the sale they are still the owners of the home. Any upset bid placed must be at least five percent higher than the last bid to attain winning bid status.

Pospoements of the auction date are allowed. These postponements are announced at the original time and auction. The new auction date must be posted on the court house door. Postponements are of course performed at the discretion of the bank.

The average length of time between a notice of sale being issued and the sale of the home in North Carolina falls between 90 and 120 days. If judicial foreclosure process is followed, it can take even longer. This is especially true if the homeowner attempts to fight the process in court. The process can also be further delayed by filing bankruptcy.

In North Carolina, the ten days following the close of the foreclosure are considered the right of redemption period. The former owner of the home may regain ownership during these ten days, if they can come up with the total amount of the unpaid plus cost of attorney's fees.

Banks can seek more money from the homeowner after the foreclosure in this state. This is called a deficiency judgment. This course of action would only be followed by the bank if they believe that the former homeowner has other assets worth taking. In most cases, the person who loses their home at auction does no have any other resources worth talking about. The bank realizes this, and understands that is would be a waste of their time and money to get blood from a stone, so to speak. If on the other hand the bank has reason to believe that this person has assets worth pursuing, they will do so.

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