Understanding how the foreclosure process works in TN is an important part of navigating your own home foreclosure.
Before we dive in to the details…
Understanding the Foreclosure Process in TN
What is a foreclosure anyway?
Foreclosure is the legal process that lenders use to take back property that secures a loan, generally after the borrower stops making payments on it.
Foreclosure is no fun for anyone. But just know that it’s not the end of the world.
When you know how foreclosure in TN works… it equips you with the knowledge you’ll need to navigate it well and come as well as possible on the other side.
The Basic Stages of A Foreclosure
There are a few basic stages that are important to any foreclosure process.
Foreclosure will work differently depending on your state.
The two different ways that states use to foreclose upon a property are 1. judicial sale or 2. power of sale.
Connect with us today by calling (865) 410-8326 or through our contact page to have us walk you through your specific foreclosure process here locally in Knoxville.
In either scenario, a foreclosure typically doesn’t go to court until after 3-6 months of missed payments. Usually (but not always), the lender sends out many notices stating that you are in arrears – aka overdue or behind on your payments.
Under Judicial Foreclosure:
- Your mortgage lender must file suit in the local court system.
- You’ll get a letter from the local court demanding payment in full.
- Assuming that your loan was valid, you’ll have only 30 days to bring full payment to court to avoid foreclosure (they may extend this in some cases).
- If you do not pay during the specified payment deadline, a judgment will be entered and the lender can request the sale of your property – usually through an auction.
- Once the property is sold, the sheriff will serve an eviction notice and force you to immediately vacate the property.
Under Power of Sale (aka Non-Judicial Foreclosure):
- The mortgage lender will serve you with papers demanding payment, and the courts are not required for this – although the process may be subject to judicial review.
- After the established waiting period expires, a deed of trust is drawn up and the control of your property is transferred to a trustee.
- The trustee can then sell your property to the lender at a public auction (notice must be given).
Any person who has an interest in the property must be notified during either type of foreclosure.
For example, any contractors or banks with liens against a foreclosed property are entitled to collect their shares from the proceedings of the auction.
What Happens After A Foreclosure Auction?
After a foreclosure auction is complete, the loan amount is paid off with the sale proceeds.
Sometimes, if the sale of the property at auction isn’t enough to pay off the sellers mortgage, a deficiency judgmentcould be issued against the seller/borrower.
A deficiency judgment is when the bank issues a judgment against you, the borrower, for the remaining funds owed to the bank on the loan amount after the foreclosure sale is complete.
Some states will limit the amount owed in a deficiency judgment to the fair market value of the property at the time of sale, while other states will allow the full loan amount to be assessed against the borrower.
Here’s a great resource that lists the state by state deficiency judgment laws, because every state will be different.
Generally, it’s best to avoid a foreclosure auction. Instead, call up the bank, or work with a reputable real estate firm like us at Southern Sky Home Buyers to help you negotiate discounts off the amount owed to avoid having to carry out a foreclosure.
Experienced real estate legal professionals can help you by negotiating directly with banks to lower the amount you owe in a sale – or even eliminate the remaining debt, even if your home is worth less than you owe.
If you need to sell a property in or around Knoxville quickly, we can help you.
We buy houses in Knoxville TN just like yours from people who need to sell fast.
Give us a call anytime (865) 410-8326 or
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BONUS: Added Foreclosure Resource For Knoxville TN HomeOwners: