Summary of Virginia Foreclosure Procedure
IntroductionIn Virginia a foreclosure may occur by way of a judicial foreclosure proceeding, or a non-judicial foreclosure sale. A Judicial foreclosure proceeding is a lawsuit which if successful will grant a court order allowing the foreclosure sale to proceed. A Non-judicial foreclosure usually occurs where there is a power of sale clause in the mortgage or deed of trust, which grants a pre-authorization of a foreclosure sale in the vent of a default.
Judicial ForeclosureIf no power of sale clause exists in the mortgage or deed of trust, the lender must first obtain a court order from the court in order to proceed with a foreclosure sale. The lender or his agent will file a lawsuit in the court of the county where the property is located. If successful in the law suit, the lender will be granted a court order which will allow the lender to sell the property.
After the court declares a foreclosure, an auction will be held, where the property is sold to the highest bidder.
Non-Judicial ForeclosureMost mortgaged property in Virginia contains a deed of trust. In a deed of trust the borrower grants a "power of sale" to the lender which pre-authorizes the lender to sell the house to cover the deficient balance if the loan is in default. Because of this pre-authorization, and the opportunity for abuse, there are specific regulations that must be followed.
The lender or his agent must send a copy of the advertisement or a notice with the same information to the borrower at least 14 days before the foreclosure sale.
Remember, any time before the sale, a borrower may cure the default and stop the sale by paying the lien debt, costs and reasonable attorney's fees.
Advertisement RequirementsTypically the deed of trust or mortgage contains a power of sale clause which specifies the time, place and terms of sale. Virginia Statutes set forth additional requirements to be met.
In addition to the terms, ads are required to be published no less than once a day for three days, which may be consecutive. If the deed of trust is silent, then the ad shall be run once a week for four successive weeks. If advertised near a city, the ad may run on five different days, which may be consecutive.
The ad must include a legal description of the property, a street address and a tax map identification or general information about the property's location. The notice must include the time, place and terms of sale and give the name, address and phone number of the trustee and a person who will be able to respond to inquiries about the foreclosure sale. As well as anything else required by instrument. An examination of the deed of trust is recommended.
Sale RequirementsThe sale may be held no earlier than eight (8) days after the first ad is published and no more than thirty (30) days after the last advertisement is published. The trustee may require bidders to place a cash deposit of up to ten (10) percent of the sale price, unless the deed of trust specifies a higher or lower amount. The trustee has the discretion to postpone the sale, however, advertisement of such postponed sale shall be in the same manner as the original advertisement of sale.
Any person other than the trustee may bid on the property, and the sale is to be made at auction to the highest bidder. A person may submit a written one-price bid. Written one-price bids may be made and shall be received by the trustee for entry by announcement of the trustee at the sale. Any bidder in attendance may inspect written bids.
After the Non-Judicial SaleUpon completion of the sale, a disbursement of the proceeds will occur in the following order:
1) repayment of the expenses of executing the trust;
2) discharging all taxes, levies, and assessments, with costs and interest if they have priority over the lien of the deed of trust;
3) discharging in the order of their priority, any remaining debts and obligations secured by the deed, and any liens of record inferior to the deed of trust under which sale is made;
4) if any proceeds are remaining they will be disbursed to the borrower.
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