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When you develop a definite plan of action with well-timed,
well-informed steps, you can stop the foreclosure process and save your
home. We have outline the foreclose process for the state of
North Carolina .
The Process
North Carolina offers two methods of foreclosure:
- by filing a lawsuit seeking foreclosure
- by conducting an out-of-court foreclosure sale under the terms of
a power of sale clause in a deed of trust.
In the event the lender elects to foreclose by filing a lawsuit, it
will try to get a default judgment. Once the lender gets a judgment, the
court clerks for the Superior Court have the power of the judge to
appoint commissioners to make the foreclosure sale, receive the reports
on the sale and confirm the reported sale. They may order the execution
and delivery of a deed to the property. The clerk may also issue a writs
of assistance to evict any occupants, provided ten days' advance notice
is given to such occupants.
Deed of Trust Foreclosure
In North Carolina, a deed of trust foreclosure has several unusual
features. First, there must be a preliminary hearing as to whether to
foreclose or not. Interested parties must receive notice of the hearing.
The clerk of the court, not the judge, holds the hearing. Afterward, a
notice of the foreclosure sale must be given; then the sale is
conducted. A deposit must be made at the sale. After the sale, however,
a very unusual procedure called an upset bid exists. An upset bid
consists of making a higher bid than the foreclosure bid within a set
time, which will cause the property to go through a resale, which may
happen again and again! After the final sale, the sale is reported to
the court clerk.
Preliminary Hearing
Under North Carolina law, a lender or trustee who has the power of
sale under a deed of trust may foreclosure it by following a statutorily
prescribed procedure. At the outset, a hearing must be held before the
court clerk (not the judge) to determine whether the foreclosure should
take place or not. Notice of the hearing must be served in the manner in
which a lawsuit is served, or by certified mail, return receipt
requested, or, if no other process to give notice works after diligent
effort, then the notice of the hearing can be posted in a conspicuous
place on the property that will be foreclosed on.
Notice of the Foreclosure Hearing
Notice of the hearing must be sent to the borrower, anyone who owes
money or could owe money on the loan and every person who has a recorded
claim or lien on the real estate that would be affected by the
foreclosure.
The notice must describe the real estate, give the name and address
of the current lender, describe the nature of the default, state whether
the loan has been accelerated and mention any right the borrower has to
pay cure the default.
The notice must state that the borrower has the right to appear
before the clerk of the court at the date and time specified and show
cause as to why the foreclosure should not be held. The notice must
state that the borrower does not have to appear, and that failure to
attend does not preclude the buyer from trying to cure the default or
buy at the foreclosure sale.
The notice should warn the borrower that the foreclosure buyer will
be entitled to possession as soon as the foreclosure buyer accepts
delivery of the deed to the property. The borrower is further advised to
keep the lender informed as to the borrower's latest address to aid
delivery of copies of any subsequent foreclosure notices.
The right to receive a notice of hearing may be waived, but only if
the debt is over $100,000 and the waiver is in writing and signed in the
presence of the witness. When such written waivers are delivered to the
court clerk, the clerk may skip the hearing on whether the foreclosure
should take place or not.
The Hearing
The clerk will hold the hearing. During the hearing, the clerk will
consider evidence as to whether the debt exists, whether a default has
occurred and whether the lender has the right to foreclose. If the clerk
answers those questions in the lender's favor, he or she will authorize
the foreclosure. Either side may appeal the clerk's ruling to the judge
within ten days. (This is likely to be fruitless.)
Notice of Sale - Contents
The notice of sale shall describe the loan instruments. It must
identify the original borrowers as they are shown in the deed records
within ten days prior to the posting of the foreclosure notice. If
someone other than the borrower owns or claims ownership of the property
in an instrument that has been recorded, then such a person must be
mentioned in the notice of the foreclosure sale.
The notice must give the date, hour and place of the sale, provided
such date, hour and place are consistent with the state law regulating
such sales. (More details will follow on the sale itself.) The notice
must describe the property and state the terms of the sale and that the
property will be sold subject to taxes, special assessments and any
other terms required by the deed of trust, which must be specifically
described.
Notice of Sale - Posting and Publishing
The notice of the sale of the real estate must be posted at the
courthouse door for 20 days prior to the sale. In addition it must be
published once a week for two successive weeks. The two ads must be
published at least eight days apart. The last ad cannot be published
less than ten days before the sale. The notice of the sale must be
mailed first class mail at least 20 days before the sale to the borrower
and any other owner or record title or lien claimant at the address last
known to the trustee or the lender. The notice must further be sent to
anyone who has taken the time and trouble to record a request for copy
of notice in the statutory form as follows:
In accordance with the provisions of G. S.. 45-21.17(5) request is
hereby made that a copy of any notice of sale under the deed of trust
(mortgage) recorded on ____________________19____, in Book____, page
______ records of ________________ County, North Carolina, executed by
__________________________ as trustor (mortgagor) in which
_________________________
is named as beneficiary (mortgagee), and ____________________________
as trustee to be mailed to ______________________ at the following
address __________________________.
Signature: __________________________
If the sale is made to someone other than the lender,
or if the lender resells to a good-faith buyer and such a buyer holds
the land six months, then a person who did not receive a notice of sale
loses the right to challenge the foreclosure. To challenge the sale, the
party must post a bond equal to what the lender is owed on the loan
against the property. The bond is irrevocable, pending the final
decision of the court.
Time of Sale
A sale shall begin at the time designated in the
notice of sale, but never on a Sunday and always between the hours of 10
a.m. and
4 p.m. The sale may be continued or postponed. However, a postponement
may only be for good cause, such as bad weather, an excessive number of
competing sales, illness or another good reason. The postponement must
be announced at the time and place the regular sale would have taken
place. A notice of the postponement must be posted on the courthouse
door, and be given orally to each party who is normally entitled to
notice of a foreclosure sale. The notice has to state the hour and date
to which the sale is postponed and the reason for the postponement and
it must be signed.
Place of Sale
The property must be sold at the courthouse door in
the county where the land is located, unless the deed of trust provides
for a different location. If the deed of trust gives the trustee the
authority to designate a place of sale, then the place of sale will be
the place the trustee designates on the notice of sale. The deed of
trust may require a cash deposit at the sale and set the amount. If the
required cash deposit is not specified in the deed of trust, then the
trustee holding the sale may require the highest bidder at the sale to
pay a cash deposit not to exceed 10 percent of the bid up to $1,000, and
5 percent of the amount by which the bid exceeds $1,000. If the high
bidder fails to make the deposit at the sale, then the trustee may
immediately re-offer the property for sale to any bidders.
Report
A preliminary report of the sale must be made to the
court within five days after the sale. The report must give the name of
the borrower; the lender; the date, time and place of the sale;
recording information about the deed; the name of the foreclosure buyer;
the price at which the property was sold and the name of the person
making the report.
Proceeds of the Sale
The foreclosure sale proceeds should be used to pay
off the costs of the sale, the taxes on the property and any special
assessments. Next, the money goes to pay the balance due on the loan,
and then to creditors in order of their seniority. Anything left over
goes to the borrower, or his or her estate. A special proceeding is
available to contest the distribution of the sales proceeds.
Upset Bids
One of the most intriguing features of North Carolina
law is the upset bid on real estate sold at foreclosure. Even after the
sale, a potential buyer can come in and make an upset bid. An upset bid
is an increased bid whereby a bidder offers to buy the real estate
previously sold at foreclosure for an amount exceeding the reported
foreclosure sale price by 10 percent of the first $1,000 and 5 percent
of the amount over $1,000 of the old foreclosure bid. Such a sum of
cash, or a cashier's check, must be deposited with the clerk of the
Superior Court, within ten days after the clerk receives a report on the
old foreclosure sale. The clerk may also require a bond in the amount of
the upset bid price, minus the cash deposit. The clerk may then order a
resale of the property.
Resale Under Upset Bids
When the clerk offers the property for resale due to
the deposit of an upset bid, then the notice of the resale must be
posted at the courthouse door for 15 days prior to the sale. A newspaper
ad must be published once a week for two successive weeks before the
sale. Eight days must separate the two ads. The last ad must be run no
less than seven days before sale. A notice of the resale must be mailed
to each party. The sale will take place in the same manner as the
original sale. Once again, a high bidder will emerge, who may well be
the person who put down the upset bid deposit. The entire resale may be
done again and again as often as upset bids are submitted!
Final Report
A final report on the sale and the disposition of the
proceeds must be given to the clerk by the person who held the
foreclosure sale, within 30 days after receipt of the proceeds of the
sale. The final report should show what part or parts of the property
were sold. The clerk must audit the report and record it. A copy of the
notice of sale or resale, and an affidavit of publication should also be
recorded. At this point, the sale is final. Special procedures exist to
validate foreclosure sales well after they took place when the proper
procedures were not complied with, or the trustee was also the lender.
Injunctions
It is possible to enjoin a foreclosure sale in North
Carolina.
Deficiency
A lender may not sue for a deficiency if the loan
that went into default was for the purchase price of the real estate.
However, in other cases a lender may sue for deficiency, but the
borrower has the right in a deficiency suit to prove the reasonable
value of the property as a defense or offset to the lender's claims. The
borrower is not restricted to forcing the lender to credit only the
foreclosure bid against the property; the borrower can instead assert
and prove the market value of the property as an offset to a deficiency
suit by the lender.
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