Non judicial Foreclosure or Power of Sale
In a non judicial foreclosure, also known as a power of sale, the court not involved in oversight. In many cases, trustted deed foreclosure is non judicial or a urgent power of sale. In a no of states, mortgages can be also containing with a power of sale clause. The “power-of-sale clause” allows the trustee, if payments are not made on the loan, to sell the property at the courthouse steps, and so bypass a lengthy court process (sometimes referred to as the “trustee’s sale”). Thus, the name, non judicial foreclosure.
The Trustee records a “notice of default” and sends a copy to the trustor. The sale here is final. There is no redemption and no deficiency judgments in trust deed states. Make sure your attorney includes in your purchase contract the right to various inspections after the sale, with sufficient time to perform such inspections.
A good reference for seeing your state’s security document/foreclosure method combination is the book, Your Fortune in Foreclosure: Today’s Best, Low-Risk, High-Profit Real Estate Investment, by Fredy Bush, Carl Hunter and Bruce Erb, pages 199 to 204.
Deed in Lieu of Foreclosure:
In a deed in lieu of foreclosure, the lender has taken possession and deed, i.e., put the house into the bank’s inventory. This is not good for the bank since they now have a liability with no offsetting receivable. Get to know the bankers dealing with this property. Take them to lunch. As always, do a lien search, but also get a Warranty Deed to protect against future claims on the property