The concept of "foreclosure" evolved as a remedy to "cut off" or "terminate" the borrower's equity of redemption. "Strict foreclosure" was an early, very harsh remedy which required the borrower to forfeit his land if payment was not made by the final due date. "Foreclosure by Sale" eventually evolved as a more fair remedy and  required that the property be publicly sold to the highest bidder at auction. This was followed by the "statutory redemption period" which gives the borrower the right to redeem his property within a specified time period after foreclosure.

In North Carolina and other states, a borrower, lender, or anyone else may submit an "upset bid" within 10 days following foreclosure. A "resale" of the property occurs each time another upset bid is filed that exceeds the previous highest bid (by a stated margin).  Each time there is a highest bid, another 10 day upset period begins. This bidding process can continue indefinitely until the property is eventually sold and the borrower's right to redeem is eventually terminated.   

The statutory redemption period was enacted to grant some degree of protection to a defaulting borrower when the highest bid at foreclosure is below fair market value.

Other Aspects of Foreclosure

A deed of trust grants a "trustee" the "power to sell" the property in the event of foreclosure. This eliminates a court hearing simplifying the foreclosure process. Proceeds from the public sale go to satisfy the debt. Proper notice is given to all parties including the public through advertising the sale. After the sale and passing of the statutory redemption period, the highest upset bidder receives the property. Monies go first to pay taxes, lender, and legal fees with any excess going to the borrower. If no excess is left, a deficiency  judgment may be taken out against the borrower thereby placing a lien on all property although a deficiency judgment may not be taken where a Purchase Money Deed of Trust is held by the seller.   

How Do I Find Foreclosures?

Most real estate brokers have listings of foreclosures. HUD and VA foreclosures will usually be advertised in the real estate section of the newspaper. HUD places its own "for sale" signs on open-listing homes once the inspectors have completed their initial inspection. 

How Do I Make An Offer On A Foreclosure? 

HUD and VA foreclosed homes require a written bid.  Unless an exclusive listing contract exists with a real estate agent, the home may only be sold through sealed bid. Bidding procedures may vary for other conventional foreclosures. Advertised foreclosure auctions usually give the specifics as to how much deposit is required by the bank to secure the bid. Multiple offers can be made but HUD only accepts the offer that provides the "highest net return" to HUD.

Anyone may attend the public opening of bids on HUD homes. New listings are open to offers for up to ten days. Offers may be accepted up to the date/time revealed in the ad. Closings are generally held at the HUD closing agent's office.

What HUD may pay for:

• customary seller costs at closing
• delinquent water and sewer bills
• prorated taxes
• home ownership dues 
• certain financing/closing costs such as origination fees, discount points, appraisals, surveys, updated title search, etc.

Foreclosure Caveats

Foreclosures are usually sold "as is" so you should have the home carefully inspected. Obtain contractor bids for repairs and consider these costs in your offer so that you do not end up with a value you didn't  bargained for.

Types of Foreclosure

Document Type: Trust Deed 

• Non-Judicial: Non-judicial foreclosure is possible with a "power of sale" clause in the deed of trust.
  
• Judicial: Judicial foreclosure is less common but still available to a lender.
  
• Deficiency: The lender may be granted a deficiency on other than properties acquired as purchase money but market value, not the purchase price,  must be considered when determining a deficiency judgment.
  
• Redemption: No redemption is allowed under the non-judicial procedure.
  
• Oddities: When a property is sold at foreclosure, the sale is not final and for a period of ten days,  the price may be overbid; 10% of the first $1,000, 5% for anything over $1,000.