Definition
A Decree of Foreclosure and Sale is a judicial order whereby a court establishes the amount of an overdue mortgage and implements the sale of the mortgaged property. This legal decree is generally issued after a lender has moved to foreclose due to delinquent payments. The decree specifies the exact debt amount, including principal, accrued interest, and legal fees, and calls for the property to be sold publicly—typically through an auction—to recover the owed amount.
Examples
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Example 1: A homeowner defaults on their mortgage after failing to make payments for six months. The lender files for foreclosure, and the court determines that the homeowner owes $150,000, inclusive of the principal, unpaid interest, and other fees. The court issues a Decree of Foreclosure and Sale to auction the property to satisfy the debt.
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Example 2: A commercial property owner misses several mortgage payments, leading the lender to seek judicial intervention. The court establishes the outstanding debt at $500,000 and issues a Decree of Foreclosure and Sale. The property is subsequently auctioned to the highest bidder, with proceeds used to pay off the debt.
Frequently Asked Questions (FAQs)
What triggers a Decree of Foreclosure and Sale?
This decree is triggered by the lender’s request for foreclosure due to the borrower’s default on mortgage payments.
How is the sale conducted?
The sale usually occurs through a public auction, often on courthouse steps, where the property is sold to the highest bidder.
Does the debtor have any recourse after the decree?
In some jurisdictions, the debtor might have a redemption period to repay the outstanding debt and reclaim the property before the sale is finalized.
- Foreclosure: The process by which a lender takes control of a property after the borrower fails to comply with the mortgage agreement.
- Judicial Sale: A sale of property conducted under the supervision of a court, often arising from a Decree of Foreclosure and Sale.
- Mortgage: A loan secured by the property, which the borrower must repay according to specified terms.
- Redemption Period: The time frame in which a borrower can reclaim their foreclosed property by paying the owed amount in full.
Online Resources
References
- Real Estate Finance and Investments by William B. Brueggeman and Jeffrey D. Fisher offers an in-depth exploration of foreclosure processes and related financial real estate concepts.
- Mortgage Banking Law and Regulations by L. Jean Noonan, Kathleen M. Rosvally covers legal frameworks around mortgages, including foreclosure proceedings.
Suggested Books for Further Studies
- Foreclosure Investing For Dummies by Ralph R. Roberts provides practical advice for navigating and investing in foreclosure properties.
- The Foreclosure Survival Guide by Stephen Elias offers essential guidance on understanding your options and rights when facing foreclosure.
Real Estate Basics: Decree of Foreclosure and Sale Fundamentals Quiz
### What is a Decree of Foreclosure and Sale?
- [ ] A mortgage agreement between a lender and borrower.
- [x] A court ruling to establish and enforce the sale of a property to cover unpaid debt.
- [ ] A formal agreement for refinancing a mortgage.
- [ ] A property tax assessment documentation.
> **Explanation:** A Decree of Foreclosure and Sale is a judicial order establishing that the property must be sold to pay off an overdue mortgage.
### Who issues the Decree of Foreclosure and Sale?
- [ ] Mortgage lender
- [ ] Borrower
- [x] Court
- [ ] Real estate agent
> **Explanation:** The decree is issued by a court after the lender seeks judicial intervention to address the borrower's mortgage default.
### How is the debt amount determined in a Decree of Foreclosure and Sale?
- [ ] By the real estate agent
- [ ] Randomly assigned by the judge
- [x] Based on unpaid principal, interest, and fees
- [ ] By the borrower
> **Explanation:** The court calculates the debt based on the unpaid principal, accrued interest, and any additional legal or administrative fees.
### What happens to the property after a Decree of Foreclosure and Sale?
- [ ] It remains with the borrower
- [x] It is typically sold at a public auction
- [ ] The lender maintains ownership
- [ ] It becomes state property
> **Explanation:** Following a Decree of Foreclosure and Sale, the property is usually sold in a public auction to the highest bidder.
### Can a borrower stop the foreclosure process after the decree?
- [ ] No, the decree is final.
- [x] In some places, the borrower may have time to repay the debt (redemption period).
- [ ] Only if the lender agrees to withdraw the proceeding.
- [ ] Only by declaring bankruptcy.
> **Explanation:** Depending on the jurisdiction, the borrower may have a redemption period after the decree to repay the debt and reclaim the property.
### What type of sale is mandated by a Decree of Foreclosure and Sale?
- [x] Public auction
- [ ] Private sale
- [ ] Direct lender sale
- [ ] Mortgage refinancing
> **Explanation:** The decree usually mandates a public auction, where the property is sold to the highest bidder to recover the debt.
### Who benefits from the sale proceeds after a foreclosure auction?
- [ ] The new property owner
- [x] The lender
- [ ] The real estate agent
- [ ] The court
> **Explanation:** Sale proceeds are used to pay off the outstanding mortgage debt to the lender.
### What is the main purpose of a Decree of Foreclosure and Sale?
- [x] To repay the unpaid mortgage debt
- [ ] To assess property taxes
- [ ] To offer refinancing options to the borrower
- [ ] To inspect property conditions
> **Explanation:** The primary purpose is to ensure the unpaid mortgage debt is repaid through the legal sale of the property.
### In which scenario might a Decree of Foreclosure and Sale be issued?
- [x] When the borrower defaults on the mortgage payments
- [ ] When property taxes are overdue
- [ ] When utility bills are unpaid
- [ ] When renovating a property
> **Explanation:** Such decrees are typically issued when a borrower defaults on mortgage payments and the lender seeks legal action.
### What steps should a borrower take to prevent a Decree of Foreclosure and Sale?
- [ ] Ignore lender notices
- [ ] Delay payments further
- [ ] Sell the property immediately
- [x] Communicate with the lender and explore repayment alternatives
> **Explanation:** To prevent foreclosure, borrowers should promptly communicate with lenders and explore options like loan modification, refinancing, or repayment plans.
