Foreclosures By State - Different Regulations Apply

Nationally the basic rules and regulations of the foreclosure process are very similar, but these do vary slightly from state to state and from county to county. It is because of this fact that anyone wanting to purchase a property under foreclosure needs to have some understanding of the laws that apply in the state they are intending to purchase a property in. For instance the investor who wants to purchase a second home as a holiday home in say Tennessee or Florida, but lives in New York, would be wise to bone up on the foreclosure laws of those states.

As an example we know that all foreclosures in Florida take place under the judicial process. Laws in Florida do not allow non-judicial foreclosures as they are sometimes considered to not have been properly conducted. So every foreclosure that takes place in Florida passes through the courts. The primary instrument of security is the mortgage and mortgages in Florida do not have power of sale clauses in them. The time line for the completion of a foreclosure in Florida is approximately 180 days, and all Florida home owners have the right of redemption.

Right of redemption means that the home owner has a certain period of time after their property has been sold on auction, to reclaim their property, if they can come up with the money to pay the debt and meet all costs. Granted this is only 10 days, so there is not much chance of rights of redemption being exercised if you are looking to invest in foreclosure property in Florida.

In a Judicial foreclosure the lender is required to file a complaint with the courts, the courts will then issue the lender with a decree of sale. The lender is then able to take possession of the property from the borrower. This decree of sale does offer the home owner a certain amount of time to come up with the money to pay back the debts and costs and the court will only order that the property be sold if the home owner does not come up with the money.

Deficiency Judgments are not allowed in Florida. This is a judgment that allows the lender to sue the home owner again for any shortfall between the amount raised in the sale of the property and what was actually owed on the debt. All mortgages are foreclosed in equity and counter claims have to go to a separate trial.

In comparison Tennessee allows both judicial and non-judicial foreclosures to take place. The main instruments of security are the Deed of Trust and the Mortgage, and power of sale clauses are allowed in both these agreements. Typically foreclosures are completed in as little as 60 days and the owner of a home in Tennessee does have rights of redemption. This state also allows for deficiency judgments. So as you can see these laws do vary in foreclosures by state.