Also known as: power of sale foreclosure · power-of-sale foreclosure · power-of-sale foreclosures · nonjudicial foreclosure
Written by attorneys · grounded in primary & secondary sources — see below
An extrajudicial method of foreclosure by which a mortgagee or trustee sells the mortgaged property pursuant to the terms of the mortgage or deed of trust and applicable state statute without obtaining a court decree. The mortgage or statute dictates the required notice, sale procedures, and redemption rights. This method terminates the mortgagor's equity of redemption upon completion of the sale.
Paul Peterson defaulted on payments secured by a deed of trust containing power-of-sale language. The beneficiary directed the trustee to post and publish the minimum statutory notices and conduct a public auction. The trustee sold the property to the highest bidder, terminating Peterson's equity of redemption without any court proceeding.
Phuong Pham fell behind on her mortgage obligation. The creditor verified that default had occurred and all contractual and statutory conditions were satisfied before instructing the trustee to commence the sale. The trustee then initiated nonjudicial foreclosure proceedings under the deed of trust.
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Power-of-sale foreclosure proceeds without court action under the mortgage or deed of trust and state statute, while judicial foreclosure requires a court decree. The mortgage or statute controls the notice, sale, and redemption procedures in a power-of-sale proceeding.
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A creditor may commence nonjudicial foreclosure only after default in the obligation and satisfaction of all conditions required by the mortgage agreement and by law. The creditor may also authorize another person in a record to commence the proceeding.
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The notice must disclose the name of the creditor and, if applicable, the person authorized by the creditor to foreclose. Additional disclosures may be required when the obligation is evidenced by a negotiable instrument.
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A foreclosure sale price obtained pursuant to a regularly conducted proceeding does not render the foreclosure defective unless the price is grossly inadequate. Courts focus on compliance with notice and sale procedures rather than whether a higher price could have been obtained through alternative marketing.
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