Can I Sell My Home If It’s In Foreclosure in NC?

When a homeowner in NC is unable to make their mortgage payments on time and has no way to catch up on the missed payments, foreclosure may occur. A mortgage, known as a Deed of Trust in North Carolina, is a binding legal agreement between the homeowner and the lender. In the event of default on the loan, the lender can proceed to auction off the property to recoup any outstanding debts, potentially resulting in the homeowner becoming homeless and facing severe credit consequences.

No one wants to receive a notice of foreclosure and yet, in a nationwide study, nearly 1 million Americans were afraid of losing their homes (U.S. Census Bureau Household Pulse Survey, fielded from July 27 to Aug. 8, 2022). And foreclosure can occur from a number of reasons, including:

• Job loss and loss of income
• Divorce or death of a spouse or partner
• Mounting debt, including medical and credit cards
• Moving without being able to sell the home
• Natural disaster
• Serious injury causing disability
• Drug Addiction or Alcoholism

Zack Buys Houses is a local company operating in NC that has built their business by buying distressed houses and properties in the area for cash. They promise competitive cash offers without the hassle of dealing with real estate agents, title companies, traditional bank financing, and more!

What is a Deed of Trust?

A deed of trust plays a vital role as a legal document transferring the legal title of a property to a trustee to secure a loan for a beneficiary, while the equitable title stays with the borrower. A common feature in North Carolina deeds of trust is the inclusion of “power of sale” language, requiring the trustee to sell the property at the beneficiary’s request in the event of default under the terms of a promissory note or deed of trust.

What is Foreclosure?

Foreclosure in North Carolina is a legal process used to enforce payment of a debt secured by a mortgage, deed of trust, or lien on real property. This process involves selling the property and using the proceeds to settle the debt, ultimately leading to the loss of all property rights for the owner.

Imagine a scenario where you or your partner have recently faced unemployment or a serious illness, hindering your ability to earn. Despite having ongoing financial obligations, such as your mortgage, you may find it challenging to make ends meet. If you eventually secure employment or resume your previous job, the accumulated debt during this period could be overwhelming. If you stopped making payments and cannot catch and bring the mortgage current. At some point, the bank initiates foreclosure proceedings.

How Long Do You Have To Get Out of Your House After Foreclosure?

The steps for foreclosure in most states are missed payments, public notice, foreclosure, auction, and eviction, but the amount of time for each step varies based on state. You could have anywhere from 120 days to nine months before the bank can foreclose using either a judicial or non-judicial foreclosure. During this time, your lender will reach out to you by phone, mail, and email to let you know about the process.

The Different Types of Foreclosure

There are two different types of foreclosure you may experience:  nonjudicial foreclosure or judicial foreclosure.

What Is Non-Judicial Foreclosure? 

A non-judicial foreclosure in NC is the most efficient and cost-effective method for a lender to foreclose on a property. This process eliminates the need for court involvement and can be carried out in compliance with state laws and regulations. During a non-judicial foreclosure, the lender takes possession of the property to sell it and recoup the outstanding debt utilizing the “power-of-sale” provision outlined in the deed of trust. In NC, non-judicial foreclosures typically require only one court hearing, after which the lender can proceed with selling the property at a foreclosure auction. Most Lenders choose the non-judicial foreclosure option because it is faster and less expensive than going through the court process.

What Is Judicial Foreclosure?

In a judicial foreclosure process, your lender is required to file a lawsuit seeking court approval to proceed with the sale of your home. It is crucial that you respond to the official letter from the lender, as failing to do so could result in an automatic win for the lender, leading to the initiation of a foreclosure sale. Following the sale, you remain obligated to cover the difference between your outstanding mortgage balance and the final sale price.

Unlike traditional home sales, auctions in foreclosure scenarios often do not yield market value prices. Consequently, even if your property is well-maintained and valued higher than your mortgage balance, you might still end up facing substantial financial liability, known as a deficiency judgment. Lenders typically prefer non-judicial foreclosures due to the costly and protracted nature of pursuing deficiency judgments to recover debts.

Are Deficiency Judgments Allowed in North Carolina?

When a property goes into foreclosure, it’s common for the borrower to owe more on the mortgage than the sale price. This difference between the total debt and the sale price is referred to as a “deficiency.” For instance, if the total debt is $400,000 and the property sells for $350,000 at a foreclosure sale, the deficiency amounts to $50,000.

In certain states, the lender has the option to pursue a personal judgment against the borrower to recoup the deficiency. Once the lender obtains a deficiency judgment, they have the right to recover this amount—such as the $50,000 deficiency in the example—directly from the borrower.

Deficiency judgments are allowed in North Carolina as per state law, albeit with specific provisions and exceptions.

What does the Non-Judicial Process look like?

Notice of Preforeclosure

At least 45 days before commencing a foreclosure proceeding on a primary residence in NC, the servicer is required to send a notice to the borrower. This notice must include essential information such as the total past due amount, additional charges required to bring the loan current, contact details for the mortgage lender, the servicer, or an authorized agent who can assist the borrower in avoiding foreclosure, and contact information for a HUD-approved housing counseling agency.

Furthermore, within 30 days of the notice of hearing, the lender must send a notice of default to the borrower. This notice includes a comprehensive breakdown of the amounts owed, including a daily interest charge calculated based on the contract rate as of the statement date.

Notice of Hearing

Initiating the foreclosure process, the lender commences by filing a notice of hearing with the court clerk. This notice must be delivered to the borrower, typically by certified mail, at least ten days before the hearing (if personally served) or twenty days before the hearing (if posted on the property). (N.C. Gen. Stat. § 45-21.16).

During the hearing, the court will assess various factors such as the validity of the debt, the rightful holder of the debt, the homeowner’s default status, the permissibility of foreclosure under the deed of trust, and the adequacy of the notice provided. (N.C. Gen. Stat. § 45-21.16(7)(d)).

If necessary, the clerk may opt to postpone the hearing for a maximum of 60 days under specific conditions: if the property facing foreclosure is the borrower’s main residence and there are indications that additional time or measures could potentially resolve the delinquency without resorting to foreclosure. (N.C. Gen. Stat. § 45-21.16C).

In cases where a postponement is deemed unnecessary and the lender has adhered to all procedural requirements, the clerk will grant authorization for a foreclosure sale to proceed.

Notice of Sale

As per N.C. Gen. Stat. § 45-21.17, a copy of the notice of sale must be sent to the borrower and posted in a public place at least 20 days before the sale.

Typically, after the hearing, the notice is promptly posted at the courthouse.

Furthermore, the notice of sale has to be published once a week for a minimum of two consecutive weeks in a newspaper in the county where the property is located. The final publication should not be more than ten days before the sale, as outlined in N.C. Gen. Stat. § 45-21.17.

North Carolina Foreclosure Sales Process

A public auction is how properties in foreclosure are sold in North Carolina. The lender has a right and usually makes credit bid, which can reach the total debt amount or be less.

In states like North Carolina, if the lender secures the highest bid but offers less than the total debt, they may pursue a deficiency judgment within specific constraints. Should a third-party outbid the lender and generate excess proceeds from the sale, you, as the property owner, stand to benefit from the surplus funds.

How to Sell House Before Foreclosure in NC

Let’s break down a few ways you can sell your house, depending on your time frame and situation:

Hire A Real Estate Agent

When facing a challenging situation like foreclosure, many Americans automatically turn to local real estate agents when selling a property. While enlisting the help of a real estate agent can offer benefits such as listing on the MLS and assistance with preparations and showings, there are drawbacks to consider. One significant downside is the agent’s commission, which typically ranges from 3% to 6% of the final sale price. For individuals already burdened with debt and aiming to repay their lender in full, surrendering a substantial portion of the sale proceeds may not be feasible.

Moreover, uncertainty looms over the closing timeline when working with real estate agents. Despite assurances, the process of finding the right buyer and undergoing a traditional 30 to 60-day closing period can prolong the selling process. This timeframe may be impractical for homeowners on the brink of auction or eviction, who require a quicker resolution.

Short Sale

If you find yourself in a situation where you owe more on your property than its current market value, you may need to consider a short sale. A short sale becomes necessary when the outstanding mortgage balance exceeds the property’s worth. For instance, if your property is valued at $250,000 in the current market but you still owe $300,000, a short sale is the option to explore. However, it is essential to note that despite its appeal, a short sale process is neither quick nor straightforward.

The initial step in initiating a short sale is to obtain approval from your lender. To qualify for a short sale, you must demonstrate financial hardship supported by documentation such as W-2s, medical bills, etc. In cases of income loss, the lender will seek assurance that the situation is prolonged and unlikely to reverse. Upon approval from the lender, you will need to engage a real estate agent and attorney experienced in handling short sales. Their fees will remain consistent with those of a conventional home sale.

If you have been proactive in your communication with the lender and the foreclosure process has not been drawn out , there is a high probability of the short sale being allowed. Opting for a short sale allows the lender to bypass the time and expenses associated with foreclosure proceedings, while still recouping a portion of the losses from missed mortgage payments. Nonetheless, for the average homeowner, a short sale record stays on their credit report for the next 5 to 7 years on average.

While a short sale enables you to sell the property and settle some of your debts, it can have adverse effects on your credit score similar to filing for bankruptcy. Credit reporting agencies incorporate mortgage delinquencies and short sale details in their assessments, making it challenging for former property owners to obtain credit cards, vehicle loans, or new housing opportunities for about the same timeframe as a bankruptcy filing.

Sell Your House AS-IS to A Cash Buyer

If you’re under a strict time restraint to sell your house before a foreclosure progresses to auction and eviction, you do have options! You can try to sell your property with a real estate agent, work with your lender to complete a short sale, or – best of all – turn to a trusted and reliable cash investor to help you with your situation.

Some of the benefits of selling to a direct cash investor include:

• A quick and pain-free closing process.
• Avoid paying any commissions or fees.
• You won’t have to worry about marketing your house and waiting for a buyer.
• No need to clean-up or complete any repairs!

When you sell your home as-is to a direct cash buyer, you not only can avoid losing your home to an auction, but you also may be able to sell the property for enough money to get out of financial debt. Moving on with your life without the burden of a monthly mortgage payment and debt hanging over your head is one of the best gifts you can give yourself!

Can You Stop Foreclosure Once it Starts?

Reinstating the Loan

Although state law may not offer a statutory right to reinstate the loan prior to the sale, numerous deeds of trust, such as the standard Fannie Mae and Freddie Mac deeds of trust, grant the borrower the option to proceed with a reinstatement. It is crucial to review your loan documents to determine if a reinstatement period exists and the associated deadline for completion.

Pay Off Your Loan & Fees to Redeem the Property Before or After the Sale

One strategy to prevent foreclosure is through the process of “redeeming” the property. To redeem the property, the borrower must settle the entire loan amount prior to the foreclosure sale.

In certain states, such as North Carolina, foreclosed borrowers may have a chance for redemption after the foreclosure sale. North Carolina legislation allows for an upset-bid period lasting for ten days following the sale’s report. During this period, a competing buyer can acquire the property by submitting a higher bid than the one presented at the initial sale, triggering what is known as an “upset bid.” Subsequently, a new 10-day upset bid period commences. Throughout this period, the borrower retains the right to repay the debt in full and redeem the property (N.C. Gen. Stat. § 45-21.20, § 45-21.27).

Declare Bankruptcy 

If you find yourself facing foreclosure, bankruptcy could be a last-resort option to halt the process, albeit with significant consequences. Navigating the complexities of bankruptcy necessitates the expertise of a specialized attorney in this area. Upon approval by the court, you will need to participate in a government-endorsed credit counseling program, and the bankruptcy will remain on your credit report for up to 10 years. The repercussions of bankruptcy extend across various facets of your life, impacting endeavors such as acquiring a vehicle, applying for credit cards or bank accounts, and even potentially affecting your eligibility to rent a house or apartment.

The Homeowner Affordability and Stability Plan (HASP) 

If you find yourself in a situation where your debt surpasses your income, you might meet the criteria for the Homeowner Affordability & Stability Plan (HASP). HASP represents a loan modification initiative tailored to assist borrowers facing potential foreclosure due to income inadequacies. This program offered by the governmental is specifically crafted to aid homeowners in the United States in restructuring their monthly payments to align with a constrained budget. Check your eligibility and apply for the program here.

Sell Your House Fast to a Cash Buyer 

Are you ready to sell your house but don’t have the time to wait 30+ days for a traditional close? Does a short sale seem like a fast way to ruin your credit? Prefer to pay off all your debt at once and get the bank off your back fast? A direct home buyer and cash investor might be exactly the solution you’ve been searching for! When you work with a trusted and reliable investor with a great reputation in your area, you’ll find a helpful company with cash on hand that is ready to purchase your home from your as-is. With a cash buyer, you can skip the lengthy process of foreclosure, eviction, and auction within a matter of days, and save your credit as well!

You may not get full market value for your house or property when you sell to a trusted cash investor, but the timeliness of a fast closing, and the lack of fees, required inspections, and commissions often balance this out at close. Best of all, because an investor can close fast, you can often close before the bank is able to auction off your property! This means you can sell the property for the amount that benefits you versus the pennies to the dollar price the bank will often try to sell your house for just to get it off the books.