Category: Publications



Real Property Foreclosure Procedures – (Defective Foreclosures)



L. Defective Foreclosures

The procedure for foreclosure of real property has many technical requirements and many different time frames to keep track of.   Despite careful training of staff, tickler systems, and reports to track the steps of foreclosure cases, errors may still occur with respect to service of process, notice requirements, or publication of the Notice of Sale.  When defects are discovered during the foreclosure process, it is sometimes best to dismiss the action and re-file to ensure clear title.   However, not all errors will necessarily cause the foreclosure to be defective.  A Notice of Hearing was not fatally defective where it was dated December 8, 1978 stating that the hearing would be held January 3, 1978 rather than January 3, 1979.  Lovell v. Rowan Mutual Fire Insurance Co., 46 N.C. App. 150 (1980).  A foreclosure sale was not invalid because the notice of publication filed in the office of the clerk of court was unsigned.  Britt v. Britt, 26 N.C. App.132 (1975). (more…)



Real Property Foreclosure Procedures – (Distribution of Proceeds Upon Foreclosure Sale)



K. Distribution of Proceeds Upon Foreclosure Sale

1.  Sale Proceeds.    Proceeds of the foreclosure sale must be distributed pursuant to the terms of N.C.G.S. § 45-21.31.  The proceeds are first applied to the payment of costs and expenses of the sale, including any trustee commission.  N.C.G.S. § 45-21.31 (a)(1).  While property taxes and special assessments are next in line to be paid, the trustee may then apply the proceeds towards the secured obligation if the Notice of Sale provides that the property is being sold subject to unpaid taxes and assessments. (more…)



Real Property Foreclosure Procedures – (Defaulting Bidder)



J. Defaulting Bidder.

When the high bidder’s rights to the sale become fixed, the bidder is contractually obligated to pay the trustee the balance of the purchase price.  When a bidder fails to comply with his bid upon the trustee tendering a deed, or after making a bona fide attempt to tender a deed, the bidder is deemed to be in default.  N.C.G.S. § 45-21.30 (c).  When the highest bidder at a sale defaults, the Clerk of Superior Court may, upon motion, enter an order authorizing a resale of the property.  The procedure for resale of the property is the same as the original sale, and a new hearing is not necessary.  Id.   If a resale is necessary, the defaulting bidder will remain liable to the extent that the final sale price is less than the bid plus all costs of the resale.  N.C.G.S. § 45-21.30 (d).  The defaulting bidder’s deposit will secure payment of any amounts for which the bidder remains liable as a consequence of the default.

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Real Property Foreclosure Procedures – (IRS and U.S. Redemption Rights )



I. IRS and U.S. Redemption Rights

The federal government requires more extensive notice of a foreclosure sale, and has greater rights with respect to its liens than other parties.  As mentioned earlier, if the Internal Revenue Service (IRS) files a Notice of Federal Tax Lien against the owners of the property at least 30 days before the sale date, notice of the sale must be sent by certified mail to the District Director of the IRS at least 25 days prior to the sale.  26 U.S.C. 7425.  The content of the notice must contain the following information set forth by 27 CFR 70.205: (more…)



Real Property Foreclosure Procedures – (Upset Bid Period)



H. Upset Bid Period

The foreclosure sale is not final until after 10 days following the filing of the preliminary report of sale.  This is because another party can offer to purchase the property by increasing the reported sale price by at least 5%, but in no event less than $750.00, within this 10-day period of time.  N.C.G.S. § 45-21.27 (a).  The raised bid on the property is known as an upset bid.  Id. An upset bid is made by depositing cash, a cashier’s check, or certified check with the clerk of court’s office in an amount of at least 5% of the upset bid, but no less than $750.00.  Id.  The deposit must be made by the close of business hours on the tenth day after the filing of the Report of Sale, or the last notice of upset bid.  Id.  If the tenth day falls on a day in which the office of the clerk is not opened for business, the upset bid period is extended through the next day that the office is open for business.  Id.  Each time an upset bid is filed, another 10-day upset bid period begins.  Id.  The rights of the parties to the sale do not become fixed until the upset period elapses.  Id. (more…)



Real Property Foreclosure Procedures – (Sale)



G. Sale.

1.         Time and Place.   The sale should begin at the time designated in the Notice of Sale or as soon thereafter as practicable, but not later than one hour after the designated time unless delayed by other sales held at the same place.  N.C.G.S. §45-21.23.  It must be held between 10:00 A.M. and 4:00 P.M. on any day other than Sunday or a legal holiday on which the court house is closed for transactions.  Id. (more…)



Real Property Foreclosure Procedures – (Notice of Sale)



D. Notice of Sale

Subsequent to obtaining an order of the Clerk of Court authorizing a foreclosure sale, a Notice of Sale must be posted in the area designated for posting public notices at least 20 days before the sale date.  N.C.G.S. §45-21.17(1).  Typically the trustee will post the Notice of Sale immediately after the foreclosure hearing has been concluded. (more…)



Real Property Foreclosure Procedures – (Hearing)



D. Hearing

A foreclosure hearing is held before the Clerk of Superior Court in the county where the land being foreclosed is located. N.C.G.S. § 45-21.16(d). In the event that the property is situated in multiple counties, only one hearing needs to be held, but prior to the hearing, a Notice of Hearing must to be filed in any other county where any portion of the property is located.  Id. (more…)



Real Property Foreclosure Procedures – (Service Of Process)



D. Service Of Process

1. Parties Entitled To Receive Notice Of Hearing.    The Notice of Hearing must be served upon all parties designated by N.C.G.S. §45-21.16(b), which are:

a. Any person to whom the deed of trust directs notice to be sent in case of default;

b. Any person obligated to repay the indebtedness against whom the holder intends to assert liability; and

c. Every record owner of the real estate whose interest is of record in the county where the real property is located, which includes both present and future interests. (more…)



Real Property Foreclosure Procedures – (Notice of Hearing.)



C. Notice of Hearing.

Once a substitution of trustee is recorded with the Register of Deeds, the substitute trustee may initiate the foreclosure action by filing a Notice of Hearing with the Clerk of Superior Court of the county where the land being foreclosed on is situated.  N.C.G.S. § 45-21.16(a).  Prior to filing and serving the Notice of Hearing, the trustee will need to confirm that a statement of the debt, as described directly below in paragraph “6”, has been mailed to the borrower.  N.C.G.S. § 45-21.16(c)(5a).  The Notice of Hearing must specify the time and place for hearing, and comply with the requirements of N.C.G.S. § 45-21.16(c), which includes: (more…)



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Maitin Law Firm, PLLC handles legal matters in the following practice areas: Residential Real Estate, Foreclosures, Creditor's Rights, Landlord/Tenant and Collections. We strive to provide the highest quality legal services while meeting the needs and exceeding the expectations of our clients. Our clients range from individuals, to small businesses, to large lending institutions.

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