North Carolina Foreclosure Procedure
In North Carolina, lenders may foreclose on deeds of trusts or mortgages in default using either a judicial, filing a lawsuit, or non-judicial foreclosure process, by conducting an out-of-court foreclosure sale under the terms of a power of sale clause in a deed of trust. The primary security instruments are Deed of Trust and Mortgage and the foreclosure usually lasts sixty (60) days. Right of Redemption is allowed while deficiency judgments vary.
Lenders who resort to foreclose by filing a lawsuit try to secure a default judgment. This is to appoint commissioners to make the foreclosure sale, receive the reports on the sale and confirm the reported sale.
All sales of real property, under a power of sale contained in any mortgage or deed of trust to secure the payment of money shall be valid, whether or not such mortgagee or trustee was or shall be present at such sale
Deed of Trust Foreclosure
The deed of trust foreclosure in North Carolina has a number of uncommon features. A preliminary hearing as to whether to foreclose or not is held with both interested parties having to receive notice of the hearing. The clerk of the court, not the judge, holds the hearing. Afterward, a notice of the foreclosure sale must be given; then the sale is conducted. A deposit must be made at the sale. If the instrument contains no provision with respect to a cash deposit, the mortgagee or trustee may require the highest bidder immediately to make a cash deposit not to exceed the greater of five percent (5%) of the amount of the bid or seven hundred fifty dollars ($750.00).
After the sale, however, a very unusual procedure called an upset bid exists. An upset bid is an increased bid whereby a bidder offers to buy the real estate previously sold at foreclosure for an amount exceeding the reported foreclosure sale price by 10 percent of the first $1,000 and 5 percent of the amount over $1,000 of the old foreclosure bid.
The clerk of the court will conduct a hearing to determine whether or not a foreclosure sale may take place after preliminary notices have been issued. If and when the clerk issues a notice of sale, the foreclosure may proceed as follows: a notice of sale must be mailed first class to the borrower within twenty (20) days before the sale and should be published in a newspaper of general circulation in the country where the property is located once a week for two (2) successive weeks, with the last advertisement being published not less than ten (10) days before the sale and posted on the courthouse door for twenty (20) days prior to the foreclosure sale.
The sale must be conducted at the courthouse in the county where the property is located between the hours of 10:00 am and 4:00 pm. The property will be sold to the highest bidder.
Upset bids may be filed with the court clerk for a period of ten (10) days after the foreclosure sale.
The sale may be postponed by announcing the need to postpone at the time and place the regular sale would have taken place.
Injunctions
It is possible to enjoin a foreclosure sale in North Carolina.
Deficiency
A lender may not sue for a deficiency if the loan that went into default was for the purchase price of the real estate. However, in other cases a lender may sue for deficiency, but the borrower has the right in a deficiency suit to prove the reasonable value of the property as a defense or offset to the lender's claims.
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