North Carolina Foreclosure Law
- Judicial Foreclosure Available: Yes
- Non-Judicial Foreclosure Available: Yes
- Primary Security Instruments: Deed of Trust, Mortgage
- Timeline: Usually 60 days
- Right of Redemption1: Yes
- Deficiency Judgments2 Allowed: Varies
Lenders in the state of North Carolina may foreclose on deeds of trusts or mortgages in default using either a non-judicial or judicial foreclosure process.
Judicial Foreclosure
A judicial process of foreclosure requires that the lender file a lawsuit and attain a court order to foreclose on a particular property. This type of process is generally used when no power of sale is present in the mortgage or deed of trust. A power of sale is a clause found in a deed of trust or mortgage that authorizes the sale or transfer of land as outlined by the terms of that clause.
Non-Judicial Foreclosure
If a power of sale clause exists in the deed of trust or mortgage document, a non-judicial process of foreclosure is used. This allows the lender to sell the property and pay off the balance of the loan in the event the homeowner defaults. The power to sell may be completed by the lender or their representative in situations where a power of sale exists. The procedure for this type of foreclosure process is explained in the "Power of Sale Foreclosure Procedure" listed below.
Power of Sale Foreclosure Procedure
If the deed of trust or mortgage contains a power of sale clause and provides the time, place and terms of sale, then the procedure outlined must be followed. North Carolina does things a little differently in that it requires a preliminary hearing be held prior to a power of sale foreclosure.
The clerk of court conducts the preliminary hearing at which all interested parties are expected to attend. Following the hearing, the clerk determines whether or not a foreclosure sale will occur. If one will, the clerk issues a notice of sale and the foreclosure process moves forward.
The notice of the sale is mailed first class mail at least twenty (20) days prior to the sale to the borrower and any other owner or record title or lien claimant. The notice is also sent to anyone who has recorded a request for copy of notice.
A notice of sale is posted at the courthouse door twenty (20) days before the sale. The notice is also published once a week for two (2) successive weeks, published at least eight (8) days apart, with the last advertisement published no less than ten (10) days prior to sale.
The sale is held at the courthouse in the county where the property is located. The property is sold to the highest bidder. North Carolina law also allows upset bids by interested bidders even after the sale. An upset bid is a higher bid from a potential buyer who offers to buy the real estate previously sold at foreclosure for an amount exceeding the reported foreclosure sale price by ten (10) percent of the first $1,000 and five (5) percent of the amount over $1,000 of the old foreclosure bid. Upset bids may be filed with the court clerk for a period of ten (10) days after the foreclosure sale.
Borrowers have the right to redeem. Lenders retain the right to pursue a deficiency judgment.
1 A borrower’s right to reacquire property lost due to a foreclosure.
2 A personal judgment against the borrower for the remaining balance on the loan after a foreclosure sale.
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