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Real Estate Term of the Day – Power of Sale

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“Power of Sale” is a clause written into a mortgage agreement that authorizes the lender to sell the property in the event of default in order to repay the mortgage debt. Basically, a property that is foreclosed is sold by the lender in order to recover losses incurred by the loan default. Power of sale also refers to the power expressed or implied in a trust agreement permitting the trustee to sell the investments compromising the trust.

A majority of states allow power-of-sale clauses to enact foreclosures without judicial review, but the lender must follow specific guidelines and procedures to take action. After the borrower defaults on the mortgage, the lender must give notice of the pending foreclosure, but it is possible that the borrower will have little warning after a default that a power of sale clause has been implemented and the property will be sold. For this reason, mortgages that include this power-of-sale clause can put the new buyer at risk of a fast foreclosure should they default. The buyer might be able to get a judicial review of the impending foreclosure, but they typically must file litigation to bring the case to court.

Lydia Whiteford (60 Posts)


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