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Focus on the Law: Foreclosures

By Sharon Frankenberg,
Attorney at Law

When you purchase real property and finance part of the purchase price you will usually sign a promissory note and a deed of trust.   The promissory note is the promise to pay.  The deed of trust document places the legal title to the real property in a trustee to secure the repayment of a sum of money and/or other conditions.  Maintaining full coverage insurance,  keeping current on real property taxes and performing necessary repairs and maintenance on improvements to the real property are typically required conditions listed in the deed of trust.  If you violate the terms of your deed of trust and your loan goes into default, the trustee will sell the real property to apply toward your debt.

In Tennessee, most real property foreclosures are done by non-judicial sale meaning that they are not sold through the court.  This makes the process faster and less expensive than in states where foreclosures are initiated by the filing of a lawsuit.  The state statutes regulating these sales are found in Tennessee Code Annotated Section 35-5-101, et seq.

The Trustee is named in the deed of trust and he or she advertises the property for sale by publishing a notice of trustee’s sale in “some newspaper published in the county where the sale is to be made.”  The beneficiary under the promissory note (usually the same party as the lender) may select another trustee to conduct the foreclosure process by doing so in writing and recording the document.  This is quite commonly done and you will see the newspaper advertisement refer to a “Substitute Trustee’s Sale” or a “Successor Trustee’s Sale” to reflect the change in trustee.

The newspaper advertisement identifies the interested parties and describes the land to be sold.  The time and place of the sale is listed.  Any state or federal liens are identified in the advertisement and the right of those entities to redeem the property is disclosed.  The right of the state to redeem property after a foreclosure sale is found in Tenn. Code Ann. Section 67-1-1433(b)(1).  The federal government’s right to redeem property after a foreclosure sale is found in 26 U.S.C. Section 7425(d)(1).   The specific terms of the sale are listed in the advertisement.  Most foreclosure sales are conducted for cash payable within a very short time frame.  The real property is usually sold with the purchaser being responsible for the payment of any and all delinquent taxes.  Also the property is often sold subject to the rights of any tenants in possession so that the purchaser becomes responsible to pursue any necessary eviction after the sale is completed.  The Trustee auctions the property at the time and place advertised and conveys the real property by Trustee’s Deed to the winning bidder.

Obviously this article does not cover every issue which might arise.  You should always contact an experienced attorney to get advice and assistance with your unique situation.  My office number is (865)539-2100.

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