Lenders who have completed the arduous process of foreclosing on a commercial real estate property may wonder what the asset recovery process looks like after the foreclosure sale has been completed. After auction, there are a number of processes for which to look out, including confirmation of sale, objections, and potential evictions.
What is the Asset Recovery Process After a Nonjudicial Foreclosure Sale
File Confirmation of Sale with County Courthouse
If a buyer places the highest bid in a foreclosure sale, it is not an official sale until it is approved by the court. After a property is sold in auction in a foreclosure sale, the lender must file a Confirmation of Sale with the county courthouse in order for the buyer to become the legal owner.
The court will verify that the notice procedures were followed and that the lender remained in compliance. They will also ensure that the buyer paid a fair market value for the property.
If the borrower has an objection to the sale, the confirmation process is a possible time to bring those objections before the court. It is critical for lenders to follow all compliance laws for their states throughout the entire foreclosure process, as an objection may be enough to pause the confirmation of a sale.
If the court grants the lender a deficiency judgment, it would be during this time period. Because the sale of the property is meant to be efficient to satisfy the default, most nonjudicial foreclosures do not allow deficiency judgments. Some judicial foreclosures allow deficiency judgments, but this is typically not available for “purchase-money” loans, which include mortgages.
Related Article: Everything Lenders Need to Know About Commercial Real Estate Nonjudicial Foreclosures
Deliver Notice to Evict
Once the sale has been confirmed, if there are tenants, the court will deliver an Eviction Notice to the tenants of the property. The tenants will have a short time period to leave the property, usually anywhere from 30 to 60 days, depending on the state.
Not every foreclosed commercial property will need to be evicted. In certain properties, like office buildings with leased spaces or apartment buildings, the property changes hands without disturbing the residents. This is often made possible because tenants sign leases with SNDA clauses attached.
Related Article: What is an SNDA and Why is it Important for Lenders?
Surplus Claim
If the property sells for more than is needed to cover the default and any remaining fees, it creates a surplus. Borrowers have a right to this surplus and may file a claim. The surplus is designed to be easily accessible to the borrower without the need to hire an attorney.
Redemption
In some states, if the lender buys the property for less than the borrower owes, the borrower has the right to buy the property back at that lower cost. This is known as the statutory right to redemption. Of the states that Total Lender Solutions operates in, Missouri alone allows redemption, with the redemption period lasting one year.
Finding the Right Commercial Real Estate Foreclosure Partner
Failure to follow compliance laws throughout the foreclosure process can result in objections during the post-foreclosure period, which can result in devastating delays or lawsuits for lenders. Total Lender Solutions comes alongside lenders to make the asset recovery process simple, leaving lenders to focus on their customers. Contact Total Lender Solutions today for guidance through the foreclosure and recovery process.
