Foreclosure Help Blog

How to Stop a Sheriff Sale and Defend Your Home’s Equity

One of the complaints of many homeowners that fight foreclosure but whose homes have significant equity is that their house is auctioned for far less than its fair market value at the county auction. In the majority of cases, there is no one else bidding at the sale besides the original lender, and the bank only bids enough to pay off the balance due on the mortgage or deed of trust. For homeowners in this situation, though, there may be a different option.

Courts in the past have ruled that, because foreclosure is such a harsh remedy to a default of a contract, the use of the court and forfeiture of property should be a last resort. Especially in cases where there may be enough equity to pay off the loan in full as well as give the owners back some amount of money, selling on the open market may present a more equitable solution.

Thus, borrowers may be able to have their foreclosure enjoined for a reasonable length of time in which to list and sell their home. If there is enough equity to pay off the mortgage and receive some sort of gain on the sale, foreclosure should not be used unless there are no potential buyers. As well, open market sales present no risk to the lenders, who will be paid in full if the sale goes through.

The main issue holding this solution back is often the homeowners themselves, who are unable to use the courts with the same skill as the lender’s attorneys. They may not know how to file motions to enjoin the sale, or not even respond to any of the legal paperwork the mortgage company sends them. When the borrowers do not respond to the foreclosure, then there is little the courts can do to help them.

Lenders also have a duty to the homeowners to obtain the highest price possible for a property even at a sheriff sale. Allowing the owners to list the house for sale on the open market can be an effective way to show that the bank has made efforts to retain their equity and avoid foreclosure. The lender must meet its fiduciary duty to the homeowners to get the highest price for a property, even if state laws allow a faster process.

Despite this duty, some lenders may be unwilling to stop foreclosure for long enough to sell the house. In these cases, homeowners may be able to file bankruptcy in order to take advantage of the automatic stay and then list the house on the open market. Filing Chapter 13 may allow the borrowers to move forward with an orderly sale in order to liquidate the property and avoid a sheriff sale.

To be able to sell the property, utilize the equity, and prevent a foreclosure auction, homeowners may desire to retain an attorney about obtaining an injunction against the trustee sale. Especially if there is a realistic chance of keeping some equity, courts may understand that there is only minor risk to the lender of permitting the borrowers to attempt selling on the open market.