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A judicial sale occurs when a court orders the auction or sale of a piece of real estate for a certain price. When the property is sold, the new owner takes over its title. Ordinarily, the proceeds from the sale go to pay off the balance on an outstanding debt, such as a mortgage, court judgment, or unpaid taxes. Once the debt has been paid, remaining money goes to any entitled lien holders and then to the homeowner. A judicial sale may also be referred to as a sheriff’s sale because a sheriff or other court appointed authority is required to preside over the actual auction of the foreclosed property in many jurisdictions.
A judicial sale can be used by a plaintiff who is seeking to enforce the terms of a court judgment. Typically, this happens when a defendant is ordered to pay a judgment in a civil case but fails to make good on the payment. The plaintiff then compels the sale of the defendant’s property unless and until the defendant pays off the judgment. In some circumstances, a government body will request the sale of property in order to require a taxpayer to pay delinquent taxes.
Banks, mortgage companies, and other lending institutions may also request judicial sales when homeowners fail to make their mortgage payments. Ordinarily, this is a long process and requires lenders to adhere to various laws in the jurisdiction in which the property is located. Once a homeowner has defaulted on a payment, the lender generally files a notice of default. Following the notice, the borrower usually has a grace period in which to pay off the deft. If the borrower pays off the debt within the allotted timeframe, the sale will not occur.
If the borrower does not pay off the debt, the process of a judicial sale continues. During the sale, a county, sheriff, or court official typically auctions off the property. At the conclusion of the sale, the highest bidder ordinarily receives a deed to the property. The homeowner’s mortgage lender may decide to bid on the property for the amount of the outstanding debt. If there are no other buyers, the lender will get title to the property.
Proceeds from a judicial sale are not always sufficient to pay the balance of an outstanding court judgment or mortgage balance. In that situation, the mortgage holder or plaintiff can file a deficiency judgment to receive the remaining amount. For instance, if a mortgage company receives only $20,000 US Dollars (USD) from a sale, but is entitled to $25,000 USD, it can sue the mortgagor for the remaining $5,000 USD.