Disclosure of Pending Foreclosure Proceeding
QUESTION: The seller on one of my listings has just faxed me a copy of a Notice of Hearing which indicates that his property is being foreclosed on. Do I have to disclose this to prospective buyers? If I get an offer, will the seller even be able to sell and close on the property?
ANSWER: The answer to both questions is yes. Regarding your first question, the Notice of Hearing filed with the clerk of court’s office officially kicks off the foreclosure proceeding. According to the Real Estate Commission, once the foreclosure proceeding is commenced, it is a material fact that must be disclosed because it “casts significant doubt on the seller’s ability to fulfill his contractual promise to convey the property to the buyer” (see Foreclosure: Material Fact or Confidential Information? NC Real Estate Commission Bulletin, Fall 1996).
Regarding your second question, the filing of the foreclosure proceeding does not affect the seller’s legal ability to sell and close on his property. The Notice of Hearing must be served on the seller at least 10 days before the hearing itself. If, at the hearing, the clerk of court enters an order allowing the property to be sold, there will be a sale of the property, which typically takes place at the courthouse. Notice of the sale must be posted in the courthouse at least 20 days before the sale. The sale is followed by an upset bid period that lasts for a minimum of 10 days. During this period, higher bids may be made. At any time prior to the end of the upset bid period, the seller has the right to end the foreclosure proceeding by paying off the mortgage debt and the expenses incurred with respect to the foreclosure proceeding. Thus, until the foreclosure has run its course, it’s not too late for the seller to sell and close on his property.
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