Alabama Foreclosure Laws

Learn about the foreclosure laws in Alabama. Research the foreclosure process in Alabama to understand how it works and the various stages of default. How long does foreclosure take in Alabama? What are the foreclosure consequences in Alabama? Is Alabama a judicial or non-judicial foreclosure law state? Find out the answers to these questions and many more with the foreclosure information and foreclosure laws in Alabama below.


Questions
How are mortgage liens treated in Alabama?
How are Alabama mortgages foreclosed?
What are the legal instruments that establish an Alabama mortgage?
How long does it take to foreclose a property in Alabama?
Is there a right of redemption in Alabama?
Are deficiency judgments permitted in Alabama?
What statutes govern Alabama foreclosures?
How to Buy Alabama Foreclosures

Answers

How are mortgage liens treated in Alabama?

Alabama is generally known as atitle theory state where the property title remains in trust until payment in full occurs for the underlying loan. The document that secures the title is usually called adeed of trust ormortgage. In Alabama, the mortgage serves the same purpose and generally contains the same terms as adeed of trust and serves the same function in anon-judicial foreclosure.

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How are Alabama mortgages foreclosed?

The primary method of foreclosure in Alabama involves what is known asnon-judicial foreclosure. When themortgage is initially signed it will usually contain a provision called apower of sale clause, which upon default allows an attorney to foreclose on the property in order to satisfy the underlying defaulted loan. Auctions are conducted by the sheriff. Because this is anon-judicial remedy, there are very stringent notice requirements and the legal documents are required to contain thepower of sale language in order to use this type of foreclosure method.



Power of Sale Notice Requirements:

  1. Prior to initiating a foreclosure the attorney conducting the foreclosure must obtain and file a notice of sale indicating the foreclosure will be pending. The lender must then publish a notice of foreclosure sale date for three (3) weeks in a newspaper of general circulation in the county in which the property is located. If there is no such newspaper in the county in which the property is located, then the newspaper in an adjacent county may be used.
  2. The borrower may make payment and discontinue the foreclosure process provided the payment is made prior to the foreclosure sale and all costs and fees are paid in full.
  3. Thesheriff will auction the property to the highest bidder, including the lender. Sales usually occur between 11AM and 4PM. The foreclosure sale may be postponed by the sheriff from day to day.

In Alabama, the lenders can also go to court in what is known as ajudicial foreclosure proceeding where the court must issue a final judgment of foreclosure. The property is then sold as part of a publicly noticed sale by thesheriff. A complaint is filed in court along with what is known alis pendens. Alis pendens is a recorded document that provides public notice that the property is being foreclosed upon.

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What are the legal instruments that establish an Alabama mortgage?

The documents are known as themortgage, or in a commercial transaction, asecurity agreement. Sometimes the mortgage document is combined with thesecurity agreement. Amortgage is filed to evidence the underlying debt and terms of repayment, which is set forth in thenote.

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How long does it take to foreclose a property in Alabama?

Depending on the timing of the various required notices, it usually takes approximately 60-90 days to effectuate an uncontestednon-judicial foreclosure. This process may be delayed if the borrower contests the action in court, seeks delays and adjournments of sales, or files forbankruptcy.

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Is there a right of redemption in Alabama?

Yes, Alabama has astatutory right of redemption, which would allow a party whose property has been foreclosed to reclaim that property by making payment in full of the sum of the unpaid loan plus costs within twelve (12) months after the sale. A Deed in Lieu of Foreclosure does not provide a right of redemption nor does it permit a deficiency judgment.

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Are deficiency judgments permitted in Alabama?

Yes, adeficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount which the underlying mortgage secures.

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What statutes govern Alabama foreclosures?

The laws that govern foreclosures are contained in Alabama Code (1975) Foreclosure sales are covered in Title 35 (Property) Articles 1, 1A, 2, 3 §35-10-1 et. seq. (Powers Contained in Mortgages, Foreclosure by Power of Sale).


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How to Buy Alabama Foreclosures
Overview
Basic Steps to Purchasing Preforeclosures
Basic Steps to Purchasing Property at an Auction Sale

How to Buy Alabama Foreclosures
 

Overview

In Alabama, the primary method ofdeed of trustforeclosure isnon-judicial. However, if adeed of trust does not contain thepower of sale language or a standard mortgage is used, the lender may seekjudicial foreclosure.

As few as 60 days may pass from the time a property owner receives anotice of default until the property is sold at apublic foreclosure auction sale. Accordingly, don't wait until the property becomesReal Estate Owned (REO) after the auction because the property will cost more than it would inpreforeclosure.

Adeficiency judgment is available to a lender if a property inforeclosure is sold at apublic foreclosure auction sale for less than the loan amount that the underlying mortgage secures.

As you search foreclosure.com, please always remember one important item: It is absolutely critical that you learn as much as you can about theforeclosure laws that govern the state in which the property is located. There are many nuances and complicated steps that you must understand before making a bid at apublic foreclosure auction sale.

Case in point, several states - including Alabama - allow a homeowner/borrower to reclaim his or her property throughright of redemption. And, overlooking a detail like this could cause a major problem. That's the reason most prospective homebuyers in theforeclosure industry prefer to purchase a property during thepreforeclosure period.

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PREFORECLOSURE

As is often the case, the best time to purchase property in Alabama is during thepreforeclosure period. Most properties are bought during this time, which is the reason foreclosure.com offers its subscribers the nation's largest and most accuratepreforeclosure listing inventory on the Internet.

If you wait until thepublic foreclosure auction sale - or afterwards - the competition may be stronger and the prices will be higher to cover the lender's legal costs.

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Basic steps for you to consider during thepreforeclosure purchase process:


Inspect the Property

  • If the broker/homeowner is receptive, you should schedule a mutually convenient time to visit the property. Once there, carefully examine the entire property, and take pictures for your file - provided the homeowner doesn't object. You should also prepare a checklist to take important notes throughout the tour.
  • If you've found your ideal property, work with the broker/owner to schedule independent professional inspections. Even though the home may look like it's in fine condition, hidden defects may lurk beneath the surface or between walls. From the electrician to the exterminator, these inspections are critical because they will ultimately save you money.

Make an Offer

  • If the inspections go well, and you are satisfied with the information you have gathered, you can prepare to make an offer. To do this, you will need current standardcontract of sale forms, which you can get from most real estate brokers and attorneys. You may also be able to download and print state promulgated forms if they are available on the Web site of the real estate regulatory commission in the state in which the property is located. When preparing contracts it is always advisable to have anattorney represent you.
  • It's important to clearly explain the terms of your offer to the homeowner and/or the real estate agent. If you are unable to do this in person, write a cover letter that briefly explains to the homeowner the most important points of your offer, especially why it is in his or her best interest to accept it.
  • Early inpreforeclosure, when the homeowner may feel there is time to market the house for sale, your offer may be ideal because you have the financing already arranged. Or, because you are not making an offer contingent upon further inspections and repairs. If thepreforeclosure time is running out and loss of the property throughforeclosure is imminent, the biggest advantage is that you can close quickly and - to some extent - preserve the owner's credit rating.


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FORECLOSURE

Many Alabama properties are bought atpublic foreclosure auction sales, but the competition may be strong and the prices are higher than duringpreforeclosure to cover the lender's legal costs. At this point, it is unlikely that the homeowner will be able to avoidforeclosure. Therefore, the property will be auctioned to the highest bidder, including the lender.

By law,foreclosure auction sales must be announced publicly and held at the date, time and place required by state statutes. To find these sales, read newspaper notices prior to the auction date, look for public notice posted - when required - on the property, or search other public places in the county where the real estate is located.

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Basic steps for you to consider when purchasing a property at apublic foreclosure auction sale:


Contact the Lender's Representative

  • Contact thetrustee,lender's attorney,public trustee, orsheriff and ask what is required to purchase the property at the auction. Traditionally, an earnest money deposit amount in the form of a cashier's check or money order is acceptable.
  • Ask for a copy of the purchase agreement, orcontract of sale document, that you will need to complete if you are the winning bidder. Have yourattorney review it carefully and negotiate any changes in advance, if necessary. Be aware that the seller, as represented by anattorney,trustee or other official, may not be open to making many substantive changes - if any at all.
  • Make arrangements to view and inspect the property if it is vacant. Even if it is still occupied, theattorney,trustee, or the realtor if it has been listed for sale, may be able to gain access for you. Realize that the owners may not be very cooperative.

Inspect the Property

  • Once there, carefully examine the entire property, and take pictures for your file - provided the homeowner doesn't object. You should also prepare a checklist to take notes throughout the tour.
  • If you've found your ideal property, work with the broker/owner to schedule independent professional inspections. Even though the home may look like it's in fine condition, hidden defects may lurk beneath the surface or between walls. From the electrician to the exterminator, these inspections are critical because they will ultimately save you money.
  • Always remember, you are buying the property strictly "as is" at an auction sale!

Bid on the Property at the Auction

  • On the day of thepublic foreclosure auction sale, meet the lender's representative at the courthouse and show him or her the earnest money deposit and an acceptable form of identification.
  • Have your top bid worked out in your mind in advance. When bidding starts, be aware of your competition and increase your bid to exceed theirs by the increment set in advance (usually $100 to $1,000, depending on the value of the property).
  • When you have won the bid, complete the transaction per the direction of the lender's representative by signing the purchase agreement and submitting the deposit.
  • At this point, your earnest money deposit is non-refundable.

  • Be prepared to close within the required time period, which is usually only 30 days.


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