Judicial/ Non-Judicial Foreclosure: Both
Right of Redemption/ Deficiency Judgment: Depends on the Process
Timeline: 120 Days, Can vary depending on individual cases
Deed of Trust / Mortgage as Security Instruments: Both are required
In Arkansas it is mandatory to make an appraisal of the value of the property before the foreclosure process, which can be done using Judicial process or Non Judicial Process. In Arkansas, the property is not given to the highest bidder if the property does not sell at least for two-thirds of the appraised value. In such cases, another auction is organized within twelve months without any reference to the previous appraisal.
Judicial Foreclosure process:
In the Judicial foreclosure process where a court is involved, the court normally gives some time for the borrower to pay up their debt. If they fail to do so, the clerk puts up the property for sale via a public auction to the highest bidder.
The highest bidder generally gets a credit of 3-6 months to pay the full amount or they may choose to pay in installments not exceeding four months. The highest bidder is expected to give a bond with surety for the purchase price agreed upon during the auction.
The lender may also bid for the property during the auction. The borrower has a right of redemption for up to one year from the date of sale. However, they need to pay the amount offered by the highest bidder, along with interest charges.
Non-Judicial Foreclosure process:
If the ‘power of sale’ clause exists in the Deed of Trust/ Mortgage document, then the property can be foreclosed using the Non-Judicial foreclosure process by the lender (bank) or their authorized agent, also referred to as Trustee. The guidelines to follow for a Non-Judicial foreclosure process is given below.
If the power of sale clause mentions the procedure to be followed for the sale, the same has to be followed. Otherwise, the following procedure can be followed.
The lender needs to file a notice of default/ intention to sall at the recording office of the county where the property is located. A notice of default/ intention to sell needs to be mailed (using registered post) to the borrower and anyone else mentioned in the Deed of Trust/ Mortgage documents within 30 days of filing of the notice at the recorders office.
A notice of sale is then sent to the borrower / any other member involved in the foreclosure proceedings within 5 days of filing such a notice, using registered post. The notice of sale should also be advertised in a local newspaper of the county where the property is located for four consecutive weeks, and the last notice must be advertised not less than 10 days prior to the date of auction.
The notice of sale should contain all the details of the property, its description, location, names of the parties to the mortgage, recorder’s document number, default amount, the lender’s intention to sell the property, statutory warning – ‘You may lose your property if you do not take appropriate action’, time and date of auction, terms of sale, and all other details related to the property/ sale.
The lender may also bid during the auction. The highest bidder at the time of auction is required to pay the agreed amount within 10 days of the date of sale after deducting unpaid taxes, insurance amount, etc.
The lender may postpone the date of auction by up to seven days after the date that was initially announced. But, if the lender wants to postpone it further, the entire notice procedure mentioned above should be followed again.
The borrower receives any excess funds after deducting the payable amount, attorney fees, interest, etc from the value offered by the highest bidder. The highest bidder gets the trustee’s deed. The lender may choose to apply for a deficiency judgment against the borrower if the sale price is less than the loan amount due to it. The lender can file a case for the difference between the amount due and the actual sale price (or) the difference in the loan amount due and the fair market value of the property.