Financing Property In AL, Odd Foreclosing Proceedure
I am financing a purchase in Alabama, Warranty Deed at closing. In the mortgage contract, can there be a power of sale clause that would allow a private foreclosure and sale rather than a public one on the court house steps? The purchaser has been very honest and is not 100% sure they can afford the property (self-employed, what if something happens), and they want me to not put the foreclosure on their public record if they can't pay, I just take back the property. They're paying a lot down, and I don't really have a problem with this, but I'd like to know 1) if it is legal, 2) any possible negative results on my end.
Normally a foreclosure in AL is advertising it for 30 days in the paper and conducting a sale on the court house steps.
My closing attorney lawyer doesn't know the answer to this 
Thanks,
Terry
I am not an attorney and I am not at all familiar with Alabama law. However, I would guess that such an agreement is illegal as there is a foreclosure law for a reason--to protect the homebuyer. The law has a specific procedure that must be followed.
That said you could verbally agree that a deed in leiu of foreclosure is certainly an option. This is where they sign the property back over to you in leiu of you foreclosing. This only works if your mortgage is the sole lien on the property.
If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. However, if the deed of trust or mortgage contains a power of sale clause, but does not specify the time, place and terms of sale, then a foreclosure sale may take place at the front or main door of the courthouse of the county where the property located, after default of the deed of trust or mortgage, for cash to the highest bidder. The sale may not take place until thirty (30) days after the last notice of sale is published.
Said notice of sale must be given by publication once a week for four (4) successive weeks in a newspaper published in the county or counties in which the property is located. If the property is under mortgage in more than one county, the publication is to be made in all counties where it is located. The notice of sale must give the time, place and terms of said sale, together with a description of the property. If no newspaper is published in the county where the lands are located, the notice shall be placed in a newspaper published in an adjoining county for four (4) successive weeks.
If no power of sale is contained in a mortgage or deed of trust, the lender, or any assignee thereof, may, after default of the mortgage or deed of trust, either file a lawsuit to foreclose or foreclose by selling the property to the highest bidder for cash at the courthouse door of the county where the property is situated. Said sale may not take place until after notice of the time, place, terms and purpose of the sale has been published for four (4) consecutive weeks in a newspaper published in the county wherein said lands, or a portion thereof are situated.
For more information see: http://alisdb.legislature.state.al.us/acas/ACASLogin.asp
[addsig]
Thank you for the reply.
The folks want a clause that says if they default on the loan, the mortgage holder (me) will basically buy back the property and purchase the note without a public auction for what is left owed on the mortgage, and that no public record of default will be made (i.e., it won't affect their future credit). This seems like a great deal for me, with little risk. I just worry about it being a possible violiation of their rights, even though they are asking for it.
Thanks again,
Terry
Just outta curiousity, why would you have to foreclose? I DON'T know real estate law, particularly in Alabama, but it seems to me that if you wrote up a contract stating that if they got behind X number of dollars in their payments they would agree to quit claim their interest in the house back to you in exchange for forgiveness of their debt.
This is kinda interesting, and I hope somebody that knows the law in Al chimes in here...
Quote:
. I'll run it by my lawyer.
On 2005-01-06 17:00, jam200 wrote:
Just outta curiousity, why would you have to foreclose? I DON'T know real estate law, particularly in Alabama, but it seems to me that if you wrote up a contract stating that if they got behind X number of dollars in their payments they would agree to quit claim their interest in the house back to you in exchange for forgiveness of their debt....
This makes sense to me
Thanks!
Terry