Approximately half of the states in the United States, including Virginia and Maryland, are “deed of trust states,” which means they typically allow foreclosure by non-judicial sale. The District of Columbia is also a deed of trust jurisdiction. Non-judicial sales are conducted entirely outside of the judicial process, and must follow the statutory process established by the applicable jurisdiction.
The remaining states – “mortgage states” – usually require judicial foreclosure, meaning the secured party has to go through the judicial process which entails obtaining authorization from the court to sell the subject property. Judicial foreclosure is the rare exception in Virginia and Maryland, because each state’s laws allow the less-complicated non-judicial foreclosure under a power of sale. However, judicial foreclosure is available as a remedy in Virginia and Maryland. It is not available in the District of Columbia.
Reasons to proceed judicially instead of non-judicially when state law offers the option of judicial foreclosure include:
- Judicial foreclosure might be appealing to a secured party, if the property is subject to a number of junior liens, and there is a question as to priority.
- Doubt or a lack of certainty as to the debts secured may exist, or there could be a conflict among creditors.
- A cloud may exist on title that needs to be removed prior sale of the property.
- The security instrument may not include the “power of sale” clause that authorizes the non-judicial sale.
- A dispute may exist between the secured party and the debtor as to whether the debtor has defaulted in its obligations under the security instrument.
Downsides to judicial foreclosure include a longer time frame than an uncontested non-judicial foreclosure, and it can be more expensive. Therefore, the preferred choice in Virginia and Maryland is non-judicial foreclosure. Please consult a McGuireWoods real estate attorney to discuss whether judicial foreclosure is a practical option in your case.