A real estate agent in Gadsden is advising a seller who is considering offering seller financing on a residential property. The buyer would make monthly payments directly to the seller, who would hold the mortgage. The seller asks what would happen if the buyer defaults and stops making payments. Under Alabama law, which statement correctly describes the seller's options?
Correct Answer
C) The seller may use a power of sale clause in the mortgage to conduct a non-judicial foreclosure sale within 30 days
Even when the seller is acting as the lender in a seller-financing arrangement, the mortgage is still governed by Alabama law. Under Code of Alabama §35-10-1 et seq., Alabama requires judicial foreclosure for all mortgages — the seller-lender must file a foreclosure lawsuit in the appropriate circuit court and obtain a court judgment before the property can be sold at foreclosure. The seller cannot self-help or use non-judicial methods simply because they are an individual rather than an institutional lender.
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Related Topics & Key Terms
Key Terms:
Related Concepts
TILA is a federal law that requires lenders to disclose the true cost of credit to borrowers, including the annual percentage rate (APR), total finance charges, and loan terms. It is implemented by Regulation Z.
A trustee sale is a type of foreclosure where a trustee, appointed under a deed of trust, sells the property at auction to satisfy the debt.
Usury is the practice of charging an interest rate that exceeds the maximum rate permitted by state law. Usury laws protect borrowers from excessive interest charges on loans.
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