What are the rights of the owner and subsequent encumbrancers in a Power of Sale?
When a borrower defaults on a home mortgage, the lender may attempt to recover its losses by selling the property under power of sale. Definition of Power of Sale: A clause commonly inserted in a mortgage and deed of trust that grants the creditor or trustee the right and authority, upon default in the payment of the debt, to advertise and sell the property using standard methods such as the the MLS or at public auction, without resorting to a court for authorization to do so and without actually taking possession of the property. Once the creditor is paid out of the net proceeds, the property is transferred by deed to the purchaser, and the surplus, if any, is returned to the previous owner (the debtor). The debtor is thereby completely divested of any interest in the property and has no subsequent right of redemption—recovery of property by paying the mortgage debt in full once title has transferred to the new buyer. You will often see advertisements about Court Auctions, Pre-Forclos
