Arkansas Foreclosure Law

Arkansas foreclosure law applies to mortgages and deeds of trust, and may follow a judicial or non-judicial process. Once started, the foreclosure process lasts an average of 120 days.

However, before the foreclosure is carried out, the state requires an appraisal of the property in question. The home must be sold for at least two-thirds of the value; otherwise, it can be put up for sale again within one year. The second sale is made to the highest bidder, regardless of the value in the first appraisal.

Judicial foreclosure
A judicial foreclosure occurs when the mortgage or deed of trust does not contain a Power of Sale clause. This clause would authorize the lender to sell the home in order to pay off the loan in case the borrower defaults. If the clause is not present, the lender has to obtain a court order before they can foreclose.

In an Arkansas judicial foreclosure, the court gives the borrower a short time frame to pay the amount of debt decreed. If the deadline isn’t met, the property is advertised for sale. The sale can be made on a credit of three to six months, or in installments spread out over a maximum of four months. The buyer must provide a bond with surety equal to the purchase price, and payment is secured by keeping an equivalent lien on the home.

The lender also has the option to bid for the home by crediting part or all of the debt (as decreed by the court) against the sales price. If the home sells for less than the amount owed, the lender can seize other properties from the borrower to cover the difference.

After the home is sold, the borrower is a Right of Redemption, or the right to regain possession of his home within a given time. In Arkansas, borrowers are given one year from the foreclosure sale date to buy back the property, at the same purchase price plus interest.

Non-judicial foreclosure
This process is followed when the contract contains a Power of Sale clause. If the clause defines the date, time, and place of the sale, then these terms will be followed throughout the foreclosure. Otherwise, the following process takes effect:

First, the lender or his trustee submits a Notice of Sale for record at the county office where the home is located. Within 30 days afterward, the lender sends a Notice of Default by certified mail to the borrower, as well as any other person with a Request for Notice recorded in the contract. Other parties to the trust deed must also be notified by certified mail within five days.

Next, the NOD is published in a local newspaper along with the intention to sell. The ad contains the names of all parties involved, a legal description of the home, the street address, and other relevant details. It must also contain a visible warning saying “YOU MAY LOSE YOUR PROPERTY IF YOU DO NOT TAKE IMMEDIATE ACTION,” followed by the date, time and place of the sale. The notice must appear at least once a week for four successive weeks, ending no less than ten days before the sale date.

During the auction, any person may make a bid except for the trustee, although he or she can bid on behalf of the lender. Lenders can bid by canceling the amount owed, including other unpaid costs such as taxes, insurance, and maintenance. The winning bidder must pay the price at the time of the sale or within ten days afterward.

The sale can be postponed up to seven days by making an announcement at the appointed date and venue. If the delay is longer than seven days, the lender has to undergo the notice procedure again, including the standard wait time of 60 days.

Unlike a judicial foreclosure, the non-judicial process does not give borrowers a Right of Redemption. The proceeds of the foreclosure sale will be used to pay off the loan, as well as the processing expenses for the foreclosure itself. The funds will also be distributed to the junior lien holders, and any remainders will be given to the original borrower.

Deficiency claims
In non-judicial foreclosure, the lender is allowed to make a deficiency claim. This is a personal claim made against the borrower if the foreclosure sale does not cover the entire amount owed. The claim must be made within 12 months after the foreclosure date. Lenders can sue for the difference between the balance and the sale price, or the balance minus the current fair value of the property, whichever has a smaller value.

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