Tennessee foreclosure law

Foreclosures in Tennessee may be carried out by judicial or non-judicial methods. This means that lenders can foreclose in or out of court, depending on the mortgage contract. Both mortgages and deeds of trust are considered primary security instruments. The average wait time for a Tennessee foreclosure is 60 days, or around two months.

Judicial foreclosure
The judicial foreclosure process is used when the contract does not include a Power of Sale clause, which typically states the terms of foreclosure and authorizes the lender to sell the home directly. Without this clause, the lender has to file a lawsuit and get a decree of sale from the court before he or she can foreclose.

If the court rules in favor of the lender, the borrower is given a fixed period within which they have to pay the past-due balance, as well as other related costs. Otherwise, the court orders the sale of the property, and the home is auctioned off to the highest bidder.

Non-judicial foreclosure
If the contract contains a Power of Sale, the lender can use a non-judicial foreclosure. The Power of Sale states that the borrower has agreed to let the lender sell the home in case he or she fails to make the payments. This power may be used by the lender himself, or a representative called the trustee.

Most Power of Sale clauses indicate the time, date, and place of the sale, which will be followed throughout the foreclosure. If the clause does not include these terms, the foreclosure proceeds as follows:

First, the lender posts a Notice of Sale in a newspaper with circulation in the county where the foreclosure will be held. The ad must appear at least three times, with the first notice published at least 20 days before the sale date.

If there are no suitable newspapers, the notice is instead posted at the courthouse door and at least four other public places in the county, including the neighborhood where the home is located. If the borrower currently lives in the property, he or she must also be served with a copy of the notice.

Unless the borrower cures the default within the given deadline, the sale is held on the appointed date anywhere from 10am to 4pm. The home is sold for cash via public auction. The county sheriff can set a minimum price for the bidding, as long as it is at least 50% of the home’s fair market value.

Right of redemption and deficiency judgments
Unless the original deed states otherwise, the borrower has two years after the sale date to regain possession of the home. This is done by paying the foreclosure sale price, plus costs. If they fail to redeem the home within this period, the deed is endorsed to the winning bidder.

Lenders can also file a deficiency suit, which is an additional claim against the borrower for the amount not covered by the foreclosure sale.

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