In Virginia, lenders may foreclose on deeds of trust or mortgages in default using either a judicial or non-judicial foreclosure process.

Judicial Foreclosure

When a mortgage or deed of trust lacks the power of sale, the legal process of foreclosure—which include bringing a lawsuit to get a court order to foreclose—is used. The property will often be auctioned off to the highest bidder following the court’s declaration of foreclosure. After the sale, the borrower has 240 days to purchase the property back by paying the purchase price plus 6 per cent interest.

Non-Judicial Foreclosure

When a power of sale provision is present in a mortgage or deed of trust, the non-judicial process of foreclosure is applied. A “power of sale” clause is a provision in a deed of trust or mortgage that permits the borrower to pre-approve the sale of real estate to settle an outstanding loan obligation in the event of default. The authority granted to the lender to sell the property through deeds of trust or mortgages that contain a power of sale may be exercised by the lender or their agent, who is commonly referred to as the trustee. The “Power of Sale Foreclosure Guidelines” provide guidelines for this kind of foreclosure

Power of Sale Foreclosure Guidelines

1. If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. However, additional requirements must be met, as outlined below in section 1-

Even when the deed of trust makes allowances for advertising the foreclosure sale, Virginia Statutes require ads to be published no less than once a day for three days, which may be consecutive days. These requirements are in addition to the advertising terms stipulated in the deed of trust. If the deed of trust does not provide for advertising, then the ad shall be run once a week for four successive weeks. However, near a city, an ad on five different days, which may be consecutive, will be sufficient.

A copy of the advertisement or a notice with the same information must be mailed to the borrower at least 14 days before the foreclosure sale.

2. The foreclosure sale must include anything required by the deed of trust and may include a legal description of the property, a street address, a tax map identification, or general information about the property’s location. The notice must include the time, place, and terms of sale. It must give the name of the trustee and the address and phone number of a person who will be able to respond to inquiries about the foreclosure sale.

Any time before the sale, the borrower may cure the default and stop the sale by paying the lien debt, costs, and reasonable attorney’s fees.

3. The sale, which may be held no earlier than eight (8) days after the first ad is published and no more than thirty (30) days after the last advertisement is published, is to be made at auction to the highest bidder. Any person other than the trustee may bid at the foreclosure sale, including a person who has submitted a written one-price bid. Written one-price bids may be made and shall be received by the trustee for entry by the announcement of the trustee at the sale. Any bidder in attendance may inspect the written bids. Additionally, the trustee may require bidders to place a cash deposit of up to 10 per cent of the sale price, unless the deed of trust specifies a higher or lower amount.

In the event of postponement of the sale, which may be done at the discretion of the trustee, the advertisement of such postponed sale shall be in the same manner as the original advertisement of the sale

4. Once the sale is complete, the proceeds will go to 1) the expenses of executing the trust; 2) to discharge all taxes, levies, and assessments, with costs and interest if they have priority over the lien of the deed of trust; 3) to discharge in the order of their priority, if any, the remaining debts and obligations secured by the deed, and any liens of record inferior to the deed of trust under which sale is made; and 4) any remaining proceeds go to the borrower.