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What is the Difference Between a Missouri Trustee’s Sale and a Foreclosure?

Posted by davisrk on January 4, 2019
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What is the difference between a foreclosure and a Missouri trustee’s sale?

In Missouri, a loan for the purchase of real property is secured by a deed of trust and when the borrower is in default under a deed of trust, the lender has the ability to sell the property through a Missouri trustee’s sale.  The difference between a mortgage and a deed of trust is that a mortgage is a lien against a property.  In contrast, when a borrower signs a deed of trust, the borrower is transferring ownership of the property to the lender (trustee) who holds ownership of the property for the benefit of the borrower.  As such, the lender does not need to go through the court system to remove the borrower from the property for non-payment.

How does a Missouri Trustee’s Sale work?

The basic process for a Missouri trustee’s sale is as follows.  First, the attorney or law firm handling the foreclosure must be named as a substitute trustee in place of the lender.  This allows the law firm to conduct the sale on behalf of the lender.  Next, a notice is published in the newspaper and mailed to the borrower.  This notice will list the date, time, and location of the sale.  The sale will take place approximately three weeks after the notice is published.  The lender will have the ability to “credit bid” or bid up to the amount owed without paying any money.  After the sale is completed, a trustee’s deed is prepared and filed with the county transferring the ownership of the property to the purchaser at the sale.

What are the borrower’s redemption rights in Missouri?

Unlike in Kansas, the borrower’s redemption rights are very limited and can only be exercised prior to the sale being conducted.  In order to exercise its redemption rights, the borrower must notify the trustee of its intention to redeem in writing prior to the sale.  After the completion of the sale, the borrower must petition to the court to set a redemption bond.  A bond is money that will be held to pay the purchaser if the property is not redeemed.  Because these bonds are expensive, properties are rarely redeemed following a Missouri trustee’s sale.

Foreclosure

A foreclosure is a legal action filed by a lender to take over ownership of a property after the borrower fails to make payments under his or her mortgage.  In Kansas, a lender is required to file legal action to take ownership of a home in this fashion; however, in Missouri legal action is not required.  This is because in Missouri, borrowers provide a “deed of trust” instead of a mortgage.  The deed of trust provides the lender the power to simply sell the property without going through the legal process.

How long does a foreclosure take?

In Missouri, the trustee’s sale can be scheduled within a month and the procedure for redeeming the property (taking back ownership after the sale) is very limited.  In Kansas, the foreclosure process can be completed in 6-7 months or can take years if the borrower attempts to delay the proceedings.  Additionally, in Kansas, the borrower has a long redemption period (either 3 or 12 months) and during this period can remain in the home, rent the home to other parties or sell his or her redemption rights to another party.

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