The major advantage to judicial foreclosure is that the lender may obtain a deficiency judgment that could not be obtained with a nonjudicial foreclosure. The deficiency judgment lets the lender hold the borrower personally liable if the property does not sell at the auction for the amount owed to the lender. If a lender uses this process, you should immediately consult a lawyer to see what the consequences will be. These are state proceedings and are not the same in each state.
There are several disadvantages to judicial foreclosure, which is why it is not frequently used. These disadvantages include the following.
• Since it is a court action, it is more time-consuming and expensive than nonjudicial foreclosure.
• There is usually a longer redemptive period for judicial foreclosure than nonjudicial foreclosure. This means that the borrower can buy back the property after the auction sale, creating an uncertainty for the new owner’s ability to keep the property. This may delay repairs or remodeling.
• The deficiency judgment obtained may not be collectible since most borrowers who are solvent do not default on their mortgages. The judgment may also be discharged in a bankruptcy proceeding since it is unsecured. The security (the real estate) is no longer owned by the borrower.