Even if your home has been subject to a foreclosure and has been sold to a new owner, you may not be entirely out of options. In some unusual situations, a homeowner may be able to set aside the foreclosure sale after either a judicial foreclosure or a non-judicial foreclosure. (Read more here about the difference between judicial and non-judicial foreclosures.) Getting the sale set aside means that the homeowner regains title until the lender can restore the mortgage. If the home already has been sold to a good-faith purchaser, though, the homeowner might not be able to set aside the sale and might be limited to pursuing damages from the lender.
Trying to set aside a sale after a judicial foreclosure may involve raising an objection to the sale in the foreclosure case if it remains open until the sale is made. However, if the case ends upon the entry of the foreclosure judgment, the homeowner will need to start a new action or ask the court to reopen the foreclosure case. Trying to set aside a sale after a non-judicial foreclosure, by contrast, almost always involves filing a new lawsuit. Or you may be able to contest the sale when the court is confirming the sale if your state provides for this process. If you file for bankruptcy, you also may be able to get the sale set aside, although you should not file for bankruptcy for this reason alone.
Grounds for Setting Aside a Foreclosure Sale
You may be able to set aside a foreclosure sale if the foreclosing party violated state law during the process. For example, it may have failed to provide the notice required by due process, or it may not have received a valid assignment of the mortgage. You may not be able to get the sale voided based on a technical error unless you can show that you suffered actual harm from it. An example of this situation might be a deficiency judgment created by a low sale price, if lower bids at the sale resulted from the lender violating state law.
You also can set aside a foreclosure sale if the foreclosing party did not follow the terms provided by the mortgage or deed of trust. The lender might fail to provide a breach letter, for example, and give the homeowner the required period to catch up with payments on the loan.
Yet another basis for setting aside a foreclosure sale is when the sale price is extremely low. However, the price must be dramatically lower than the expected price to make this argument. The legal phrasing is that it “shocks the conscience.” You may need to show some further problem with the sale in addition to a low price. This might involve holding the sale at an unusual time or a time different from the scheduled time. Again, just as if you were objecting based on a violation of state law, you might need to show that you were actually harmed by the low price.