Power of Sale

Clause, sometimes inserted in mortgages or deeds of trust, which grants the lender (or trustee) the right to sell the property upon certain default. The property is to be sold at auction but court authority is unnecessary. See also Power of Attorney.

A clause sometimes inserted in Mortgages or Deeds of Trust grants the lender (or Trustee) the right to sell the property upon certain Default. The property is to be sold at Auction but court authority is unnecessary.
Example: The Savings and Loan Association exercises the power of sale clause in the mortgage by selling the defaulted property at public auction for $100,000. Since the debt was $60,000 and expenses of sale $5,000, the $35,000 surplus belongs to the borrower.

A clause commonly inserted in a mortgage and deed of trust that grants the creditor or trustee the right and authority, upon default in the payment of the debt, to advertise and sell the property at public auction, without resorting to a court for authorization to do so.

Once the creditor is paid out of the net proceeds, the property is transferred by deed to the purchaser, and the surplus, if any, is returned to the debtor. The debtor is thereby completely divested of any interest in the property and has no subsequent right of redemption — recovery of property by paying the mortgage debt in full.