Foreclosure Process in South Dakota

By: Kathy Swift

South Dakota allows both judicial or in court and non-judicial or out of court foreclosures. As in all states where both forms of foreclosures are used, the vast majority of foreclosures are out of court processes. This is done because it saves the bank time and money. The determining factor as to which method of foreclosure is followed, is whether or not the mortgage or deed of trust contains a power of sale clause. This power of sale clause allows for out of court proceedings and is included in most such documents, in the absence of such language in a mortgage or deed of trust, in court foreclosures must be used.

In court proceedings begin with the bank filing a lawsuit to foreclose. It takes a while for a judge to declare a foreclosure depending on how full the docket of lawsuits are. It could be a very long time to get to this point. Once a declaration of foreclosure has been obtained from the court, the home will be scheduled for an auction, which is most commonly referred to as a trustee's sale. The highest bidder at the sale is awarded the property and the entities most likely to receive the proceeds from the sale are first the IRS (if there is a federal tax lien on the property) and the first mortgage holder.

The actual sale of the property follows the same process in both in court and out of court foreclosures. The only difference is the time and expense necessary to file the law suit prior to moving to a sale date.

In the unusual event that the power of sale clause in the mortgage or deed of trust states a specific time, place, including terms of sale, then those instreuctions must be followed. However, most power of sale clauses are not so specific. So in most cases, the following procedure will be followed.

A notice of foreclosure will be advertised once a week for four weeks, in a local paper, that has circulation in the county where the home is located. Additionally, twenty one days before the scheduled sale date, the bank has to give a written notice of the foreclosure sale to the homeowner. Additionally, the bank is further required to give the same information to any other lien holders connected to the property.

This notice of sale needs to include the names of the home owner and the bank executing the foreclosure. It also needs to explain the mortgage date, the amount due, and contain a description of the property. It of course must also state the date, time, and place of the scheduled sale.

The sale is conducted by the sheriff of the county where the home is located. It may be run by the deputy as well. The sale will always be held between 9:00 am and 5:00 pm. The home will be awarded to the highest bidder participating in the sheriff's sale. In South Dakota, the winning bidder will receive a certificate of sale.

Postponement of such a sale can occur at the banks discression. If the choose to execute such a postponement, they must advertise the new sale date in the same paper as the notice of sale was originally placed. Continuing the publication of the notice of the postponement date until the new sale date is reached.

Deficiency judgments are allowed in South Dakota. This means that if the bank is not satisfied with the proceeds from the sale, they can continue ton pursue the former home owner for the difference between the amount of the highest bid at the sake, and how much was owed to them on the loan. However, most lending institutions understand that a person losing their home at auction, almost always have nothing else of value for them to try to take. Consequently, deficiency judgments are rarely sought by the bank.They know it would be a waste of time and resources to try to pull water from an empty well.