Power of Sale

Power of sale is a clause in a deed of trust (and, in some states, a mortgage) that authorizes the property to be sold on default without going to court. It is the single feature that enables non-judicial foreclosure — the fast, low-cost recovery process that makes notes in power-of-sale states more valuable. For a note buyer, the presence and enforceability of a power-of-sale clause is one of the most important things about a note, because it directly determines how quickly the collateral can be turned back into cash if the borrower stops paying.

How power of sale works

When a note secured by a deed of trust goes into default, the power-of-sale clause lets the trustee conduct a trustee sale by following a statutory notice-and-sale procedure instead of filing a lawsuit:

1. Record/serve the required notice of default and/or notice of sale
2. Publish and post notice per the state's statute
3. Auction the property publicly on the scheduled date
4. Convey title to the buyer with a trustee's deed

Because no judge is involved, this can be completed in weeks to a few months — Texas ~41–90 days, Georgia ~30–60 days, Tennessee/Missouri ~45–60 days — at far lower cost than litigation.

Power of sale vs. judicial foreclosure

The contrast defines a note's recovery risk:

• Power-of-sale (non-judicial) states: Fast, cheap, predictable recovery → notes valued higher. Examples: Texas, California, Georgia, Virginia, Tennessee.
• Judicial-only states: Foreclosure requires a lawsuit, often 8–18 months plus attorney fees. Examples: Florida (8–14 mo), New York (14+ mo), Illinois (13–15 mo), New Jersey (8–13 mo) → notes valued more conservatively.

This is why an otherwise identical note can be worth meaningfully more when secured by a power-of-sale deed of trust in a non-judicial state.

What power of sale does not eliminate

Even with a power-of-sale clause, two state-specific risks remain and must be underwritten:

• Redemption periods: Some states (Alabama, Michigan, Minnesota, Tennessee unless waived) let the former owner reclaim the property after the sale.
• Anti-deficiency rules: Some states bar pursuing the borrower for a shortfall after a non-judicial sale.

So "power of sale" means fast recovery of the collateral, but the net result still depends on redemption and deficiency law.

Why it matters when you sell

If your note is secured by a deed of trust with a power-of-sale clause in a non-judicial state, that is a strong selling point — it supports the best pricing on a default scenario. If your note is a mortgage in a judicial state, it is still very sellable, just valued for the slower recovery path. Provide the recorded security instrument so the buyer can confirm the power-of-sale clause, the state's process, and any redemption/deficiency factors.

This is general information, not legal advice; foreclosure procedure is state-specific — verify the controlling statute and the instrument.