Forced Sale

Definition of "Forced sale"

Written by

Shawn Lee

Keller Williams Realty

A forced sale or forced liquidation typically means an involuntary sale of valuables or property for financial reasons. If an unpredictable or uncontrollable event emerges, a seller must resort to forced selling. A financial hardship (for example, bankruptcy), a change in the seller’s personal life (divorce or a relative’s death), or even a legal order can trigger the event. 

The accumulation of debts or a personal financial crisis can lead to forced sales. Its purpose is to pay off the debts, usually tax liens or mortgage loans, accumulated by the assets’ original owner. Regularly, a court will render a judgment in the matter, resulting in this involuntary transaction.

Forced sale in real estate

By definition, property owners sell their house or land under duress in a real estate forced sale. Sellers do so in compliance with a court judgment that specifies a well-defined sale date and other judicially determined sale conditions. A foreclosure sale is an example of a forced sale. However, there are ways to get the property out of foreclosure. There are damaging consequences of a forced sale in real estate. One might occur when the seller cannot allow current market prices for their property to determine the actual selling price. 

Examples for forced selling

Let’s consider some real-life instances of forced selling! On the one hand, owners must opt for a forced sale when a family member deceases. In addition, a forced sale is an efficient yet harsh solution to settle mortgages if the departed hadn’t met their debts. In divorce proceedings, ex-partners can also sell their properties.

Forced selling of a mutually owned property

Suppose two or more owners hold the same property (joint ownership.) And only one of the proprietors intends to sell the property. Then, they can legally ask for a forced sale of the jointly owned property in the form of a partition action or lawsuit. Thus, they can take the dispute to a judge. The court can divide the land into portions. Or it can stipulate a forced selling with the revenue split between the owners. 

The disadvantages to a lawsuit

There are several drawbacks to a partition action. A lawsuit may last six to twelve months on average. Though, there are some US states where they conclude the case and the resulting sale sooner. Still, one shouldn’t count on less than six months due to unpredictable obstacles.

Furthermore, a partition lawsuit can cost at least $5,000. And a party can contest the ruling. In the meantime, they should cover the attorney’s fees.

For this reason, local real estate agents will advise settling a dispute over property outside of court. Negotiation and buyout can be viable alternatives.