Isn't It the Same Auction?... What Are the Differences Between Imui Auction and Forced Auction?

[Asia Economy Reporter Ryu Taemin] Court auctions for real estate are considered a means to acquire a home more cheaply than through regular sales transactions. However, court auctions are divided into compulsory auctions and voluntary auctions depending on the rights of the applying creditor, so it is necessary to understand the differences between them.

First, a voluntary auction is an auction procedure to enforce a security interest. If a creditor holding a security right such as a mortgage does not receive repayment of the debt amount from the debtor by the due date, the creditor applies to the court for a sale. When the secured property is sold, the creditor receives repayment up to the amount of the unpaid debt.

For example, if someone wants to borrow money from a bank but has low creditworthiness, they provide specific real estate as collateral, which is called a "geunjeodang" (mortgage registration). If the loan principal and interest borrowed from the bank are not repaid later, the property goes to auction, which is called a voluntary auction. Such transactions involving loans secured by a mortgage can occur not only between banks and individuals but also between individuals or between corporations and individuals.

On the other hand, a compulsory auction occurs when the debtor fails to repay the loan by the due date. In this case, the creditor obtains a court judgment confirming the debtor's debt through litigation and repays the loan by selling the debtor's real estate through an enforcement order.

For example, a compulsory auction happens when someone with high credit borrows money from a bank without any collateral but later fails to repay the loan principal and interest. The bank files a lawsuit by submitting loan documents to the court, and if the bank wins the court ruling, the debtor's real estate is put up for auction.

Compulsory auctions often arise from monetary transactions between individuals. Unlike transactions with banks or financial institutions, monetary transactions between individuals rarely involve real estate as collateral. However, even if one secures documents and wins a judgment, if the other party does not have sufficient assets such as real estate to repay the loan, significant losses may occur. Therefore, it is safer to secure safeguards such as mortgages even in transactions with individuals.