There are two types of California foreclosures:
Judicial Foreclosure (least common)
As the name implies, a Judicial Foreclosure involves
the process of gaining a court order to start the foreclosure process. In many cases, the court order is needed to
foreclose on a property when there
is no sales power present in the mortgage or deed of trust. This starts the process off of auctioning a
property off to a bidder.
With a Judicial Foreclosure, borrower has one
year to redeem property after the sale of property. The lender has the ability to keep both the
foreclosure sale and the judgment for deficiency by
the court. The lenders can only keep the
difference between the market value of the foreclosed property and the value of
the security collateral.
Non-Judicial Foreclosure (most
common)
A Non-Judicial Foreclosure is used when
the borrower authorizes, in advance using a “power of sale,“ to sell of the
property to pay off the balance of the loan if the mortgage is defaulted
upon. When a power of sale exists, the
lender or trustee has the power to sell the property as described in the deed of trust or mortgage. This is preferred process in
California as it involves less court time, costs, and does not have redemption
feature available to the borrower.
The Non-Judicial foreclosure process
in California can best be illustrated by the diagram
below:
Notice of Default
The foreclosure timeline for a Notice of
Default:
-
Within 10 business days, according to California foreclosure law, a Notice of Default must be sent by certified and regular mail to the borrowers.
-
30 days from the date of mailing to the Notice of Default to borrowers, the Notice of Default is executed by sending a certified and mailed copy to the new owners and interested parties including all secondary lien holders of the Deed of Trust on the foreclosed property.
-
To gain all title information, a Trustee’s Sale Guarantee Report is obtained from the title company and the foreclosure rests for 60 days to provide the borrower with time to stop the sale or foreclosure auction.
Publication of Auction (Trustee
Sale)
In accordance with California foreclosure laws, the
publication of foreclosure auction for a Trustee Sale starts once
the 60 day redemption period ends. The
Notice of Trustee Sale creates and circulates a general advertisement every week
for three weeks in the newspaper in the city of the property announcing the foreclosure intention and foreclosure auction. The date of sale for the foreclosure auction is set at 20 days from the
first publication of the advertisement in the newspaper. Notices of Trustee Sale are also required to
be posted in a public area and on the foreclosure property itself. Within 14 days before the foreclosure auction or sale date, the
Notice of Trustee Sale will be noted in the county location of the foreclosure property.
Foreclosure Auction
When the date of the foreclosure auction is set and the publications of
Auction requirements are met, California foreclosure law states that
the foreclosure property is sold to
the highest bidder for the full amount of the bid in cash plus any foreclosure fees with expenses. In the event that there are no bids at the Trustee’s Sale foreclosure auction, the
foreclosed property reverts back to
the receiver or lender for the debt. The
Deed of Sale is noted in the county
where the foreclosure property is located effectively transferring the title to
the foreclosing party to sale the foreclosed property to recoup the
debt.
Sales are made in public auctions to the highest bidder
during normal business hours of 9 am to 5 pm Monday through Friday at the time
specified in the Publication of
Auction by the Trustee. Within their
rights, most Trustees require bidders to show proof of their ability to meet the
bid price by asking for cash, cashiers check, or bank checks before the foreclosure auction. By law, foreclosure property bids are
considered concrete offers to buy the foreclosed properties in which the next
highest bid automatically cancels the previous offer. There can be a penalty of up to $10,000 or 1
year in jail for failure to consider all bids or efforts to contain the bidding
process.
In the case of Junior Lien holders,
they can not redeem the foreclosure
property. Hence, they might take
steps such as forwarding funds to keep senior loan payments up to date, bidding
at the foreclosure auction to drive the price up enough to cover senior and
junior liens, or outright buying the property at the foreclosure auction.
In any case, lenders can not seek a
deficiency judgment if the foreclosure is non-judicial or the foreclosure property is based on a
purchase money obligation.
Summary
It is far less risky to purchase San Diego foreclosure homes directly
from the lender as opposed to buying the property at the foreclosure
auction.
The main disadvantages San Diego foreclosure auction homes are
that you have to pay cash at the sale and you don’t get to investigate the
condition of the property. There many
other risks associated with purchasing a home at a foreclosure auction. Want to know more
about How to Buy a San Diego Foreclosure Property?
A complete list of San Diego bank
owned foreclosure property for sale
is available free at http://sandiego.houserebate.com/foreclosures/. Buying a San Diego Bank REO foreclosure property
allows you the option to obtain conventional financing, title insurance, and the
right to inspect the property.
The information is meant
for general illustration and/or informational purposes only and it is not to be
construed as tax, legal, or investment advice. Although the information has
been compiled from sources deemed reliable, please note that individual
situations can vary and therefore, please consult your attorney for specific
advice and legal counsel.
________________________________________________________________________
Brian Yui is the CEO of
HouseRebate.com, which he founded in 1999, utilizing 20 years of real estate
experience to create a full-service discount online/offline real estate
brokerage firm.
He’s the co-author of the
best-selling books; Home Buying by the Experts and Wake Up…Live the Life You
Love: Purpose, Passion, and Abundance. Brian Yui (www.brianyui.com) regularly offers his expertise on the
real estate industry as a media contributor. Visit www.houserebate.com/blog to get valuable information
about San Diego Foreclosure properties.
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