As many people start on their real estate investment careers, they seem to think that investing in foreclosures are the best way to start. This blog will explain many details related to foreclosures within the state of California. Unlike most of the other states within the United States, California is very different because there are many legal issues that most of the foreclosure books, seminars and courses never even hint on let alone tell you about.
Beware investing in California foreclosures can be very risky and the risk that is involved should not be taken lightly however it can be done and when done right it can make you a lot of money.
During this first blog, I’m going to explain the process of which a California foreclosure goes through and when most of the other investors are attempting to blindly contact the owners of the properties without ever realizing the ramifications of their actions and efforts.
1. The current owner must be behind on their payments for their mortgage that is secured on a piece of real estate via a deed of trust.
2. A Notice of Default (NOD) is filed within the county where the property is located.
a. A copy of the NOD must be sent via certified mail to the borrower within ten (10) business days of the recording.
i. At this time, the borrower has ninety days (90) from the date the NOD was filed to stop the foreclosure process without the lender being able to take any further action.
3. A Notice of Trustee’s Sale will be recorded in the county where the property is located if after the 90 days has reached and the borrower has failed to cure (meaning to bring the loan current).
a. A copy of the Notice of Trustee’s Sale must also be sent via certified mail to the borrower of the property.
i. The minimum timeframe allowed by the state is twenty-one (21) days notice prior to proceeding on to the next step of the foreclosure process.
ii. The Notice must also be published weekly in a local circulated newspaper within the county of the property for three (3) consecutive weeks prior to the sale.
iii. Must also be posted on the property and posted within the county courthouse.
4. Trustee’s Sale is the last and final step for a foreclosure within the state of California.
a. This must happen no sooner than three (3) months and twenty-one (21) days after the NOD was filed.
i. This is public oral bid auction that is conducted by the lender’s representative (usually a Title Company or Trust Company)
ii. Here’s the hidden secret that all of the people selling you products about foreclosures don’t want you to know – the successful bidder must pay with CASH or CASHIER’S CHECK the ENTIRE AMOUNT of the winning bid.
In the event, no one bids the amount of the loan plus all costs that have added since the beginning of the default process then the property goes back to the bank as Real Estate Owned (REO).
Note that I’m not a real estate attorney or certified public account and am providing this information for informational purposes and it should not be taken as legal advice.