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California Foreclosure Basics Part 4 STAGE 3 BUYING AFTER THE TRUSTEE SALE

STAGE 3 BUYING AFTER THE TRUSTEE SALE
Once the foreclosure process is complete there are 3 possible outcomes; the property is sold to a third party buyer (STP), the property reverts back to the Beneficiary(B2B) or the sale is cancelled. While cancelled sales (which make up the majority of sale outcomes) are not as likely to result in a purchase opportunity right away (they may be back depending on why the sale was cancelled) STP and B2B each have their own set of strategies when making an offer to purchase. Also, there are different strategies based on property type: Residential 1-4 Unit properties and then everything but 1-4 Residential.

Residential 1-4 Unit properties fall under SB1079/AB1837. As stated in the previous post, if an owner occupant is the successful bidder at the Trustee sale the sale is final, as long as they present their affidavit to the foreclosing Trustee by 5 pm on the next business day following the sale. If not, other "Eligible Bidders" have 15 days to submit a non-binding "Letter of Intent to Bid" to the foreclosing Trustee. If a letter is received, eligible bidders have until 45 days after the initial sale to submit bids for the purchase of the property. If you are an eligible tenant, you only have to match the winning bid at the initial sale but you must submit your “Letter of Intent to Bid” (LOI) within those 15 days after the sale. On the 45th day the highest bidder will be the new owner of the property.

So…if you are an “Owner-Occupant” you can buy right away at the sale or submit your LOI and have lots of time to “do the due”, vetting the property and getting your money together to submit your cashier’s check for the purchase.

However, the majority of 1-4 Unit buyers at the Trustee sales are investors. Since the passage of AB 1837 we have seen more legitimate investors purchasing at the sales compared to 2021 when the law first took effect; the tightening of guidelines has been effective in reducing the # of “fraudulent” Owner-occupant purchasers. The same is true for properties that go B2B; the numbers are increasing since the weeding out of the false Owner-Occupant buyers. Once the initial 15 day window has passed and no one submits a LOI, the property is now owned by the buyer at the sale (either the investor or the Beneficiary).

It's important to remember that the new owner must now keep current any loans senior to their loan (above the loan with the asterisk). For Lenders, it’s very expensive for them to be stuck with these properties (they are Lenders, not Investors!) The whole key to buying at this stage is to act quickly by approaching the beneficiary (lender) before they turn the property over to a real estate agent for resale. Quick action at this point can save you tens of thousands of dollars. Simply call the trustee an hour after the posted sale time to determine the sale results. If the trustee confirms that the property did revert back to the beneficiary then call that lender immediately and express your desire to present an offer if no-one submits under AB 1837. Stress to this lender that with your offer they will incur no commission costs, no clean up and repair costs (if you choose to take the property "as is"), and no holding costs. These costs to the lender would be enormous in the event that they chose to list the property with a broker as many months can elapse during the clean-up, marketing, and escrow period. When no-one submits an LOI, you will be there ready to buy from the Lender.

The same is true for Investors. Another approach is to contact them after the sale and offer them an amount over what they just paid at the sale. They make a smaller return on their investment but can get it much faster than rehabbing and re-marketing the property.

When the property sold at the foreclosure sale is not a 1-4 Unit residential the same process is followed but you make your offers immediately after the sale takes place.




The information provided does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available are for general informational purposes only. You should contact your attorney with respect to any legal matter.

California Foreclosure Basics (Part 3) Stage 2 Buying at the Trustee Sale

The main advantage of buying at a Trustee’s sale (foreclosure auction) is that the moment a property is sold at auction all trust deeds (loans) junior to the foreclosing loan (below the asterisk * on the County Records Research website) are wiped off the property. The Borrower still technically owes the debts but they are no longer being secured by the property. As such this can create instant equity. The winning bidder at the auction will pay off the loan with the asterisk with his/her winning bid amount and will then take title subject to (take over payments on) all trust deeds above the asterisk * (if there are any) as well as any Liens. As stated on our profile pages, confirm all open liens and loans before buying at the Trustee Sale. Due diligence is key to a profitable transaction.

The approximate bid amount is derived by adding the current balance of the foreclosing loan (loan with the asterisk) plus unpaid interest, advances, penalties and foreclosure costs. At the Trustees Sale all bids are in the form of cashier's check. Remember you are only paying off the loan with the asterisk. You then own the property subject to any senior loans or liens…and don’t forget you will also owe any unpaid property taxes. Speaking of property taxes, people buying at the Trustee Sale should also do a search to see if there are any PACE (Property Assessed Clean Energy) or HERO (Home Energy Renovation Opportunity) liens on the property. These liens are added to the Property Taxes and represent funds borrowed to install energy efficient, renewable energy, water conservation and seismic improvements on the property. Again, all loans below the asterisk are wiped off the property.

Since the passage of SB 1079, Owner occupant buyers of 1-4 Unit residential properties now have a distinct advantage at the Trustee sales. If an owner occupant is the successful bidder at the Trustee sale the sale is final, as long as they present their affidavit to the foreclosing Trustee by 5 pm on the next business day following the sale. If not, other "Eligible Bidders" have 15 days to submit a non-binding "Letter of Intent to Bid" to the foreclosing Trustee. If a letter is received, eligible bidders have until 45 days after the initial sale to submit bids for the purchase of the property. If you are an eligible tenant, you only have to match the winning bid at the initial sale but you must submit your “Letter of Intent to Bid” within those 15 days after the sale. On the 45th day the Trustee will open the bids and the highest bidder will be the new owner of the property.







The information provided does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available are for general informational purposes only. You should contact your attorney with respect to any legal matter.

California Foreclosure Basics (Part 2) Stage 1 Buying before the Auction during default period

Buying Before the Auction…During default

The first thing to do is find out what properties are in default. County Records Research has been providing investors with this information for over 40 years and has been processing foreclosures for over 30...making it a unique source and a great company to partner with to acquire this information.

Begin your searches by identifying areas and property types you are interested in. There's an old saying...plan your work and work your plan. Decide what you are interested in and then structure your searches accordingly. If you are looking for Single Family residences in a certain City or Zip Code, enter in those characteristics in your search and then save them, name them and activate email updates. That way you will receive email notifications when properties get posted that match your criteria.

If you are not an active realtor, you will want to get help from Realtors in the area you are interested in. You can always drive the area and look for an agent that has properties up for sale, or call an office in the area you are interested in and find an agent who will help you with valuations and perhaps submit your offers to the people in foreclosure. In return you can arrange a mutually beneficial agreement to where you give them the listings if you are going to sell or lease (depending on your long term plan) or any other agreement between you. There are a lot of talented Realtors who do not have current business but they are capable and knowledgeable and can be a huge asset.

After you start narrowing down the properties you are interested in and go out to view them you will soon discover that some properties have "for sale" signs and others do not. While some of these properties will be listed for sale, for obvious reasons the sellers would rarely volunteer this information to you as a buyer. You are at a tremendous bargaining advantage knowing the enormous pressure that the seller is under to sell during these months before the actual auction sale date. In fact, once the Notice of Trustee Sale (NTS) is recorded motivation goes up exponentially as the NTS is physically posted on the property and published 3 times 7 days apart in an adjudicated newspaper.

Some buyers prefer to make offers on the properties that are not on the market for sale so that the seller does not have to pay any commissions to real estate agents, which will allow the seller to accept a lower offer. Even if there is a listing agreement on the property (and you are not a licensed agent) always approach the seller directly. Only call the agent if the seller directs you to their agent. Even then, you are at a great bargaining advantage knowing that foreclosure is pending and time is running out. Every day that elapses puts you as the buyer in a better position.

When buying from the owner during his/her default a common arrangement is when the buyer simply takes over payments by taking title subject to existing loans (as opposed to assuming the loans) by reinstating the back payments that have been missed. Don't worry about handling the transaction yourself. After making an agreement with the owner, simply go to any escrow company to open an escrow and an escrow officer will process the paperwork. After ownership has transferred to you as the buyer you can continue to keep the open loans current or if the Lender exercises the “Due on Sale” clause you will need to refinance the loan. Keep in mind that the “due on sale” clause is a right but not an obligation on the part of the lender. Lender’s just want the loan to be paid on time.

If after the three-month default period the owner has not sold or reinstated, the beneficiary (lender) then proceeds to the final stage by filing the NTS and scheduling the trustee's sale (auction). But again, the owner can still sell the property up until the sale date that is shown.

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