Foreclosure
A common misconception is that once a homeowner misses a payment that he is immediately in danger of foreclosure. The reality is that foreclosure is a legal process that a lender must go through in order to take possession of a property for with it holds a mortgage. If you are facing foreclosure it’s important to understand how the process works.
[Continue reading below for the Buyer's section]
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NOD: A loan is considered to be in default when the payment is 30 or more days past due. Usually, the initial foreclosure action (notice of default) is started when a loan is 90-120 days delinquent.
SB 1137: For loans made between Jan 1, 2003 and Dec 31, 2007, the lender must meet, or attempt to meet, with the borrower in person or by phone in order to assess the borrower’s financial situation and discuss foreclosure options. The lender is not allowed to record a notice of default until 30 days after it makes contact with the homeowner.
CA Foreclosure Prevention Act: Imposes a 90 day foreclosure moratorium (suspension) in order to give the homeowner time to either come due with all missed payments and fees, or work out some other solution with the bank.
Notice of trustee sale: At least 3 months after the notice of default is recorded, the trustee can arrange for the house to be sold at a trustee’s sale. The actual Trustee Sale date must be at least 21 days from the date the notice is posted. The borrower may pay off the default plus any applicable costs of foreclosure and stop the foreclosure process up to 5 business days before the trustee’s sale.
Trustee Sale: The trustee’s sale is a public auction and the property is sold to the winning bidder. If a sufficient bid is not made, then the property will revert back to the bank and become an REO.
Eviction: After the property goes through foreclosure, a new owner (or the lender) may decide to evict you. The previous owner of the home gets a 3-day notice . If the previous owner refuses to vacate within the three-day time period, then the new owner can file a lawsuit to have the previous owner removed from the premises.
If you are having difficulty paying your mortgage on time, it’s important to act now before things get so bad that you are facing foreclosure. Don’t hesitate to speak with a professional so that you know what your options are.
Interested in buying a foreclosure?
The old mentality of buying a foreclosed property was that you could buy them at deep discounts compared to market comparables. The reality now is that banks are no longer selling a foreclosed homes for less than market value of comparables. The only time that they sell homes for a discount is if they are in poor condition. Even still, those properties would sell at the value of comparables.
If the bank can’t get the total debt owed including costs at a public auction, then the property will get assigned to an asset management company. These companies are hired by banks to work with Realtors in local areas to properly market and sell the property. Depending on the quality of the property, the Realtors could be compensated by the banks to arrange for the property to be brought to a reasonable condition.
There are also other programs in place in order to work out a solution with distressed property owners which is limiting the inventory of foreclosures on the market. Properties in desirable areas that are in good condition are selling for a much higher price than properties in less desirable areas in poor condition.
There are no free giveaways. Properties will sell for what they’re worth on the open market. Especially in San Diego! Banks are also increasingly accepting Short Sales as long as the property owner meets certain criteria.
Are you having financial difficulty and fearing foreclosure?
As your CDPE agent, I will explore every option with you and work towards a resolution. While it may not seem like it now, there will come a time where you current financial troubles will pass. You will feel much better knowing that you did everything you could to avoid this devastating financial consequence so many people face today.
Russell Odom is a Certified Distressed Property Expert (CDPE). Don’t hesitate to contact him to find out what your options are if you are in financial distress.
