The following article is not meant to be legal advice and although believed to be accurate is not guaranteed. You should verify all information before investing in and transacting trustee sale properties and possibly seek legal council. “Caveat Emptor“, Let the buyer be ware.
In California, most lenders choose non-judicial foreclosure. When we look at the difference between the 2 forms of foreclosure it becomes clear why lenders choose this form of foreclosure.
With Judicial foreclosure, the foreclosure occurs in the courts. Its starts with a complaint filed to the court and notice of Lis Pendens. This process can involve attorneys, added court costs and can take 1 to 2 years. In addition, the borrower may have a right of redemption from 3 months to 1 year and may be allowed to remain in possession of the property during this time period.
Loss of marketability and control of the property can make judicial foreclosure much more costly and may ultimately reduce the net recoverable amount that the bank may get from its liquidation. The benefit of a judicial foreclosure is that a deficiency judgement may be issued in favor of the lender against the borrower. However, this may only be true for recourse loans. In California, most first trust deeds are non-recourse loans. In these cases judicial foreclosure simply would not make any sense.
Therefore, non judicial foreclosure is much more common in California. With this form of foreclosure, the lender first files a notice of default. For the next 60 days, the foreclosure will remain dormant. This is the time of redemption for the borrower. Once the redemption period has expired, a notice of trustees sale is published in the adjudicated paper of general circulation in the city where the property is located. Publication takes place 1 time per week for 3 weeks. The actual sale date will be established at least 30 days after the date of first publication. At the sale, the property will be sold for a minimum of the full amount of the debt plus foreclosure fees and expenses to the highest bidder. Bidding for non judicial foreclosure properties typically takes place on the steps of the county courthouse or other public predisclosed locations. The procedure is typically conducted by a foreclosure company or title company. Successful bidders must pay for the property in full at the time of bidding in the form of cash or a cashiers check or equivalent.
This information was gathered in response to a question that I recently received regarding the borrowers redemption period. I hope that it proves helpful to you in your bid for investment property. These are but some of the many issues surrounding foreclosure properties and trustee sales. Please do your research carefully regarding liens that may not get wiped out by the foreclosure process.
