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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.

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