13 May 2021
Changes at the Trustee sale: SB 1079 has opened the door for owner occupant buyers.
2 ways to buy: at the Trustee sale or 45 days after the sale has taken place
At the Trustee Sale:
There is currently a big advantage to being a bidder at the Trustee sales if you’re looking for a 1-4 Unit home to occupy. As a refresher, prior to passage of SB 1079 when a property was sold at Trustee sale the highest bidder at the auction was the new owner of the property (subject of course to any senior liens recorded before the foreclosing loan). They would receive a “Trustees Deed Upon Sale” from the Trustee handling the sale and if recorded within 15 days of the sale it would be deemed perfected as of 8 am on the day of the sale. That was true whether an investor bought the property or it was purchased by an owner occupant buyer.
Now, since passage of SB 1079 if you buy the property at the Trustee sale as an “Owner Occupant” the sale is final. If an investor buys at the sale, they have to wait 15 days to see if an “Intent to bid” letter is sent by an “Eligible Bidder”, and if one is submitted they then have to wait an additional 30 days to see if any other “Eligible Bidders” come in with funds to outbid the original purchaser or other “Eligible Bidders” (except for an eligible tenant buyer, who only has to match the initial bid). So, given these new ground rules it’s the Owner Occupant buyer who is in the most favorable position.
After the Trustee Sale:
You could also place an “intent to bid” on other properties sold at auction. You can run a report looking for 1-4 Unit properties sold at sale, and then contact the Trustee to see if the bid is final (purchased by an owner occupant) or if they are accepting notices of intent to bid from other “Eligible Bidders”. The notice of intent to bid is non-binding so there’s no commitment there, and you’d have the chance to check out the property in detail before submitting your actual bid to the Trustee. The “Eligible Bidder” who submits the highest bid for the property will be the new owner.
In both types of purchases you will need a cashier’s check for the full amount of your purchase price. There will be no inspection of the interior of the property, and you’ll have to do your due diligence to check for any senior liens against the property. But in return you’ll be getting a great deal on a home that otherwise might not be available to you on the market.
