CRR Blog

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.