The three steps in the California Foreclosure Process
An Overview of the California Foreclosure Process
When a property owner is no longer able to make their mortgage payments and defaults on the loan, the property goes through a process know as foreclosure. When this occurs, the lender initiates the sale of the property by auction through a third party; called a trustee.
The trustee is required to advertise a notice of default of the property in the newspaper for three continuous weeks. Take a look in the classified section of your local newspaper and you'll see a list of foreclosed properties for your area.
The owners of the property have until five days before the scheduled date of the auction to pay all monies owed. If they can not come up the money within the allotted time period, the trustee conducts an auction for the property on the steps off a courthouse located in the county where the property is located.
The flowchart below gives a visual representation of the process and possible outcomes. Note that the times provided are the MINIMUM required number of days. When there are many homes in the process, banks may get behind and take much longer between steps.
Step 1- Notice of Default (NOD) Properties are considered to be in Preforeclosure from the filing of the initial Notice of Default (NOD) until the property is sold at auction. During this period the owner/borrower can cure the default by refinancing or working out a payment plan with the lender, a buyer can purchase the home directly from the owner, Realtor's can list the home and sell it for more than the amount due as a standard sale, or if the property cannot be sold for enough to cover costs the seller's agent can the lender to accept a short sale.
Step 2- Auction (after the notice of trustee sale) After 90 days, there is generally a Notice of Trustee Sale filed, setting the auction date 3 weeks in the future. The notice must be advertised in a local paper for 3 consecutive weeks. If the default is not cured by the sale date, the property goes to Auction. Anyone can bid at the auction, however, the first bid amount will typically be equal to the outstanding loan balances plus fees and must be paid IN FULL by cashier's check at the actual auction.
Step 3- Unsold property reverts to bank If there are no bidders, the property reverts back to the bank. Los Angeles Bank owned properties are commonly referred to as REO's (Real Estate Owned). Buyers can try to purchase these properties directly from the bank but in general the bank will list the property for sale with a Realtor® after clearing liens. Many times a bank owned property will be sold as-is with existing tenants in place. They will usually not do more than cursory repairs prior to putting the property on the market and are looking for a quick sale to take the property off of their books. Is is possible to buy a Los Angeles bank owned property for less than market value but it depends on the condition of the property and the number of other buyers making offers. When inventory is short, prices are bid up accordingly. This is a perfect example of supply and demand in real estate.
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