How Foreclosed Homes Get Sold by Trustee Sale in California

How Foreclosed Homes Get Sold by Trustee Sale in California

It’s hard to imagine losing a home to foreclosure, but sometimes life throws difficult obstacles your way. These can take the form of medical problems, loss of employment, mismanagement, or other misfortunes. Whether we are prepared or not, the costs can sometimes be beyond our means. 

Foreclosing on a home means that the mortgage isn’t being paid and the lenders need to recoup those funds. In a California foreclosure, there’s a Notice of Default first, and then, home owners receive a Notice of Trustee Sale. After that, the home will usually get another owner at auction and finally, the deed is transferred.

Foreclosure Property

Foreclosure can be stressful for some - via BasicGov

Our guide to trustee sales and foreclosures will explain this process from start to finish. 

Who is the Trustee in a Trustee Sale?

You’re right to wonder who the trustee is. This is a person who acts as a neutral third party and does various things for the home. A trustee handles the transition of property when needed. If the mortgage is paid in full, the trustee’s role is to transfer ‌ownership to you and cease involvement. In a foreclosure, they facilitate some parts of the sale and move the title from previous owners to new ones.

Trustees may have connections to the banking system, but they remain a neutral third party - by oath. 

How Does a California Trustee Sale Work?

When you sit down and sign a loan, there are terms to meet. Mortgages are no different, except that the payments can be unforgivingly expensive if there’s a loss of income. If this unfortunate circumstance happens, lenders can choose to foreclose. 

In California, foreclose laws allow for judicial and non-judicial proceedings, which happen outside of the court system and are much more common in California. Most mortgages include a specific clause that allows lenders to foreclose non–judicially.

Public Home Auction

A sign for a public home auction - via Sarah Gilbert

The Notice of Default

This is a notice sent by your lender, but coming from the Registrar Recorder’s office. The document will show the outstanding amount, including foreclosure fees. Attached, there must be a declaration that says the lender has spoken to you or made reasonable attempts to do so. When a Notice of Default is recorded, you have 90 days to repay the owed amount, which stops the lender from selling your home.

The Notice of Trustee Sale

At this junction, the lender has tried to get payment, failed, and must (attempt) to sell the property. You’ll be sent a Notice of Trustee Sale, which shows when and where your home will be sold. That notice must be posted on your property and also mailed to you. It is also published in local newspapers, one time a week for three weeks. At least 14 days before the sale date, the Notice of Sale also gets sent to the county recorder.

Paying off your loan completely, plus the fees, is one way to get control of the home again. You can also cover the past-due amount, but this has to be done up to five days before the date of the trustee sale. Within the last five days, you would have to pay off the entire loan, plus fees.

If the homeowner pays what they owe, the lender will need to record that in a Notice of Rescission, canceling the sale.

The Trustee Sale (Public Auction)

Just like a probate sale, a trustee sale is something that the public can get involved with. Trustee sales are public auctions and the highest bidder is awarded the property. 

How do trustee auctions set the opening bid? Usually, it’s equal to the amount of the outstanding loan, interest accrued, attorney fees, and any other fees attached to the property. If nobody matches this bid, the home is purchased by an attorney presiding over  it on behalf of the lender.  

Bidders waiting at a foreclosure auction event

People wait at a foreclosure auction via source

Trustee auctions can be postponed, but only three times, and then a new Notice of Sale needs to be delivered.

What happens if the trustee auction is unsuccessful? If the property goes to auction again and the opening bid is not met, that’s called Real Estate Owned or REO. Contrary to popular belief, foreclosed homes are not always worth the price. Often, the price is higher than the home’s value and that might derail the foreclosure sale. California does have a large amount of foreclosed properties though, so there will always be other options. 

What happens if the trustee sale is a success? After ‌winning a trustee sale bid, California trustees transfer the deed to the new owner.

Do You Need Help with Foreclosure or Trustee Sales?

We can help you with both sides of this. Whether you are looking at California foreclosure laws from the homeowner’s perspective and trying to retain ownership - or looking into first-time buying at trustee sale. California is unfortunately the 10th most foreclosed state in America, so there’s plenty of choice. 

We’ll be able to use our network and find foreclosure lawyers, should you need them. If it’s a home-related question, The Jamison Team has answers.

More Questions? Follow-up With Us!

If you have more questions about what to expect from the markets around the Bay Area, don’t be afraid to reach out to us today. Our experts are experienced in all property types and the entire San Francisco Bay Area, and we can help you to find what you need to know today.

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