Are You Interested To Become a California Foreclosure Property Buyer or Investor?

You need qualified and experienced Realtor representation.  Higher foreclosure rates are creating buyer opportunities in California.  We have an updated information about NOTICE OF DEFAULT (NOD) opportunities and NOTICE OF TRUSTEE SALE situations for Orange County, California.
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Foreclosure Timeline in California (approximate minimum timeframe for the foreclosure process).

Day 1:  Notice of Default recorded

Day 14: Notice of default must be mailed to borrower 10 days after recordation.

Day 91: Notice of trustee's sale recorded, published, and mailed (lenders usually file 31 days before the sale because of IRS requirement)

Day 115: Deadline to cure default (5 business days before trustee's sale)

Day 122: Trustee's Sale (deadline to pay off loan is any time before the trustee's sale begins).

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Foreclosure is the process of selling property to satisfy a defaulting borrower's debt secured by that property.

Most foreclosures in California are private trustee's sales, rather than judicial forecslosures.  A trustee's sale is a public auction for selling property to the highest bidder, a quick and cost effective process for the lender.

However, if the foreclosure sale price is not enough to pay off the loan being foreclosed upon, the foreclosing lender cannot recover that shortage (also known as deficiciency judgment) from the borrower.

Pre-foreclosure situations are those where property owners behind on their mortgage or home loan payments.

A SHORT PAY is a property situation where it is worth less than the amount of secured debt to the bank or lender.

A SHORT SALE is a property that is sold for less than the mortgage or home loan balance.

In California, real estate investors need to be careful.  California law at Civil Code sections 1695-1695.17 et. seq. sets forth a number of strict requirements that are designed to protect homeowners who are facing foreclosure.  This law deals with equity sellers, equity purchasers, and representatives of equity purchasers.

An EQUITY SELLER is a person who owns and occupies a residence, which may be a single unit or up to four units, that has an outstanding and recorded notice of default against it.

An EQUITY PURCHASER, under the California Civil Code, is a person who is, or attempts to, acquire title to an owner occupied residence in foreclosure and who does not acquire the property for the purpose of making it his or her residence. Excluded from this definition are those who purchase property at a foreclosure sale and those who acquire property from a spouse, blood relative, or blood relative of a spouse.

A REPRESENTATIVE OF AN EQUITY PURCHASER is any person who solicits, induces, or causes an equity seller to transfer title to an equity purchaser.

California law says that a representaive of an equity purchaser must have a current California real estate license and have a bond from an admitted insurer in an amount equal to twice the fair market value of the property. An equity purchaser's representative must supply an equity seller with written proof of having fulfilled these requirements.

The California Supreme Court has denied review of a Court of Appeal decision that the bond requirement under the home equity sales contracts law is unconstitutional and unenforceable. Schweitzer v. Westminster Investments (2007) 157 Cal.App.4th 1195, review denied March 26, 2008. Under Schweitzer, buyers' agents may represent investors without obtaining the surety bond required under the home equity sales contracts law. Buyers and their agents must nevertheless comply with the other requirements of the home equity sales contracts law.  Buyers and their agents should use C.A.R.'s standard form Notice of Default Purchase Agreement (NODPA) as amended, which will be available with the April forms release.  This case arose when a seller sued to reclaim a property by arguing that the buyer's agent was not bonded under the home equity sales contracts law. The home equity sales contracts law imposes certain requirements when an investor buys an owner-occupied residential property up to four units with a recorded notice of default. One of the statutory requirements is for a buyer's agent to be bonded by an admitted insurer in the amount equal to twice the fair market value of the subject property.  C.A.R. is unaware of any insurer currently offering the requisite bond. The Court of Appeal in Schweitzer held that the bond requirement was unconstitutionally vague under the due process clause and may not be enforced. The seller requested for the California Supreme Court to review that decision, but the high court refused. As with other published appellate court opinions, the Schweitzer decision is binding and controlling authority for all California trial courts and Division One of the Fourth Appellate District (San Diego and Imperial Counties). It is also persuasive authority for the other Courts of Appeal.

A sale contract or an offer to purchase between an equity seller and an equity purchaser must comply with provisions of law in California.  If the transaction has been negotiated in a language other than English, the contract must contain a provision allowing the seller to cancel, without penalty, until midnight on the fifth business day following the day the contract was signed, or until 8 AM of the day scheduled for the foreclosure sale, which occurs first.

During the California seller's five day right of cancellation period, the equity purchaser may not accept from the seller, or induce the seller to execute, any instrument that would convey an interest in the subject property. Nor may the equity purchaser pay any consideration to the seller during the cancellation period.  It is not acceptable for the buyer to do something special to help the seller sign the contract, even if you do have the right to cancel in five days.

Violations of California law provisions can result in criminal penalties.  In situations where a purchaser has taken unconscionable advantage of the seller, the seller may have the right to rescind the sale for up to two years.

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Harrison & Christi Long

Realtors & Advisors

Explore Group, Coldwell Banker Previews

949-854-7747

© Copyright 2007  – Rights reserved 

The information contained herein is not the providing of legal services or services of an accountant.  If a person wants or needs such professional services, he or she must contact and retain counsel or a certified public accountant.  There are risks associated with the acquisition and ownership of real estate.