Foreclosure

You may ask how to buy a foreclosure in Los Angeles, before asking this question, find out how the foreclosure process takes place.

Each month, the poor economic climate forces hundreds of homeowners to default on their properties. Unfortunately, some of these homeowners may fail to cure the situation on time and may end-up losing their properties in foreclosure.

Foreclosure is a procedure whereby the Trustor's property pledged as security for a debt is sold to pay the debt by a Trustee on behalf of Beneficiary.

• The Trustor is the homeowner who deeds his property to a trustee to be held as security until he has performed his obligation to a beneficiary under terms of a deed of trust.

• The Trustee is neutral third party.

• The Beneficiary is the lender who holds the Note and Trust Deed.

• The Note is a signed written instrument acknowledging a debt and promising payment.

• The Trust Deed is a deed given by borrower to beneficiary to be held pending fulfillment of repayment of a loan.

During a foreclosure, the beneficiary may opt to use the non-judicial procedure or the judicial procedure to foreclose on a property.

The non-judicial foreclosure (Trustee's Sale) does not involve a court. The trustor does not have the right to redeem the property after the sale. This foreclosure method is the most often used in California and other States.

The beneficiary communicates to Trustee that Trustor is in default. Upon receipt and verification of all necessary information, the trustee will proceed as follow: 

• Trustee records "Notice of Default" and notifies the Trustor that a notice of default has been filed against his/her property, subsequent recorded lienors and all others who have requested "Notice of Default" 
• After at least 3-months, the trustee advertises "Notice of Trustee's Sale" in a newspaper once a week for at least 3-weeks and posts "Notice of Default" on property. 
• Trustor can reinstate the loan usually up to 5 business days before the scheduled sale and stop the foreclosure process. 
• Trustee conducts Trustee's Sale in the county where property is located. 
• The opening bid is usually what is owed to the foreclosing beneficiary. 
• At the sale, highest bidder receives a Trustee's Deed which contains no warranties.

The judicial foreclosure (Court Foreclosure) involves the court system. The trustor has the right of redemption after the foreclosure sale.

Court foreclosure proceeds as follow:

• Borrower (Mortgagor) is in default or breach of mortgage contract 
• Lender (Mortgagee) who holds note and mortgage contract brings court action. 
• Court order property sold. 
• Commissioner appointed by the court advertises "Notice of Sale" once a week for 3-weeks and posts notice on property. 
• A certificate of sale is issued at time of sale to the buyer. 
• Borrower has 1-year to redeem property and to remain in possession. 
• A sheriff's deed is issued 1-year after the sale.

When the lender repossesses a foreclosed property, the property is repossessed as-is, may be occupied or vacant, conditions vary, property may have building codes violation, liens, etc.

On occasion, the lender may sell a repossessed property the same day to investors present on the day of repossession. In other occasions when the lender has large amounts of foreclosures in inventory, the lender may decide to sell bulk of foreclosed properties to investors who buy foreclosures in bulk. Other foreclosed properties are sold through real estate companies and auction companies.

When the lender decides to sell the foreclosed property, regularly sell it as-is. On some occasions the lender may decide to repair properties before selling them. The prices of repossessed properties are determined by the conditions (good, fixer upper, burned, etc.), occupied vs vacant, financing vs non-financing, market, location, etc.

When a buyer decides to buy a foreclosed property, the buyer should be aware of the terms of sale. Some foreclosed properties are sold without showing, because occupants do not allow entry, if this is the situation, the buyer agrees to purchase foreclosed property under those terms, assuming all responsibilities after the purchase.

If a foreclosed property is a cash sale only, the reason may be either is an urgent sale or due to conditions in which the property is not financeable. Generally, lenders do not lend money on poor condition properties. Lenders (hard money lenders) who are willing to lend on poor condition properties, required the buyer to provide a high down payment.

If you need help buying foreclosure in Los Angeles or surrounding areas, please contact me.