The foreclosure process in California can be confusing, intimidating, and stressful. However, knowing in advance how this process works and typically plays out can give you the peace of mind necessary to make rational decisions about your property’s future.
Understanding the California foreclosure process timeline is key to getting perspective on your situation and options. Many homeowners will receive one of the notices mentioned in this article, and either ignore it or misinterpret the meaning. Here, we will breakdown exactly the way California foreclosures unfold, so that you can arm yourself with knowledge of your rights as a property owner.
Step 1: Notice of Default
The Notice of Default (NOD) is the first step on the part of the lender to initiate foreclosure actions. The Notice of Default in California is recorded once the borrower fails to meet the agreed upon terms of the loan. Typically, this simply means missing a payment, although in practice the NOD period extends for 90 days before the lender officially moves to the next step in the process. At this point, the property is considered to be in “pre-foreclosure,” and the homeowner may receive a notice through the mail with a projected sale date.
Step 2: Notice of Trustee Sale
As soon as 90 days have passed from the NOD being recorded, the lender can then issue a Notice of Trustee Sale. Unlike the NOD, which is essentially a courtesy window to allow the borrower to become current, the notice of sale in California is an actionable notice. It serves as a declaration of intent to sell the property at auction right out from under the homeowner.
Step 3: Auction
Depending on a variety of factors, the actual auction date for the property can vary widely. Technically, however, the lender/trustee only needs to wait 20 days after the Notice of Trustee Sale has been issued. However, there are several ways to postpone the actual auction, and many homeowners don’t face their actual sale date for about a year after the initial date.
Step 4: Aftermath
There are four main outcomes that can follow the auction phase of the foreclosure process: postponement, cancellation, sale to bank, and sale to third party. Let’s look at each of these outcomes and what they mean for the property owner.
- Postponement – If you are able to secure a postponement (usually with the help of a foreclosure attorney), a new auction date is set and the process starts all over again. A postponement can be sought for a number of reasons: to simply buy more time in the property before moving; to give yourself more time to restore your finances and become current; or to prolong the window for formulating a legal strategy to fight against the foreclosure.
- Cancellation – There are several reasons why an auction sale can be cancelled entirely. For example, the owner may decide to initiate a short sale of the property. Perhaps a loan modification was agreed upon at the last minute. At any rate, a cancellation is typically good news for the homeowner, but it doesn’t necessarily mean that they get to keep the property when all is said and done.
- Sale to Bank – A frequent outcome of the auction sale is that the lender is the only one to bid on the property. Often, the home will go right back into the lender’s possession. In this instance, it is sometimes possible to regain title after the sale.
- Sale to Third Party – Properties in foreclosure are often attractive to third party buyers who seek to capitalize on the distressed nature of the property in order to get a good deal. In these cases, it is usually impossible to regain title to the home, despite the third party needing to follow rigid guidelines regarding treatment of the previous owners.
Depending on where you are in the California foreclosure process, different options and outcomes may be more attractive to you than others. As always, it is best to consult with a qualified and experienced foreclosure consultant in order to assess the proper course of action for your own unique situation.