Understanding the foreclosure process in California is an important part of navigating your own home foreclosure.
Before we dive in…
Understanding the Foreclosure Process in California
What is foreclosure anyway?
Foreclosure is the legal process that lenders use to take back property that is securing a loan, generally after the borrower stops making payments. This protects the bank’s interest in loaning out their money, helping to ensure that they are never left completely high and dry.
Foreclosure is no fun for you or the banks. While it is a stressful situation for a homeowner, it is no picnic for a lender either. But just know that it’s not the end of the world if it does happen.
When you know how foreclosure in California works… it arms you with the knowledge to help you navigate it well and come out on the other side the best way possible.
The Basic Stages of A Foreclosure
There are a few stages that are important to any foreclosure process.
Foreclosure works differently in different states all across the country.
The two ways different states use to foreclose upon a property are judicial sale or power of sale. In California, both processes can be used. While power of sale foreclosures are much more common, judicial sales can still happen from time to time.
Connect with us by calling (661) 384-7021 or through our contact page to have us walk you through the specific foreclosure process here locally in Bakersfield.
In either scenario, foreclosure typically doesn’t go to court until 3-6 months of missed payments have elapsed. Usually (but not always), a lender will send out many notices that you are in arrears – overdue or behind in your payment. Remember, foreclosure does not usually end in anyone’s favor. Banks are in the business of lending money, not selling property. When they have to foreclose on a property, they lose a loan that they were making money on. They are now responsible to go through the legal procedures of securing the property again, which can be a big headache in itself, and also trying to arrange to have the house sold to at least make back their money that they lent to buy the house in the first place. Because this is not their primary business, it is more of a hassle than anything else.
This is really good news for you. If you are late on your payments, chances are that the bank would rather work with you to help you make up your payments than try to take your house away. They want you to continue paying the loan rather than put themselves through a lot of unnecessary hassle and headache.
Be sure to reach out to your lender if you ever run into problems paying your bills. Especially in times like these with Covid-19 taking its toll on so many people, lenders are going the extra mile to make sure that people are being taken care of.
Under Judicial Foreclosure:
- Your mortgage lender must file suit in the court system.
- You’ll get a letter from the court demanding payment.
- Assuming the loan is valid, you’ll have 30 days to bring payment to court to avoid foreclosure (and sometimes that can be extended).
- If you don’t pay during the payment period, a judgment will be entered and the lender can request the sale of your property – usually through an auction.
- Once the property is sold, the sheriff serves an eviction notice and forces you to immediately vacate the property.
Under Power of Sale (or Non-Judicial Foreclosure):
- The mortgage lender serves you with papers demanding payment, and the courts are not required – although the process may be subject to judicial review.
- After the established waiting period has elapsed, a deed of trust is drawn up and control of your property is transferred to a trustee.
- The trustee can then sell your property to the lender at a public auction (notice must be given).
Anyone who has an interest in the property must be notified during either type of foreclosure.
For example, any contractors or banks with liens against a foreclosed property are entitled to collect from the proceedings of an auction.
What Happens After A Foreclosure Auction?
After a foreclosure is complete, the loan amount is paid off with the sale proceeds.
Sometimes, if the sale of the auctioned property isn’t enough to pay off the loan, a deficiency judgment can be issued against the borrower.
A deficiency judgment is where the bank gets a judgment against you, the borrower, for the remaining funds owed to the bank on the loan amount after the foreclosure sale.
Some states limit the amount owed in a deficiency judgment to the fair value of the property at the time of sale, while other states will allow the full loan amount to be assessed against the borrower.
Here’s a great resource that lists the state by state deficiency judgment laws, since every state is different.
Generally, it’s best to avoid a foreclosure auction. Instead, call up the bank, or work with a reputable real estate firm like us at Buyers of Bakersfield to help you negotiate discounts off the amount owed to avoid having to carry out a foreclosure.
Experienced investors can help you by negotiating directly with banks to lower the amount you owe in a sale – or even eliminate it, even if your home is worth less than you owe. Why would the bank accept that? Because they typically do not want to spend the time and effort to try and recoup the loss of one property. They make more money by lending out money than they do by foreclosing and reselling those houses.
Sometimes the best option for everyone involved is to take a cash offer from an investor. This helps the bank recoup some of their loss without having to go through the entire process of foreclosure, and it help the homeowner avoid having a foreclosure stain their credit for the next several years. This is much more important than many people realize. Foreclosures don’t have to be the end of the world if you take action as soon as possible, but they can have consequences long after the fact if they are not addressed ahead of time.
If you need to sell a property near Bakersfield, we can help you.
We buy houses in Bakersfield California like yours from people who need to sell fast.
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Another Foreclosure Resource For Bakersfield California HomeOwners: