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In the US, the actual foreclosure process varies by state. However, most states follow the established procedures relating to the two primary types of foreclosure: judicial foreclosures and non-judicial foreclosures.
The primary difference is that judicial foreclosures require a court order to action. The mortgagee must attend court to prove that he owns the mortgage and has the right to foreclose. A non-judicial foreclosure does not require a court order to execute.
California follows these two types of foreclosures, non-judicial and judicial, but the highest bidder takes the property. However, with judicial foreclosure, the previous owner has up to one year to redeem his property by paying the foreclosure sale amount plus interest and any additional expenses incurred by the lender.
There Is a New Law
SB 1079, a new law relating to foreclosure in California, took effect January 1st, 2021, and applies to one- to four-unit properties sold at foreclosure auctions.
A condition is attached if an investor makes the highest bid and wins one of those homes at auction. Suppose people want to live in the property, or non-profit organizations or government entities are interested in buying. In that case, they will get 45 days to submit competing offers.
If the home is a rental, the tenants living there can secure the property by matching the investor's offer. In other words, other would-be buyers must offer more than the investor.
Yet, basic processes remain unchanged.
As mentioned above, the basic processes remain unchanged if you want to purchase a foreclosure in California. These processes are summarized as follows.
Undertake Quality Research
Spend as much time as possible undertaking research and due diligence before buying a foreclosure property. Find out as much as possible about the property and the local market regarding supply and demand, current market values, what properties sell well, etc.
Looking for properties involves obtaining a list of foreclosures in your area by checking at homesales.gov for foreclosures owned by government agencies, a private listing agency, county recorders' or clerks' offices. There are also several online foreclosure listing sites, such as Foreclosure.com, Foreclosures.com, and RealtyTrac.com. These sites allow you to filter a search by area, price, or even number of bedrooms.
Newspapers and public places also advertise potential foreclosures as part of a lender's legal steps to foreclose on a property.
Find out if the resident, the lender, or a trustee owns the property and what stage of foreclosure the house is currently. Check for back taxes and other liens that might be attached to the property, possibly at the local courthouse or county records office.
Inspect The Property
Have a look at the property externally or internally, if possible/permitted, to assess its condition and get some idea of what will require expenditure to do repairs and any improvements. If the property is still in the pre-foreclosure stage and you can inspect it, it might be worth making an offer. The owners might accept a low offer covering their mortgage balance to avoid foreclosure.
If your offer is for less than the mortgage balance, the sale is considered a short sale, and lenders must approve this type of sale before it can go ahead.
Consider Working with a Specialized Real Estate agent
Buying a home is a significant financial decision, and buying a foreclosure is more complicated. Foreclosures require a lot of paperwork and a good understanding of the market and real estate law. It's well worth engaging an experienced real estate agent if you are new to foreclosure sales, as they can guide you through the process. Plus, they may be aware of more properties as their network and access to foreclosed properties will invariably be better than yours.
If you seek a mortgage to buy a foreclosure, try to get pre-approved with your lender. Sometimes the current lenders and auction agents want proof that you have the necessary financial backing. Therefore, you must work out all the expenses involved, including the minimum deposit at auctions, closing costs, down payment, insurance, and taxes.
At The Auction
If the foreclosure action sets for a foreclosure, attend the auction and bid for the property.
You will need to sign up for the auction on the day of the sale and pay the minimum deposit to bid. Decide your maximum bid and stay with your decision, as it is effortless to get caught up in the emotion in the auction room and overbid!
In California, foreclosure sales are held on business days from 9 a.m. to 5 p.m. Usually, and you are not allowed to view the property before bidding. Anyone can bid, and the foreclosure can be postponed to another time and location by the trustee managing the sale. Some counties require sealed-envelope bids, and others need you to bring your bid amount in cash or cashier's checks.
And, finally, if you are successful, wait for your certificate of the title!