Trustee Sales: Can the owner sell directly & cancel them or have any say over it?

Question

If a house goes into a trustee sale, and the auction date is 2 months out, do they have the right to sell privately or on the market before then, and cancel the sale?  Or does the bank/lender control it at that point?

I wanted to offer to buy some houses that have trustee sale auction dates set, and swoop in, offering the owner a cash buy, but is it possible at that point? Or do the owners not have the right anymore over their property?

Thanks

Robert Davidson · Answer

You can buy a house in foreclosure up to the actual day of auction (most foreclosures in California are postponed over and over.)  The NTS is only a NOTICE of the upcoming sale. However, you must learn the California foreclosure laws.  There is a specific form (Equity Purchase Agreement) the law requires and a five day cooling off period with the Cancellation form specifically defined in the law, (even to font size) where the homeowner can cancel the sale five days after signing the Equity Purchase Agreement or up until 8:00 AM the day of sale.   I can't emphasize it enough - learn the California foreclosure laws. There are things you can not do until the five days has expired. One thing that only two investors I know are aware of is that the homeowner can show up at the foreclosure sale, and before the auction is announced, go to the auctioneer and request a 24 hour postponement.  This is rare but could be handy for an investor trying to finalize a deal at the last minute.

Rick H. · Answer

Short answer: yes!

In order to understand the logic, let's look at what happened.

The owner borrowed real money from someone's account that either went to his benefit when he bought the property or when the owner took ought cash for another reason.

When he borrowed, the bank or other lender required a mortgage be placed on the property (actually a deed of trust) as a lien.

If the borrower defaults by breaching the loan terms and the lender starts foreclosure, the lender is actually forcing the sale and liquidation of the collateral, in this case, his house.

In CA, most of the laws governing foreclosure of loans are in found in the civil code.

Some laws are specific as to conduct of the trustees who conduct the sale and are found in CC 2924. Laws concerning rules for purchasing a property from an owner who lives in the (1-4 unit residential) property are found in CC 1695.

You'd do well to familiarize yourself with these laws FULLY. There are many hungry lawyers and others eager to unwind your deal should you not use the statutory form or cut corners.

Also, you better understand the timeline and rule for reinstatement and redemption.

I'd give you websites but the over bearing moderators tend to remove them here on BP. Just try searching First Tuesday, Property Radar and Ward Hanigan.

Ron S. · Answer

I would add (Sorry, couldn't edit) that this equity protection tactic does not save a borrower from foreclosure, doesn't stop a foreclosure and doesn't stall a foreclosure if the transaction does not pay the foreclosing entity off before the date of the posted notice of sale.

Finally, I should clarify, there are no forms or rules related to the foreclosure side of this tactic. If a buyer of a property in foreclosure engages the seller in an equity purchase transaction, yes, there are rules and timelines and forms but again, This has nothing to do with the foreclosure, the borrower in foreclosure or the property in foreclosure. These are all requirements of the buyer and at the risk of being redundant, don't impact the foreclosure one way or the other if the loan is not paid off.

Ron S. · Answer

I wouldn't go spending too much time on the "Equity Purchase Agreement" tactic. There is no short cut and there is no shared equity, participation agreement or anything like it that will circumvent the default process. There is no form the law requires (I'd love to see where you came up with that) and as far as the foreclosure sale and borrower are concerned, there is no "5 day cooling off period". I think you have your sides of the equation confused with a buyer and a seller in foreclosure.

If you are a borrower and you are in foreclosure, you either sell it and pay the loan off before the foreclosure sale or, you reinstate it before the foreclosure sale or, if you qualify, you modify it, before the foreclosure sale date (You do have a right to have the foreclosure process stopped while in review for any alternative to foreclosure provided the notice of sale has not been inssued).

If you do not do any of the above, you lose any legal right to reinstate the loan once you are within 5 days of the sale. Once in five days, pay it off or lose it.

The only part of Robert's post that was good advice was to know the foreclosure laws. I would respectfully recommend that you follow your own advice Robert. The advice, forms and procedures you gave, have no relevance to anything regarding a foreclosure in the state of California.

Robert Davidson · Answer

Another good source to search is Realty Trac.  It's nationwide and has good economic information on real estate and foreclosures specifically.

To expand on the five day cooling off period the homeowner has; five days means business days.  Business days are defined as (and many investors miss this) as Monday through and including Saturday.  Sunday and holidays are not.

Jim Witten · Answer

Yeah I guess both of you are right,  maybe its possible if the bank is willing to negotiate and depending on how far in the process or how many payments are missed, etc... Im guessing 80% of the time its to late.

I'd like to get a property at  trustee sale someday, but I rely on financing, so you have to show up with a chunk of money for trustee sales, either way, just to difficult for me to try to make that work. Plus of the 7 times or so Ive went, everything was postponed, everytime. But anyways, I dont want that to the focus of this thread (ha)

Gilbert Dominguez · Answer

That I know of usually by the time the property has gone or is scheduled for a trustee sale the mortgage holders have already given the owner ample warning and opportunity to bring the loan payments current. There are certain kinds of foreclosure proceedings that allow the current owners to redeem the property but I would say in most cases regarding trustee sales that opportunity has gone. I can't say about a possible negotiation with a bank of other mortgage owners or holders. You may try asking

If you try attending trustee sales you may be able to pick up a property at a discount if there is little or no one else bidding on the property because the trustee wants to avoid giving the property back the mortgage holder who then may decide or try listing the property with a regular real estate agency to market the property. Be prepared to bring cash as that may be the only way you can get a property at a trustee sale.

You may try setting up a marketing campaign to target people in pre-foreclosure. It is at this stage where you will get the most advantages and possible discounts and be able to deal directly with the owners and not the mortgage holder.

Wayne Brooks · Answer

Yes, as long as they can pay off the entire outstanding balance including interest, fees, force placed insurance, court costs, etc.

Trustee Sales: Can the owner sell directly & cancel them or have any say over it?

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