Selling a house in foreclosure in California, before the sale date.

We have taken a lot of these calls, and the first thing we usually say is: you have more time than you think, and less than you would like. Both are true. Here is how it works in California.

The timeline, in plain terms

Most California foreclosures are non-judicial, which means they run on a clock set by state law rather than by a court.

• Missed payments. The lender has to try to contact you before it can get the process rolling. This typically happens after the first late or missed payment. After the 30-day mark, this is when the late payment can begin to reflect on your credit report.
• Notice of Default. A Notice of Default, or NOD, occurs when the lender records a notice with the county itself. From this point, you typically have at least 90 days before the next step is initiated. This window also gives you the opportunity to bring the loan current, work out things like loan modifications, or make the call to sell the property. In cases where you owe more than the home is worth, a short sale may be able to be negotiated.
• Notice of Trustee's Sale. After the 90-day mark, the lender then has the option of moving forward with the notice of sale. At this point, they can set a sale date for the property with the correct notice. If the date comes around and the property has not been sold or the loan brought into good standing, the sale typically takes place on the courthouse steps. In some cases, the lender is the one who takes the property back.

It's important to know that timelines are different for everyone. Although the time from the first missed payment to the sale date could be four to six months, some lenders move slower. Very few move faster. During the height of the foreclosure market earlier in the 2000s, we even witnessed cases where people had been in a property for 12 months, 24 months, or even more before a foreclosure ever transpired. Things seem to have sped up some since then. In practice, the best advice is to take action sooner rather than later.

What can be postponed

A trustee sale can definitely be postponed. It's actually pretty common, and there is a reason behind it. A lender would rather be paid through a sale than take the house back. Lenders are in the business of lending, not selling homes. If your home is currently in escrow with a legitimate purchase agreement, a scheduled close, and a bona fide buyer, most lenders would be willing to work with you in order to push the sale back and allow the deal to close.

Getting an extension without a buyer in place, no escrow open, no deposit, and no contract can be a much harder task. Lenders want to see something behind the request for postponement. What will they gain from the deal? The contract is typically what buys that time.

How selling works when you are behind

There is a difference between being behind on payments and having a notice of default filed against your property. In either situation, we can still help you out. Things do get a little bit more complex when dealing with NODs, but nothing that we can't handle. The first step is to get your home in front of investors. This occurs once the purchase agreement has been signed with House Into Cash. The auction is then opened up and the details shown to approved investors. In cases where there is an NOD filed against the property, these auctions are set for a minimum of seven days, so bidding cannot end before the five-business-day cancellation window California law gives you has passed.

Once the bid is accepted, escrow is then opened. When escrow closes, your loan or loans are paid from the proceeds. Whatever amount is left after the payment to the lender, any back payments if applicable, and/or fees is considered your equity and comes directly to you. In many cases, that money, or a sizable chunk of it, would be erased after a foreclosure.

What investors are told about it

In order to stay in compliance with local laws, we do advise investors who are bidding on properties in foreclosure proceedings of this fact. This is an extremely important disclosure that is required, not just by law, but because if we did not disclose it to potential buyers, they would be unaware of the procedural protocols that would need to be strictly adhered to in this situation. Investors aren't bidding because a seller is behind on their payments. They're bidding on the house itself.

When it is too late

If the sale date falls within the next 30 days, please call us before you do anything. In most cases, there's still a path forward. In some cases, there may not be. Our job is to be honest with you, regardless of the situation.