The Trustee Sale Thread - Califoria Specific

David714_IHB

David714_IHB

New member
Hi Everyone, I would like to learn more about the trustee sale process in the state of California. I have read the foreclosure thread on this forum and did some general research of my own but I'd like to get some more insight from the investors, or others in the know, here on IHB... I have lots of questions but I'll start with some very basic ones.



1. What exactly are bidders bidding on at a trustee sale, is it a deed of trust associated with a mortgage? Is it possible for something other than a deed of trust to be sold at a trustee sale?



2. Is the trustee performing the sale on behalf of the foreclosing bank? If a person bids and wins, the funds go to the bank, is this correct?



3. What kinds of instruments can be attached to a California title? Which instruments will and will not be wiped out by the auction?



4. What role, if any, does the foreclosing bank play at the trustee sale?



Please feel free to discuss other topics related to trustee sales also. I only ask that information in this thread be limited to what applies in the state of California.
 
[quote author="David714" date=1251515280]Hi Everyone, I would like to learn more about the trustee sale process in the state of California. I have read the foreclosure thread on this forum and did some general research of my own but I'd like to get some more insight from the investors, or others in the know, here on IHB... I have lots of questions but I'll start with some very basic ones.



1. What exactly are bidders bidding on at a trustee sale, is it a deed of trust associated with a mortgage? Is it possible for something other than a deed of trust to be sold at a trustee sale?



2. Is the trustee performing the sale on behalf of the foreclosing bank? If a person bids and wins, the funds go to the bank, is this correct?



3. What kinds of instruments can be attached to a California title? Which instruments will and will not be wiped out by the auction?



4. What role, if any, does the foreclosing bank play at the trustee sale?



Please feel free to discuss other topics related to trustee sales also. I only ask that information in this thread be limited to what applies in the state of California.</blockquote>
1. You are bidding on the deed for a home (SFR or condo) via a Trustee Deed (versus a Grant Deed in a regular sale). No, a deed which provides ownership for the home is sold at the trustee sale

2. Yes, the trustee is the one performing the sale on behalf of the lender (beneficiary). Yes, the winning bid amount goes to the first mortgage lender (minus maybe a few bucks to the trustee and the court)

3. Many kind of liens can be attached to a California title...HOA fee liens, mechanic liens, delinquent property taxes, IRS/other governmental liens, etc. The only instruments wiped out by the auction are the mortgage liens so it's VERY IMPORTANT to run a prelim title report on the property to check for any other liens.

4. They will instruct the Trustee as to what the opening minimum bid for the property will be. They also have a right to bid on properties just like anyone else, but obviously would never do so (although my second mortgage holders may do it to assume a first mortgage position).



You also need to see what condition the property is in before the auction to see how much it may cost you to repair the property. Once you purchase a home via a foreclosure auction, you will have to either evict the owner if they are still living there (worst case scenario) or do a "cash for keys" arrangement (better case scenario) or will obtain it vacant (best case scenario).
 
[quote author="usctrojanman29" date=1251550141]

3. Many kind of liens can be attached to a California title...HOA fee liens, mechanic liens, delinquent property taxes, IRS/other governmental liens, etc. The only instruments wiped out by the auction are the mortgage liens so it's VERY IMPORTANT to run a prelim title report on the property to check for any other liens.</blockquote>


Corrections: Pretty much the only lien you are responsible for after the trustee sale is the property taxes. HOAs and the what not follow the owner, and good luck in collecting on that. However, you would want to avoid judgments and tax liens if you can, because they are a PITA to clean up after the fact.



<blockquote>4. They will instruct the Trustee as to what the opening minimum bid for the property will be. They also have a right to bid on properties just like anyone else, but obviously would never do so (although my second mortgage holders may do it to assume a first mortgage position).</blockquote>


Correction: The auctioneer bids up the property all the time. They will state "On behalf of the trustee and the beneficiary, I am authorized to bid up the property per their request." This happened with 24022 Prague St. in Mission Viejo today at the 3pm auction. The opening bid was $444k, and only one person other than the auctioneer bidding on it was some dude, and he won the auction at $470,350. I know, because I was there. And a second lien holder is always in second position, no matter how much they bid, unless they are bidding on the first for themselves. And... yes, this does happen too. Check out 5 Hawk 92618 as an example of the second bidding up the first to get the house, and they did. Good move on their part.



David714, I will have a PM out either... uh... make that today... on a foreclosure field trip next week and I will include you. Hope you can join us.
 
[quote author="graphrix" date=1251559262][quote author="usctrojanman29" date=1251550141]

3. Many kind of liens can be attached to a California title...HOA fee liens, mechanic liens, delinquent property taxes, IRS/other governmental liens, etc. The only instruments wiped out by the auction are the mortgage liens so it's VERY IMPORTANT to run a prelim title report on the property to check for any other liens.</blockquote>


Corrections: Pretty much the only lien you are responsible for after the trustee sale is the property taxes. HOAs and the what not follow the owner, and good luck in collecting on that. However, you would want to avoid judgments and tax liens if you can, because they are a PITA to clean up after the fact.



<blockquote>4. They will instruct the Trustee as to what the opening minimum bid for the property will be. They also have a right to bid on properties just like anyone else, but obviously would never do so (although my second mortgage holders may do it to assume a first mortgage position).</blockquote>


Correction: The auctioneer bids up the property all the time. They will state "On behalf of the trustee and the beneficiary, I am authorized to bid up the property per their request." This happened with 24022 Prague St. in Mission Viejo today at the 3pm auction. The opening bid was $444k, and only one person other than the auctioneer bidding on it was some dude, and he won the auction at $470,350. I know, because I was there. And a second lien holder is always in second position, no matter how much they bid, unless they are bidding on the first for themselves. And... yes, this does happen too. Check out 5 Hawk 92618 as an example of the second bidding up the first to get the house, and they did. Good move on their part.



David714, I will have a PM out either... uh... make that today... on a foreclosure field trip next week and I will include you. Hope you can join us.</blockquote>
You bastards, I have to be in Montebello all of next week so I can't even sneak out to guys you guys for a few hours around lunch. :(



Btw, thanks for the corrections...I knew I was missing of the interesting details (I didn't know the trustee/beneficiary can instruct the auctioneer to bid up a property). Interesting in deed.
 
[quote author="graphrix" date=1251559262][quote author="usctrojanman29" date=1251550141]

3. Many kind of liens can be attached to a California title...HOA fee liens, mechanic liens, delinquent property taxes, IRS/other governmental liens, etc. The only instruments wiped out by the auction are the mortgage liens so it's VERY IMPORTANT to run a prelim title report on the property to check for any other liens.</blockquote>


Corrections: Pretty much the only lien you are responsible for after the trustee sale is the property taxes. HOAs and the what not follow the owner, and good luck in collecting on that. However, you would want to avoid judgments and tax liens if you can, because they are a PITA to clean up after the fact.



</blockquote>




I thought that mechanic liens were attached to the property, and so survived foreclosure? Is this not true in CA?





Thanks for your insight!
 
[quote author="autox" date=1251612088]Where can I get information on up coming auctions?</blockquote>
Foreclosure Radar
 
[quote author="autox" date=1251612088]Where can I get information on up coming auctions?</blockquote>


Here's a good site to see the upcoming schedule over in Santa Ana: <a href="http://www.fidelityasap.com/">Santa Ana Auction Schedule</a>
 
PLEASE READ FIRST: This is not legal advice. You should seek out a lawyer for legal advice. You should realize there is risk in purchasing at auction. You should assume the information given is inaccurate, and the poster assumes no responsibility for the information contained below.



1. This question depends on WHO is foreclosing. If it is a first mortgage, then you get the house subject to certain liens (which as suggested by another poster should be researched). If the 2nd deed of trust is foreclosing, then the first mortgage is not extinguished, and you take subject to the first.



What bidders are bidding is a tricky business. You should realize that the foreclosing bank may always put forth a full CREDIT bid up to the amount of the lien. You as a bidder, on the other hand, must pay CASH. So even if the house is $500k, and the loan is $600k, then bank almost always wins -- they can bid $600k. Because the rest of the loan amount is going to be destroyed anyway, the bank will almost always bid the full credit amount. In some situations, the lender may not want the proper or may be able to get a deficiency, so will forgo the bid. Maybe you get lucky if a bank has enough REO's and will take a significant haircut, but they can always bid the full credit amount if they want the house.



You should realize that winning at auction gets you only a piece of paper. It's your job to make sure it is valid beforehand. It does not even get you the keys. There might be people still living in the house. It is your job to do the unlawful detainer.



2. The funds flow downward. So the first person to get paid is the forecloser (1st or 2nd or more?) So bank gets paid, usually not in full. If any money left over, it's paid to junior lenders. If anything is remaining after that, to the person who got foreclosed on.



3. see other posts



4. Like stated before, they can put forth a full credit bid.
 
[quote author="awgee" date=1251615074][quote author="autox" date=1251612088]Where can I get information on up coming auctions?</blockquote>
Foreclosure Radar</blockquote>


Let me rephrase that. Are there any Free sites that list up coming foreclosure with dates and address of homes being foreclosed on. I remember finding one site, that listed the last wk worth of foreclosure and the upcoming 2-3 months, but I can't seem to find it any more.
 
[quote author="autox" date=1251665437][quote author="awgee" date=1251615074][quote author="autox" date=1251612088]Where can I get information on up coming auctions?</blockquote>
Foreclosure Radar</blockquote>


Let me rephrase that. Are there any Free sites that list up coming foreclosure with dates and address of homes being foreclosed on. I remember finding one site, that listed the last wk worth of foreclosure and the upcoming 2-3 months, but I can't seem to find it any more.</blockquote>


Sending you a PM.

-IR2
 
[quote author="IrvineRealtor" date=1251678772][quote author="autox" date=1251665437][quote author="awgee" date=1251615074][quote author="autox" date=1251612088]Where can I get information on up coming auctions?</blockquote>
Foreclosure Radar</blockquote>


Let me rephrase that. Are there any Free sites that list up coming foreclosure with dates and address of homes being foreclosed on. I remember finding one site, that listed the last wk worth of foreclosure and the upcoming 2-3 months, but I can't seem to find it any more.</blockquote>


Sending you a PM.

-IR2</blockquote>


Much thanx.
 
Thanks for all the replies. I think I understand how the sale process works, but let me cite some examples to make sure... Please let me know if any of this logic is wrong.



Example A:

1st mortgage balance remaining $120000 (foreclosure)

no 2nd mortgage



1. The bank may decide that it wants to own the home unless it can get $400K for it. It bids the home up to $400K and nobody else bids. The home goes to the bank and no money changes hands. Is this correct?



2. The bank bids the home up to $400K and a 3rd party wins the auction for $401K. The bank gets $401K and the winning bidder gets a trustee deed to the home. In this case the bank actually made a profit, right? It was owed $120K and it received $401K.



Both cases above assume that the 1st bank is allowed to bid over the "full credit amount" as described by LoadRoar.





Example B:

1st mortgage balance remaining $120000 (foreclosure)

2nd mortgage balance remaining $30000



3. The 1st bank may decide that it wants to own the home unless it can get $400K for it. It bids the home up to $400K and nobody else bids. The home goes to the 1st bank and the 2nd bank is paid $30K by the 1st bank. Is this correct?



4. Lets say that the 1st bank is not interested in owning the home and does not up the bid. A 3rd party bids $200K and wins the auction. $30K goes to the second bank, $170K goes to the first bank, and the winning bidder gets a trustee deed to the property. Is this correct?



5. Lets say a 3rd party bids $125000 and wins the auction. The 1st bank gets $120K, 2nd bank gets $5K, winning bidder gets the trustee deed. Right?



6. 1st bank wants nothing to do with the home and sets the initial bid to $100K. A 3rd party wins the auction for the opening bid of $100K. The 2nd mortgage is wiped out, 2nd bank gets nothing. The 1st bank gets $100K.



7. 1st bank wants nothing to do with the home and sets the initial bid to $120K. The 2nd bank bids $120K and wins the auction. the 2nd bank pays $120K to the 1st bank and gets the home. There was no $30K credit since it was the 1st bank that foreclosed. Right?





In cases 3, 4, 5, 6, and 7 the 2nd mortgage is always wiped out. The 2nd bank may or may not get any money, depending on how much is owed on the 1st and how high the bidding goes. Right?



I'll stop for now and make sure I understand the 1st loan foreclosure. Later we can discuss the case of a 2nd loan foreclosure.



thanks again

David
 
I may have made a mistake above, I'm not sure. If there are excess funds after both loans are satisifed then those funds would go to the homeowner? I think this is what LoadRoar stated. If that is true, then why would the foreclosing bank ever bid above its remaining loan balance? If it did it would simply be doing a favor to the 2nd lienholder or the homeowner...



David
 
<strong>PLEASE READ FIRST: This is not legal advice. You should seek out a lawyer for legal advice. You should realize there is risk in purchasing at auction. You should assume the information given is inaccurate, and the poster assumes no responsibility for the information contained below.

</strong>



[quote author="David714" date=1251718441]Thanks for all the replies. I think I understand how the sale process works, but let me cite some examples to make sure... Please let me know if any of this logic is wrong.





2. The bank bids the home up to $400K and a 3rd party wins the auction for $401K. The bank gets $401K and the winning bidder gets a trustee deed to the home. In this case the bank actually made a profit, right? It was owed $120K and it received $401K.



<strong>no the bank makes no profit. the remainder goes to the homeowner or junior lien holders</strong>





3. The 1st bank may decide that it wants to own the home unless it can get $400K for it. It bids the home up to $400K and nobody else bids. The home goes to the 1st bank and the 2nd bank is paid $30K by the 1st bank. Is this correct?



<strong>The senior lien must give juniors notice of the foreclosure. Your scenario is unlikely. The 1st can only credit bid 120k, I guess bidding up to $400k requires them to bring cash... not even sure if that is possible. Either way 2nd is getting paid once 1st is satisfied, no matter what (unless nothing left over). </strong>



4,5,6 seem right to me.



7. 1st bank wants nothing to do with the home and sets the initial bid to $120K. The 2nd bank bids $120K and wins the auction. the 2nd bank pays $120K to the 1st bank and gets the home. There was no $30K credit since it was the 1st bank that foreclosed. Right?



<strong>yep</strong>



In cases 3, 4, 5, 6, and 7 the 2nd mortgage is always wiped out. The 2nd bank may or may not get any money, depending on how much is owed on the 1st and how high the bidding goes. Right?



<strong>yep</strong>







I may have made a mistake above, I?m not sure. If there are excess funds after both loans are satisifed then those funds would go to the homeowner?

<strong>yep</strong>

If that is true, then why would the foreclosing bank ever bid above its remaining loan balance? If it did it would simply be doing a favor to the 2nd lienholder or the homeowner?



<strong>1st won't bring cash to the table, usually. doing a favor? if the bank really wants the house and they have a gift card worth $120k, why not pay $380k to get it, if u can sell for $420k. all depends on what its "worth." </strong>



David </blockquote>
 
[quote author="freedomCM" date=1251608358]I thought that mechanic liens were attached to the property, and so survived foreclosure? Is this not true in CA?





Thanks for your insight!</blockquote>


I had to double check, but this is what <a href="http://www.foreclosureforum.com/mb/messages/20049.html">I found searching ForeclosureForum with a response from Ward himself</a>:

<blockquote>

Newer to this, first one I'm watching that has a bunch of mechanics liens attached. 4 in total, different contractors, all are recorded later than the foreclosing lenders lien but I'm not sure if they are wiped off or I have to take care of them if I buy it. Anyone know or had experience with this?</blockquote>
<blockquote>

Linda,



All recorded liens that are junior to a foreclosing lien are wiped off the title of the property upon the foreclosure auction of the senior lien.





--------Ward--------</blockquote>


So... while it is not legal advice, Ward is the foreclosure guru, and I would take his word that the mechanic liens go bye bye, just like a second HELOC lien.
 
[quote author="graphrix" date=1251738119][quote author="freedomCM" date=1251608358]I thought that mechanic liens were attached to the property, and so survived foreclosure? Is this not true in CA?





Thanks for your insight!</blockquote>


I had to double check, but this is what <a href="http://www.foreclosureforum.com/mb/messages/20049.html">I found searching ForeclosureForum with a response from Ward himself</a>:

<blockquote>

Newer to this, first one I'm watching that has a bunch of mechanics liens attached. 4 in total, different contractors, all are recorded later than the foreclosing lenders lien but I'm not sure if they are wiped off or I have to take care of them if I buy it. Anyone know or had experience with this?</blockquote>
<blockquote>

Linda,



All recorded liens that are junior to a foreclosing lien are wiped off the title of the property upon the foreclosure auction of the senior lien.





--------Ward--------</blockquote>


So... while it is not legal advice, Ward is the foreclosure guru, and I would take his word that the mechanic liens go bye bye, just like a second HELOC lien.</blockquote>
So unpaid property taxes are the only thing that need to be paid after acquiring a property at the trustee auction?
 
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