How to Foreclose on a Deed of Trust in California
There are two ways to conduct a foreclosure in California: judicial and nonjudicial. Both processes are acceptable for foreclosure on a deed of trust. A deed of trust is a variation on a traditional mortgage note. A third party (the trustee) holds the property deed as long as the home owner (debtor) owes the bank (beneficiary) money on the home loan. Nonjudicial is the most common form of foreclosure because it does not require a court's involvement.
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Things You'll Need
- Original Deed of Trust note
- Lawsuit draft (judicial foreclosure)
- Power of sale clause (nonjudicial foreclosure)
- Notice of Sale documents
- Notice of Sale sign
- U.S. Postal Service Certified Mail envelope
- U.S. Postal Service Return Receipt form
- Foreclosure auction advertising
- Auctioneer
Instructions
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Determine If You Need a Judicial or Nonjudicial Foreclosure
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1
Review the original deed of trust note for a power of sale clause, or pre-authorization to sell the home if the debtor defaults on the loan. If there is a power of sale clause, you can continue to Step 2 and complete a nonjudicial foreclosure. If there is no power of sale clause, you will need to file a lawsuit and obtain a court order for the foreclosure before completing the following steps.
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2
Write a notice of sale document. The notice of sale must include the property address, the trustee's name and contact information, and a declaration that the property is to be sold at auction. The time, date, and location of the foreclosure sale must be listed. A foreclosure auction may occur on any regular business day and any time between 9 a.m. and 5 p.m. Set the date of foreclosure at least 20 days from the current date.
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3
Dispatch the notice of sale documents and signs. Send one copy of the notice of sale to the borrower by certified mail, asking for a return receipt. A notice of sale sign must be posted on the property itself. Both of these actions must occur at least 20 days before the auction. Another copy of the notice of sale document must be recorded with the county where the property is located, no later than 14 days prior to the auction.
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4
Post advertising for the foreclosure auction to drum up interest. The notice of sale must be placed in at least one public place in the same county as the property, such as a local newspaper. Additional advertising will increase bidders at the auction, and hopefully raise the sale price of the property.
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5
Hire an auctioneer and hold the foreclosure auction at the prescribed date and time. It is important to use a professional auctioneer to get the best results from the auction. Professional auction services are experienced in vetting bidders and conducting the auction to net the highest bid.
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Tips & Warnings
Under California law, a lender can seek a deficiency judgment if the house was repossessed using a judicial foreclosure. This judgment may be requested if the foreclosure sale of the property did not raise enough money to satisfy the mortgage, and the lender wants to try to recover the difference from the borrower.
With a nonjudicial foreclosure, homeowners have only until 5 days before the sale to correct the deficiency that caused the foreclosure.
In a judicial foreclosure, the homeowner may be given up to a year to redeem the property.
Lenders may recoup more money from the property with a mortgage modification or a short sale instead of a foreclosure auction.
References
Resources
- Photo Credit gavel image by Cora Reed from Fotolia.com
