California Foreclosure Timeline

This time-line applies for California Non-Judicial Foreclosures under a Deed of Trust. Foreclosures begin with the Trustor (borrower) defaulting on their monthly payments to the Beneficiary (Lender), the first missed payment is technically considered default, but in all reality, most Beneficiaries do not start the process until the third missed payment. If the Beneficiary cannot resolve the defaulted payment amount with the Trustor through Forbearance or other Loss Mitigation measures, the Beneficiary will instruct the Trustee to begin Foreclosure proceedings.

Day 1: Record Notice of Default

Within 10 business days: Mail and publish Notice of Default

Within 1 month: Mail Notice of Default

After 3 months: Set the sale date

25 days before sale date: Send notice of sale to I.R.S. (when necessary)

Within 10 days from 1st publication: Send beneficiary request for property directions

14 days before sale date: Record Notice of Sale

7 days before sale date: If court action, 7day rule may apply

5 business days before sale date: Expiration of right to re-instate the loan

Sale date: Property is sold to highest bidder

What is NOD

Notice of Default.  When the Lender doesn’t receive the mortgage payment on the agreed terms and conditions and the exact date of when payment is due, the Notice of Default will be filed.

What is NTS

Notice of Trustee Sale.  A servicer may take over a property from a borrower on behalf of a Lender.  A property usually goes into the process of Trustee Sale if payments are more than 111 days(90+21) past due

What is Trustee

A legally empowered person who holds or controls a piece of property for another person.

What is REO

Real Estate Owned by the Bank.

What is Foreclosure

The process by which a Lender takes back a property on which the mortgagee has defaulted.  A servicer may take over a property from a borrower on behalf of a Lender.  A property usually goes into the process of foreclosure if payments are more than 90 days past due

What is a Short Sale

A Short Sale is the process between the Lender and Borrower in which the Lender may agree to allow the Borrower to sell the property for less than the existing loan value.

What is a Real Estate Auction

A Real Estate Auction is the process by which the Lender decides to sell all their REOs at one designated location through an Auctioneer to the public to the highest bidder on each property.

What is Trustee sale

Notice of default - A lender's initial action when a mortgage payment is late and attempts to reconcile the issue out of court have failed.

Notice of Trustee sale - A lender's initial action when a mortgage payment is not received even after failing a notice of default and setting a exact date to auction the property to the highest bidder.

Buying at Trustee's Sale - PROPERTIES ARE SOLD "AS-IS, WHERE-IS"FOR CASH OR CASH-EQUIVALENT. USE EXTREME CAUTION WHEN BUYING AT TRUSTEE'S SALE. YOU'LL OWN IT; YOU NEED TO KNOW EVERYTHING YOU CAN ABOUT THE PROPERTY!!

Information is everything! Up to date accurate information is essential for investing in foreclosures. Foreclosure sales are commonly postponed for many reasons, some because owners are trying to save the property, others because the lender needs more time for proper processing. You will need to track properties you are interested in, making sure to record postponement dates and reasons for postponement. KEEPING AN ACCURATE DATABASE IS ESSENTIAL. When a property has postponed many times, other investors will sometimes lose track of properties you are interested in, thus reducing competition at the actual sale. Properties are tracked using a Trustee Sale Number (TS#). This number is generated when a property enters foreclosure and is used by the interested parties. When you are seeking information regarding a property, this number is usually used to reference the property. Trustee's are the ones usually processing a foreclosure, typically the only information they will give out regarding a property will be the date, time and location of a sale along with a bid if it is available or a postponement date and reason if the sale postpones. Bids are available shortly before the sale; this can range from the day before up to the actual time of sale. When a bid is available, there is a good probability the property will be going to sale instead of postponing. Be aware that published bid amounts will differ from the actual bid amount at the sale. Sometimes they will be slightly higher to cover actual costs and sometimes the lender will reduce a bid making a property an attractive purchase. Posting companies handle the publication and posting of foreclosure notices along with acting as the auctioneer at the sale site. Typically cancellations of sales are announced, and then postponements followed by properties going to sale. Again, everything is referenced by TS#, pay attention so you don't miss properties you are interested in.

“THE SALE” - The auctioneer will ask if anyone wants to qualify, either before all properties are announced or before individual properties are announced. To qualify, you will need to show the auctioneer cash or cashier's checks sufficient to cover any bids you will be making. Some Trustees specify checks are to be made out to them, usually you can get cashier's check made payable to you, then if you are a successful bidder, you endorse them payable to the Trustee. Common practice is to have large checks to cover most of the expected bid, with smaller checks to cover

increases in the bidding. You really do not want to have one check for $300,000 if you are going to be bidding on a $150,000 house or if you will want to buy more than one property. Once you sign your check over, you will not have the surplus funds available for a while. When bidding and qualifying, keep in mind that anyone around you is a prospective bidder, if you allow them to see the maximum amount you can bid to, you have weakened your position. The same holds true for notes you have written or numbers keep your information private! BIDDING. The auctioneer will ask if anyone would like to bid when they are auctioning a property. If it is a property you are interested in, your bid should be a penny over the opening bid. The property will not sell until the third call and some people like to wait and see if anyone else is showing an interest. Relax; wait to see if other bidders are going to jump in, if no one does put your "penny over" bid just before the third call. If other bidders are interested in the same property, bids will go up usually in hundred dollar increments. Know the maximum bid you are willing to place and do not exceed that number. It's very easy to get involved in a contest of who's going to win the bid, if you are investing, you need to make a profit, not prove you can bid higher.

After The Bidding - If you are the successful bidder, you will need to sign checks over to the Trustee. Usually, after all sales are complete, the auctioneer will write you a receipt, ask how title is to be held and you'll be done. The Trustee can record the Trustee's Deed for you or they will send you the deed along with any excess funds from your checks. Sales are sometimes invalidated by legal reasons, if so, you will receive your funds back. Expect to have everything done one to two weeks after the sale.

The Tools for Foreclosure Investing

There are five basic tools required for successful foreclosure investing.  
1. A notebook (I like the subject notebooks, wire bound on the side)
2. A pen kept in your car (maybe two, cars seem to eat pens)
3. A calculator (Nothing too fancy, just to do simple figures without making mistakes)
4. A Thomas Guide (This is the best way for finding locations and directions)
5. A mind willing to change behaviors and to learn new things.
The first three are fairly self-explanatory, you aren't going to be able to remember everything you see and everywhere you've been, so you'll need to make notes to refer to later, the calculator will help when you are running numbers on a property.

Let's start with an exercise in behavior.  Take your Thomas Guide and follow the routes you take to go to work, go to the bank and go to the grocery store.  How many neighborhoods do you drive by that you never actually drive through?  How many streets with how many houses are there that you haven't seen in the last six months or last year?   For the next week, leave for work 15 minutes early, pick one of those neighborhoods and drive through as many of the streets as possible at a fairly slow pace.     LOOK at the houses, what condition are they in, how are they maintained, what kind of cars are in the driveways, do a lot of people park on the street?   Any houses that are listed for sale and have flyers in front, you should stop, take a flyer and take note of the condition and appeal of the home.  Then, after work, do the same thing in the same neighborhood on your way home.  Need to buy groceries?   Drive through a local neighborhood on the way.  Same thing on the way back.
If you always take different routes and see different neighborhoods, you will begin to see properties that don't fit in with the neighborhood.  It might be the lawn isn't mowed or perhaps it's not maintained the same as the others, maybe there are too many cars parked in front or sometimes the house just looks empty.  The point of the exercise is to train your eye and your mind to always look for property that doesn't quite fit with the surrounding homes.  You take a flyer from the listed homes to start to build an idea of what homes might sell for in that area.  Each day, switch to a different neighborhood, you'll see differences between neighborhoods and individual properties will start to stand out more when they don't fit the neighborhood.  As you become more practiced, look at the style of building in each neighborhood.  Does the style and quality of construction conform with the other neighborhoods you've seen?  Even if all neighborhoods are maintained virtually the same, quality of construction can vary widely between adjacent neighborhoods.  The ability to drive into a neighborhood you don't know and fairly quickly determine housing quality in relationship to surrounding neighborhoods along with establishing an individual property's quality to it's neighborhood is essential for successful investing.  This will be discussed more in following chapters, but for now, start using tool # 5, your Mind.

What else can a Thomas Guide show you?  Things look very different when you look at a detailed map versus driving in the same area.  Look at streets and areas you know well.   Identify the neighborhoods and how they change throughout the area.  Major streets divide neighborhoods, neighborhoods usually get more desirable as they get closer to amenities (parks, open space, golf courses), they usually get less desirable as they get closer to impacts (freeways, commercial areas, high density residential).   Look at your area on the map, and then drive your area looking at the housing.  Does it hold true?  Sometimes it's just a little less maintenance, perhaps there are more rental properties than in other areas, but you will find that prices will also be lower for impacted properties.  Properties nearer amenities will usually be highly maintained and sell for neighborhood top dollar.

If you've gotten this far, the two biggest problems of "I don't have the time and I don't have the money" have been addressed. 1. You can begin to learn about property and it's values by taking just a little extra time each day when you are going to be driving anyway. 2. You shouldn't have spent more than $35.00, most of that for the Thomas guide.  Continue with driving different neighborhoods, expand into new neighborhoods and remember, you can't see what's there if you're driving 45 mph.

Determining Property Values

Property fair market value is determined by recent sale prices of similar properties in the same area.  The sales assume a fully informed willing seller and a fully informed willing buyer.  Let's say you are interested in 123 Main St. and want to know the current market value.  First step (using your Thomas guide) is to define the neighborhood this property is located in and any likely impacts or amenities.   You can do this because you followed the procedures in Chapter 1.  Next, you need a source for comparable sales (comps) from the last six months.  Realtors can provide Multiple Listing Service (MLS) comps for a given area, title companies can provide comps from tax records and there are a few on-line services that can do the same.   Taking your list of comps, you drive by each comp noting condition, size, appeal and location.  While you drive each one, look for properties that are listed for sale and take the same information for them also.  Keep in mind that comps might have had work done since the sale, look for signs of recent work, especially on very low sale prices.  Your last stop will be 123 Main St., the subject property.  How does it compare to your comps in condition?  Is it bigger in square footage or smaller than most?  Is the lot bigger or smaller?  Does it have the same number of bedrooms and bathrooms?  Are there impacts or amenities close by that will affect the sale price in relationship to the comps.  This is why having the property comp out is more an art than a science.  From your comps, you want three neighborhood properties that closely match the square footage, bed/bath count and lot size of 123 Main St., your subject property.  If those three are all pretty close in condition and there are no outside factors, the sale prices should be close together.  Making any adjustments for size and/or room counts, the market value will be in the range of the 3 close comps.   If there are a lot of properties listed for sale and they are all listed at a lower price, you'll need to look at the listings stronger; they could define the current top market value.  But, if there aren't any current listings or just a few and those few are listed at a higher price, you might be able to support a higher value upon resale.   But wait, you say, my subject property needs a new roof, there is no landscaping and the house hasn't been painted since it was built. 

Market value is going to be determined by the area the property is located in.  Rehabilitation (Rehab) is often a requirement to bring a property to its Fair Market Value.  Obviously, no one is going to pay market value for a property that needs significant rehab.  That's where you, as an investor, come in with the knowledge and capability to accomplish a rehab allowing for the property to be sold at its fair market value.  Your objective is to acquire the property at a price low enough to allow for rehab and holding costs until the property can be sold earning you a profit.

How to Rehab a Home

You've got a house, now the question is "What to do with it"?   The best first step is to evaluate the neighborhood.  If the neighborhood has shingle roofs, vinyl floors and basic amenities in the homes, you don't need a tile roof, ceramic tile and gold plated fixtures.  The objective when doing a quick cost-effective rehab is conformity with the neighborhood.  Carpet, paint and some landscape are almost always a requirement to freshen the appearance of the property, after that, your rehab should focus on getting the most improvement for your investment dollar.
Structural Rehab- I strongly advise against a new investor purchasing properties needing structural rehab.  If there are sagging floors, cracked foundations, fire damage, un permitted structural changes, water or dry rot damage, stay away from the property.   While these kinds of property can be purchased very often way below market value, the rehab cost to bring them back can make your investment a non-profit effort.  The difficulty in evaluating cost of repairs means this type of property should be left to more experienced investors and contractors.

Beginning Cosmetic Rehab - You've evaluated the area and know what the house SHOULD look like, now how do you get it there?  If you start on the outside first pruning back overgrown trees, cutting shrubbery back and getting any lawn back to a normal height, that's the first step.  Watering on a regular basis after your trim back will allow plants and trees to start to grow in an attractive fashion.  You start with vegetation first, because you can control the speed of interior projects, but you can't make plants grow any faster.  A freshly painted exterior on a home greatly improves its curb appeal.  Since you have the existing plants cut back, now is a good time to proceed with exterior paint.  Again, keep in mind you are looking for conformity with the area, colors should be in the same range as other area homes.

Inside Cosmetic Rehab - There are three basic inside area types - kitchen, bath and living.  Kitchen is the most expensive to rehab, bath is the second most expensive rehab and living areas are fairly inexpensive to rehab. 
Starting with basic living areas, pull the carpet from each room, roll it and store it in the center of the living room.  You can leave the padding.  It's much easier to paint without carpet, the living room is usually the largest room and closest to the front door.  The new carpet installers will haul it off when they install the new carpet.  Window coverings, electrical outlet covers, switch plates, light fixtures, doorknobs and hinges can all be pulled.  Please keep in mind the power should be turned off at the breaker box anytime you are working around electrical fixtures and outlets.  Mark all the doors on the top edge (no one ever sees the top) identifying which room they belong to and put them all in one room.  You should be able to see every imperfection in the walls at this point, now is the time to patch, clean and prep for painting.  Mask off doorframes, cabinets and window frames.   When you've completed the prep, start the painting.  Sprayers are the fastest method of applying paint, since the house is gutted, over spray isn't a major problem except around your masked areas.  Ventilation is important though, so you'll want open windows wherever you're working.  Living room first, then bedrooms, hall area last.  Re-inspect each room 1-2 hours after painting to make sure everything is covered and even, retouch any problem areas. 
Time to get an accurate count of outlets, switches, hinges, knobs and light fixtures.   Go through the whole house counting everything you removed or will remove.   Every light switch and cover plate should be replaced along with all outlets and plates.  Every living area light fixture (don't forget bulbs) should be replaced, determine whether kitchen and bath light fixtures need replacement or are serviceable.   Every door will need new hinges and a knob.  Do you have to change everything?   Maximizing returns is about impression.  Used hardware will be discolored, scratched, have paint on it and not match throughout the house.  A new knob (with striker plate) and hinges, a new light fixture, new switch, outlets and paint should cost less than $60.00 per room.  For a standard 3 bedroom home that's $300.00 for the living type areas.  Everything will match, be brand new and make the home much more desirable.
Doorframes, windowsills, cabinets and doors are usually going to be semi-gloss enamel paint.  Since you are now done with interior wall paint, lay doors (in the door room) on the floor, 3 or 4 at a time.  Prop one end up about six to twelve inches and you can spray one side and the two edges people see.  Keep over spray off the walls.   When they are dry, flip them over and do the other side.  Brush or use a small roller for doorjambs and cabinets.  Install light fixtures and outlets while paint dries, as doors dry, take them back to the room where they belong.  After doors and jambs are completely dry, they can be re-hung and hardware installed.  There's no need to rush, you can complete painting and installation as you rehab the bathrooms.
Bathrooms need individual attention.  In many cases, fixtures have been upgraded through the years, so a full gut and rehab isn't necessary.  Use your judgment.  It's easier to paint and replace flooring if the toilet and any sink cabinet are removed.  Re-install with new plumbing and seals and you will have a fresh bathroom with no water leaks or built up corrosion.  New handle sets and/or spouts will sometimes be enough so you don't have to replace everything.  Cabinet handles and hinges should all be replaced.  Flooring and paint should be the same if there are multiple baths, often there will be different fixture styles in each, that's fine as long as everything matches in each. 
At this point, you need to clean all the windows in the house, inside and outside.   Pick up anything remaining in the rooms and take it to the kitchen or remove it from the property.   
Kitchens are important.  Clean and paint is the first step if you are keeping the existing cabinets.  If existing cabinetry can be salvaged by intense cleaning and/or refurbishing, that will be your biggest cost savings.  Cabinet handles and hinges should be replaced unless the existing ones are in extremely good condition.  Counter-tops (if ugly or damaged) can usually be changed fairly easily; professional installation is worth it for a finished appearance.  Flooring should be installed after any necessary cabinetwork, whether it's cleaning, refurbishment or replacement.  The sink should be free of stains and corrosion; the plumbing underneath should be the same, if it's not, change it out.  Clean and put down shelf paper in all the drawer and cabinet interiors.  Make sure the lighting is adequate, if not, change fixtures or have additional fixtures professionally installed.  If the oven or stove needs replacing, there are stores that sell used appliances; these can be a good deal. 
Carpet gets installed during kitchen rehab.  As soon as the kitchen floor is down, get the installers in.  You can schedule installation when bathroom and kitchen floors are done, you should be done with paint and all of the "messy" projects.  Everything remaining shouldn't get the carpet stained or tracked up.  Any remaining tools or supplies should be in the kitchen; the rest of the house should be clean and empty.
Marketing the property can be started during kitchen rehab.  When you have carpet in the property, a "for sale" sign can go in the front yard.   The windows are clean, the property is immaculate and since you will be on-site anyway finishing the kitchen and a few other things, leave the front door open and place an "open house" sign in front while you are there.  Any remaining rehab to the kitchen should not adversely affect a buyer's decision.  They will be able to judge the quality of work by the rest of the house.

Finishing Cosmetic Rehab - It's time to finish the front of the house.   Flowers should be planted where appropriate, either rehab or replace the mailbox, porch light, house numbers and doorbell.  Keep in mind any plants planted close to the house might die if the house needs tenting for termites.  Leave some room at the base of the house if possible.  Take a critical look from the street; is there anything that stands out as being unattractive?  Is your property now the best or one of the best looking on the street?  If it's one of the best, there's nothing unattractive and you've priced right for the area, it will sell quickly.
You're still not done, so you can't rest yet.  Smoke detectors need to be installed and you need to check all the systems (electrical, plumbing) to make sure they work properly. 

Helpful Foreclosure Info.

The following information is not intended as legal advice. Consult appropriate professionals for legal advice and tax implications. No recommendation of services is intended.

Ultimately, the only thing that will stop a foreclosure proceeding is repayment of the debt; everything else is delay of the proceedings.

KEEPING THE PROPERTY VS. SELLING THE PROPERTY

If your monthly house payment (including property taxes and insurance) does not exceed 40% of your gross monthly income, it should be possible for you to keep the property. If the payment is greater than 40% of gross monthly income, consider selling or transferring the property to avoid negative impacts to your credit. The objectives in order of importance should be:
1. Keeping the property if possible.
2. Don't give away equity if you can keep it or liquidate and put it in your pocket.
3. Minimize damage to your credit. You will need it later on.

LENDER WORKOUT

Before exploring new options, have you tried to come to terms with your existing lender? Lenders want the loan to be current, not to have to complete a foreclosure. Can you make up the defaulted amount over a period of months? Can you re-write the note and include the defaulted amount? Can you give the lender a deed-in-lieu of foreclosure and preserve your credit? These are questions you should ask yourself and possibly your lender if you haven't done so already. They will want to know why the loan is in default and why you think you will be able to make the payments in the future. Temporary financial setbacks that have since been cured are the best candidates for this. Your lender will probably not be inclined to stop foreclosure proceedings if they have reason to believe they will have to start again in 6 months.

REFINANCING AND NEW JUNIOR LOANS

Basic lending guidelines will require all home loans will total up to less than

70% -80% of the current market value of the property. If you have more equity than that, you should have no difficulty in obtaining a new refinance or 2nd Trust Deed to bring your loan current. Expect higher interest rates and loan fees.

LOANS TO GET YOU CURRENT