Understanding the Foreclosure Process in California

Understanding the foreclosure process in California is important if you find yourself having trouble making mortgage payments.

We give you some background on foreclosures and what to do if you find yourself in this situation.


What is foreclosure anyway?

Foreclosure is the legal process that lenders use to take back property securing a loan, generally after the borrower stops making payments.


Foreclosure is no fun.  But just know that it’s not the end of the world.


When you know how foreclosure in California works… it arms you with the knowledge to make sure you navigate it well and come out the other end as well as possible.

The Basic Stages of A Foreclosure

There’s a few stages that are important to any foreclosure process.


Foreclosure works differently in different states around the country.


The two ways different states use to foreclose upon a property are: judicial (in court) or non-judicial (out of court). California is a non-judicial state, although judicial foreclosures are allowed (but not common).


In either scenario, foreclosure typically doesn’t go to court until 3-6 months of missed payments have elapsed. Usually (but not always), a lender will send out many notices that you are in arrears – overdue or behind in your payment.


Under Non-Judicial Foreclosure:


Understanding Foreclosure Process in California

  • The mortgage lender serves you with papers demanding payment, called a Notice of Default (NOD) and the courts are not required – although the process may be subject to judicial review. This is the “pre-foreclosure” period.
  • The NOD is mailed to you and all interested parties.
  • Three months after the NOD is filed, a bank can file a sale date, which is done through a trustee (the sale is called a trustee sale).
  • You have until 5 days before the sale date to remedy all past due balances and accrued costs for the bank’s filings.
  • If the default is not remedied, the trustee can then sell your property for the lender at a public auction (notice must be given).


Anyone who has an interest in the property must be notified during either type of foreclosure.

For example, any contractors or banks with liens against a foreclosed property are entitled to collect from the proceedings of an auction.


What Happens After A Foreclosure Auction?

After a foreclosure is complete, the loan amount is paid off with the sale proceeds.


Sometimes, if the sale of the property at auction isn’t enough to pay off the loan, a deficiency judgment can be issued against the borrower.


A deficiency judgement is where the bank gets a judgement against you, the borrower, for the remaining funds owed to the bank on the loan amount after the foreclosure sale.


Some states limit the amount owed in a deficiency judgment to the fair value of the property at the time of sale, while other states will allow the full loan amount to be assessed against the borrower.


Here’s a great resource that lists the state by state deficiency judgement laws, since every state is different.


Generally, it’s best to avoid a foreclosure auction. Instead, call up the bank, or work with a reputable real estate investment company like Skye Homes to help you negotiate discounts off the amount owed to avoid having to carry out a foreclosure.


Experienced investors can help you by negotiating directly with banks to lower the amount you owe in a sale – or even eliminate it, even if your home is worth less than you owe.


If you need to sell a property in the Bay Area, we can help you.


We buy houses in the Bay Area like yours from people who need to sell fast.


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Jake Knight

Jake Knight has been a residential real estate investor since 2016. He specializes in acquiring and renovating houses in the Bay Area, Sacramento, eventually expanding to over 15+ states. Jake’s prior experience in lending, going back to 2003, laid the foundation for solving complex real estate issues.

Drawing upon his background in assisting sellers with the task of transitioning from a home they have lived in for decades, Jake launched a “senior move management” business in 2021. This company provides valuable support to seniors during the process of packing, coordinating their moves, and downsizing as they transition into senior living communities.

In 2022, Jake expanded his services by becoming a licensed real estate agent in California, providing comprehensive solutions to his seller clients.

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On the other hand, there are some sellers who need a custom solution due to either the property’s condition or the seller’s personal situation, or a combination of the two.

When the property is in really bad shape, they’re likely going to sell to an investor, so it may make sense to save money on commissions and find their own investor.

Some examples of personal situations that we can help with are: hoarding, pre-foreclosure or other financial issues that require a fast home sale, house with non-paying tenants or squatters, severely delinquent property taxes, homeowners who want to rent back the home longer than normal, or sellers who value privacy and/or are embarrassed by their home.

If your seller lead meets these criteria, you should propose the idea of making an introduction to me. You can simply suggest to them that your partner or colleague buys houses and ask if they are interested in speaking with me. Remember, you are not performing real estate agent duties. See our disclaimer below. The main thing to keep in mind at this point is to qualify them as a good fit or not. I can help you with the documentation and process things.