Orange County Foreclosure Process
The legal process a lender takes to terminate the interest of a homeowner who has defaulted on his loan is called 'foreclosure'. At the end of the process, the previous owner loses all rights to the home. When the home has been foreclosed upon, the lender can then sell the home and use the proceeds to satisfy the mortgage, and any legal costs. If there are any monies left over, the funds might be applied to any other liens on the home, or returned to the previous owner.Foreclosure purchases are extremely risky. The homes are usually distressed (fixer uppers) and are sold at the courthouse steps for cash. There is no opportunity to inspect the home's interior, so buyers don't know how much work needs to be done. Sometimes, the previous owners will even gut the property or cause property damage. ALL SALES ARE FINAL. Title insurance is not available on these homes and there may be problems with title, undisclosed mortgages, court judgments, liens, and tax liens. Title to the property is limited by the foreclosing lender's description in the deed of trust.
There are usually few bidders at foreclosure sales because of the all-cash requirement needed to purchase the homes. It is almost impossible to get financing to buy a foreclosure, so these buyers show up with large increments of cashier's checks. Usually the same group of buyers is at every foreclosure sale.
Many of the homes that are posted to be sold, get postponed for a later date. This may be due to the homeowner filing for bankruptcy, an agreement between the bank and the owner, the homeowner making the mortgage current, or a myriad of other reasons.
Some of the homes that are available for auction that day, have such a high minimum bid, that no one bids on them. Please note that most foreclosure auctions BEGIN with the balance of the mortgage + any liens, penalties, interest, late fees, attorney fees, auction fees, etc. When no one makes the minimum bid, the home is not sold and goes back to the primary lender that started the foreclosure proceedings. At that point, the bank may list the home for sale with a Realtor as an REO (Real Estate Owned).
If a buyer does bid on the home, and wins, the buyer is given a trustee's deed to the home. This deed gives title to the buyer which is free and clear of any secondary loans, but any property tax liens and any senior liens may stay on the property. That means the new owner is responsible for them. The IRS must be given notice at least 25 days before the sale date. Otherwise, any federal tax liens may stay on the property also.
The new purchaser of the property is entitled to take immediate possession of the home. Sometimes, however, homes that have been foreclosed upon still have the previous owners or tenants occupying them. Guess who would be responsible for evicting these people? The new owner will have to start an unlawful detainer proceeding. Who knows how long it will take to get them out, or what kind of damage they may make.
Foreclosures can be very risky investments to the novice investor.
