California Foreclosure Law

I need advice from investors in California!

Once the contract is signed, the seller has until midnight of the fifth business day following the signing of the contract to change their mind and back out of the deal.

When you are direct mailing folks in preforeclosure, do you have to mention in the letter that I can purchase their house after 5 days from the signing of the contract?

Basically, do I have to state in my letters any portions of the foreclosure law so that the seller is aware of their rights?

I have a preforeclosure letter that I would like to have reviewed by someone to see if it contains correct information.

In California, Realtors® and real estate brokers (Foreclosure Consultants)—unless fully bonded –– are prohibited from professionally assisting in any real estate related transaction that would purport to save a mortgagor from foreclosure while leaving the debtor in the property.

Likewise, investors (Equity Purchasers) are prohibited from offering someone in foreclosure any scheme that would purport to “save” the mortgagor from such action while remaining in the property. In any of these categories, a careless action by an investor could result in the mortgagor’s (the mortgagor who is no longer in default) reversal of the entire transaction, costing the investor loss of the property, all monies spent, and even severe civil penalties. Warning! Be thoroughly familiar with these laws. There are easier ways to make a living.

Da Wiz

When and if you create a contract with them, you must have them read and sign a notification that they have 5 days to back out. I don’t see why you’d have to mention it in a marketing letter or anything like that.

In my letter to folks in preforeclosure, can I still state that I can buy their house in 7 days or less OR do I have to state instead that I can buy their house after 5 days since technically I can’t buy their house within the inital 5 days?

Wiz,

how is one in foreclosure defined exactly? is it once a Notice of Default is filed? Once a Notice of Auction is filed?

Just wondering if you could go to someone who’s had a notice of default filed and make up their backpayments and take over their house on a L/O if that would be violating what you stated.

Thanks.

Depends on how you say it. You can say “I can buy your house in 5 days all cash”. Doesn’t mean you will, just means you can. Big difference legally. The key is to get them to call or not throw a garbage can at you when you knock on their door. Once you find out what’s causing the problem and that they live in the house you present the offer in accordance to the law.

In CA, once the NOD has been filed they’re in foreclosure.

You probably don’t want to L/O to the homeowner. If you sell it back to them the courts will consider it a loan and unless you have a broker’s license you could be in legal hot water. My recommendation is don’t do it in CA.

One caveat, Bill Gatten seems to have a way through this and his technique is well thought out but controversial. I’d recommend you go to one of his free seminars and decide for yourself if you really feel like you want to L/O to homeowners with a proven record of missing payments. If you do his technique, be prepared to do what you probably should have done in the beginning…take over the payments of the homeowner, do the repairs, and get it resold, refinanced, or get a L/O tenant with a good history.

I hope that helps.

Kawika,

I see what you mean about the “can” vs “will”. So what are the things that I should keep in mind when dealing with folks in preforeclosure so I don’t do something illegal. I’m in California by the way.

Kawika, thanks for your reply.

I wasn’t implying a L/O back to the homeowner but L/O’ing FROM the homeowner, would that raise red flags in California law if the owner is in foreclosure?

Thanks again.

California Civil Code 1695 is the best resource as it is the law. It spells out exactly what you can and cannot say or do when the homeowner lives in the property, it’s 1-4 units, and you do not plan on living in the property.

Get a good equity purchase agreement like the one from first tuesday (firsttuesdayonline [dot] com) or on Ward Hanigan’s site (foreclosureforum [dot] com) along with notices of cancellation and an addendum. Both sources have them and they’ve been tried and tested.

I hope that helps.

That’s a possibility but generally when you do a L/O to get control of the property you want to get in light (i.e. little cash). The backpayments on all loans and any fixup to the property will make it difficult to get in light.

It’s possible to get another L/O tenant with enough of a deposit to cover the backpayments, do fixup, and net you some cash but it’s very risky unless you already have the tenant/buyer lined-up. This is a situation where having a tenant/buyer list is extremely valuable especially if you know where they want to live. You could target foreclosures in that area just for your buyers.

So, yes, it’s possible but makes it hard to get in with very little cash.

From a legal standpoint I don’t see a problem as long as you can get the owner out of the house quickly. It’s usually better to just buy the property subject-to the loans and get the house fixedup, via private money, and resold or on occassion refinanced as quickly as possible.

I hope that helps.

sure does. thanks again

also read Civil Code 2945 (foreclosure consultant Law)