Steps after win at auction?
Submitted by learningaboutforeclosures
from CA
- 02/28/2009 - 8:38pm
Not clear about the last steps after a foreclosure auction purchase. Are these the correct steps and please see my questions?
After auction steps?
1. Provide cashiers check(s) for amount of winning bid
2. Is there a receipt you will receive? What documents will you walk away with from auction?
3. Attain homeowner's insurance
4. Receive Trustee's deed in the mail?
5. New owner records deed at County Recorder's office
Are there any other steps? I'm trying to understand the full picture of this process. Thanks!
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Comments
You will get a receipt - essentially a copy of the document that the auctioneer fills out with the winning bid, funds received, your contact information and vesting.
Your outline above is pretty good. If the property is vacant you should take possession of the property immediately after the sale - do not wait for the deed to be recorded. If the property is occupied and you got a good deal, sit tight and don't start the eviction or cash-4-keys negotiation until after the deed is recorded.
If you don't receive the trustees deed within 10 days call the trustee and find out when it will be sent. It is best to make sure the trustees deed is recorded within 15 days after the sale as it perfects title as of 8am the day of the sale (see Civil Code 2924h(c))
How does the trustee's deed get recorded in the winning bidder's name?
Does the trustee take a step to record deed in winner's bidder's name?
Or is there a step the winning bidder must take to record the trustee's deed with the county?
Thanks for any insights or clarifications!
After you win the auctioneer will take your money, and fill out a form with your contact information and how you want the property to vest. They will give you a copy of the form as your receipt. The trustee will then mail you a trustees deed to record - which you should do within 15 days of the sale (doing so makes the recording of the deed effective the day of the sale protecting your interest in the property - see CA Civil Code 2924).
On rare occaission the auctioneer will collect the recording fees from you, and the trustee will record the deed on your behalf. This is the trustees decision not yours.
How much are the recording fees, generally?
$1.10 per thousand.
Sean, Is it really prudent to take possession of a property before you have the Trustee's Deed? Without a deed you don't own the property, and rekeying a property you don't own is trespass, no? Also, what if the sale is rescinded?
As long as the trustees deed is recorded within 15 days you were the legal owner as of 8am the day of sale. That said, you are correct that there is a risk that the sale will be rescinded. Still if the property is vacant, I'd personally rather take the risk and secure the property, then risk someone moving in while I was waiting for a deed that I'll get 95% of the time.
One of the key parts of being an auction investor is determining the level of risk you are comfortable with. But note that there are always trade offs and there is no way to make this business risk free.
This thread relates to another question I posted (apologies if I am repeating stuff). As far as 'taking possession' of the property - does that mean anything more than having the locks changed and/or moving in your stuff?
Thanks!
Taking possession is more of a legal concept than a particular set of steps, but yes, the general idea is to take physical control of the property.
How can I get the keys if it's empty?
Joseph Park/e-PRO Realtor/CRA/Reo Bk-1847690
Korean-American Real Estate & Investment
Tel:619-370-7199 Fax:866-542-0545
Just change the locks.
"If the property is occupied and you got a good deal, sit tight and don't start the eviction or cash-4-keys negotiation until after the deed is recorded."
I've heard you say this before, and my question is why wait. Are there things the owner could do in between that are more likely to cause problems?
It is easy for a really aggressive owner to get a sale overturned prior to the deed being mailed as all the trustee has to do is return your check. Has happened to me before. Much harder for them to rescind, though not impossible, after you get, and record, the trustees deed. So wait.
Dear Sean,
I am planning to buy at the Trustee Sale Auction soon and knowing the property is vacant but not so sure just heard it from the neighbors and the mailman. Should I change the lock right away on the same day if I win the bid? And what would happen if after I enter the property and find out that people are still living in there? So what's the best way to do this if I am not 100% sure about the occupancy?
Thanks, you're really helpful!
Yes, I will usually go the property right after the sale, and if it is vacant I'll change the locks and secure it. Obviously if it is clear someone is still living there you won't be able to do this. If it is occupied you should probably wait until you have the trustees deed recorded before proceeding further.
Sean,
Is it an ok/good/bad idea to put the house up for sale within the 15 days after purchasing at trustee sale, and before recording the deed - in order to receive the first offer(s)? Of course, maintaining the goal to record the deed within the 15 days. Simply accepting offers though during the same time frame, possibly accepting one too? I have seen plenty of other people buy at Trustee sale, and put the home up for sale within a few days after the sale, and I know they didn't receive, no less record the deed that quickly. And in this market, I know they were probably already receiving offers after 24 hours. I appreciate your response and thoughts.
If you have secured the property I see little reason not to begin marketing before you have the deed. If you actually go to accept an offer, be sure to add a clause saying that the acceptance is subject to your recording the deed. Would be a bummer to have the trustee rescind the sale on a property you were contractually obligated to sell. :-)
I bought a house at auction in california. two weeks later the bank called and said they made a mistake and want to send my money back. can they do this by california law.
yes
Hi Sean,
I just bought a property, and the trustee told me that they send out the deed after 2 weeks, so it is impossible for me to record it within 15 days. What's the consequence of not recording it within 15 days? Thanks!
Fax them a letter citing CA Civil Code 2924's requirement that the deed be recorded within 15 days. Let them know that if they fail to deliver the deed in a timely manner you expect them to take full responsibility for any liability created by the late recording.
Sean, thanks for your response! I will do that for the next property I buy if they tell me the same thing. For this one, It is too late already.
hi sean,
i final secure the property and get ready to list it. however i want to save seller agent commission and plan to do it myself as "for sale by owner or fsbo".
i bought this property at court step auction. so is it legal to use the term "foreclosure" in my listing or would it consider and fraud advertisement i'm not the bank foreclosed it? i'm confused.
also, i want to list the house "as is" no warrant etc... where can i get a copy of an addendum? any suggestions to help successful list and sell the house quick. i'm new to real estate flip. any advises will be appreciated. kathy
hi sean,
i final secure the property and get ready to list it. however i want to save seller agent commission and plan to do it myself as "for sale by owner or fsbo".
i bought this property at court step auction. so is it legal to use the term "foreclosure" in my listing or would it consider and fraud advertisement i'm not the bank foreclosed it? i'm confused.
also, i want to list the house "as is" no warrant etc... where can i get a copy of an addendum? any suggestions to help successful list and sell the house quick. i'm new to real estate flip. any advises will be appreciated. kathy
Hi Kathy - note that even though I'm a broker myself, I have almost always listed my flips with another agent or broker. A few reasons:
1. A good agent will likely get you more money for the property.
2. You benefit from their errors and omissions insurance. This alone is worth paying a Realtor in my humble opinion. In these crazy time folks tend to get litigious - better to have some protection.
3. If you're good at what you do, finding and fixing, your better off spending your time on that, than on things someone else is better at... listing and selling.
Just my humble opinion.
As to your questions. For forms check out ZipForms, or Professional Publishing. As for calling it a foreclosure, I see no issue - but remember I'm not an attorney, just my belief.
Hi,
This is a follow up question to the original question posted in this thread. Once I received the Trustee's Deed and recorded it at the County's Recorder Office, is there anything else I need to do? How do I know that the 2nd loan (the Jr. lien) has been wiped out? Do I get some sort of letter in the mail to notify me? How or when do I know that the title if clean and I own it 100%?
You will not receive anything beyond the trustees deed. One could argue that you actually never know on any property (foreclosure or not) that you own it 100%. That is the reason for title insurance - just in case someone claims ownership or a lien.
To increase your peace of mind you could have a local title company do a preliminary title report for you.
Thank you Sean for the quick response. How much does a preliminary title report cost? How about Title Insurance?
Figure $350 for a prelim by a title co. Title insurance depends on value - but most title companies won't write an owners policy after you purchase at auction (though some have). Check with your local title co.
Sean, do you know a resource in Cook County, Illinois that would confirm the same advice about changing the locks on a vacant property?
Any good eviction attorney or service should know the answer.
I live in the Inland Empire in Southern CA. actually San Bernardino County in Southern CA. How can get the list of houses before the auction? The cashier check need to be made payable to who?Also if the property that you bought has people or tenants what do you do?? Thanks for all your help
Fabian
No better source for a list of what is going to auction than ForeclosureRadar.com... IMHO. :-)
Best bet is to make the cashiers check payable to yourself and then sign it over to the trustee. Otherwise you'll need it made out in the trustees name for the particular property you want to bid on (impossible if you want to bid on a bunch unless you have unbelievable access to cash).
If the property has occupants you should try to do a cash for keys, if not then you have to evict.
Finally --- PLEASE post new questions (which these all were) as a new topic, rather than as a comment to a completely unrelated post. Thanks.
I'm planning to buy a house at the trustee auction, but the house is priced low enough that I think there will be others there bidding as well. I can have a cashier's check made for the minimum bid, but what if the amount goes $10-30,000 over? How can you possibly pay by cash or cashier's check when you don't know the final price? I can't imagine people bring a $30,000 wad of cash with them. Will they give you a few minutes to run to the bank to get a cashier's check for the remaining amount?
One more question...in California, from what I understand, all liens are released at a trustee auction except for IRS liens. What's the best way to find out if there are IRS liens on the property?
Thanks for all your posts above...lots of good info.
1. You do not need the exact amount. If you over pay the trustee will refund the difference in 1 to 2 weeks typically. Be sure to bring enough for your maximum bid.
2. All liens are NOT released, only "junior" liens. If you buy a 2nd at trustee sale, you will still owe the first. IRS liens are also wiped out, however, the IRS has a 120 day right of redemption. Also note that past due property taxes are ALWAYS senior, so you'll have to pay them. The two primary ways to find IRS liens is to do a search at the county recorders office, or get a preliminary title report from a title company.
OK, thanks. How does one find out for sure if the trustee auction is regarding the first or second mortgage? Is there a record filed somewhere? I can see the trustee is a first mortgage on ForeclosureRadar.com, but I'd like to see a document in person before taking the plunge. What a horrible prospect to accidentally buy a worthless second mortgage!
Thanks again for your help.
There is actually no way to know "for sure". That is the reason you get title insurance when you buy a home... just in case there is a claim in the future.
The issue with buying at trustee sale is that you can't get title insurance. As such you have to decide how much risk you are willing to take. If the answer is none, then don't buy at trustee sale.
Position is based on the order (with some exceptions) in which documents (loans, liens, etc) are recorded at the county recorders office.
Given that your goal is to minimize, not eliminate, the risk, there are things you can do in order from least risky to most risky:
1. Have a title company prepare a preliminary title report on the property. Title companies are good at this. The problem is that they may charge you as much as $300 to do it, so this solution really doesn't work if you plan to buy often.
2. Hire an abstractor (google it), they will do a current owner title search for maybe $60. If you find someone good it should give you a real good idea.
3. Go down to the county recorder and do a name search and review the title history. You'll need to learn some of the rules of title to do this.
4. Just use common sense (the house sold for $500k, the loan is $400k it is probably a first). This is how we >GUESS< at loan positions. Note our disclaimers, we don't recommend buying based on these guesses.
Hope that helps. You'll find a lot more details on researching title here in the forums.
Sean,
You mentioned that there is no "title insurance" for trust sale. So if I won a TS, recorded the deed and sold the property to a third party after 120 days elapsed, will a title company issue the third party an insurance policy? Thanks.
Yes they would. And the 120 days only applies if there is an IRS lien - otherwise they would likely insure a subsequent buyer anytime after your trustees deed is recorded.
I bought a property at auction this week, I am also the current tenant of the property. Do I need to notice the former owner about personal property left at the property? He really could only claim draperies, as I own everything else at the property
Sean, I bought house at trustee's sale. After I recorded my trustee's deed,I when to my house and talked to the tenant who is previous owner's friend and give him 30 days to move out, so it should be by 04-26-10. But he said he will call me back last week,and he never did,and he never returned my phone call.Should I start eviction process right now? But I don't know the tenant's full name. Should I evict the tenant and the previous owner both or just the tenant? Should I just serve the eviction notice to the house I just bought ? Thanks Sean for all the answers, it is very helpful.
I always start the eviction process immediately regardless of any cash-4-keys deals or other agreements - though I make it clear to the folks I'm doing this. Why? Its an insurance policy to make sure I don't lose a bunch of time if they don't follow through on their part of the deal. If I'm going to give someone more than a couple of weeks to get out, I have them agree to a stipulated judgment on the eviction such that I can move straight to filing the judgement and calling the sheriff if they don't perform.
what do you mean by agreeing to a stipulated judgment on the eviction ? Secondly, wha abot Jenny's question on not knowing who the tenant is, how do you start an eviction in such a case?
An unlawful detainer case will end with a judgement - a stipulated judgement is one that is pre-agreed to by the parties.
If you do not know who the tenant it is you should start by trying to contact them. If you can't identify them your eviction service can help you with including "all unknown occupants".
I bought a property at a Sheriff sale in Illinois The same day I went to see the property and talked to the owner. The first thing I said was that "I'm not the owner, I'm just the higher bidder and the judge must approve the sale. However, if she doesn't mind I would like to see the property". She was very nice with me, she showed me the property, but today her lawyer call me. What could happen?
I don't believe the borrower has a right of redemption in Illinois, but they may bring a lawsuit to try to have the sale overturned. Ask the lawyer why he is contacting you, remind him there is no right of redemption, and that as a bonafide purchaser for value you are afforded a number of protections under the law that may allow you to keep the home even if the lender may an error (though if the lender made a serious error the sale very well could be overturned). If he makes any demands simply note them and tell him you'll have your attorney get back to him.. I wouldn't try to negotiate directly with him.
As I've recommended in the forums before, I always recommend you don't contact the owner until after the deed is recorded IF you got a good deal and really want to keep the property. Easier for a lender/trustee to over turn a sale before the deed goes out, then after. On the other hand go contact the owner right away on marginal deals, as it may give you a chance to convince the lender/trustee to rescind the sale if it looks like it is going to be a fight.
Sean, the borrower has no right of redemption here in Illinois.
Today it has called my attention that the property has been listed for sale as a "short sale".
I don't want to rescind the sale. Could the sale be rescinded ? I have a deal, but not a HUGE deal.
Do I have any protection? I won the bid and I have paid the property in full 1 week ago.
What do you advice me?
Won't hurt to return the attorneys call as I mentioned above. Otherwise wait for the deed. If you get it then proceed with cash-4-keys or eviction.
Ok, I will return the attorney call as you recommend.
Thanks a lot
Gus
If I purchase property at foreclosure auction and the loan that I purchase is in first position. What other type of liens stay with the property that I will have to pay
You will always want to check for delinquent or current property taxes. If the loan you are purchasing was a refi you will also want to check for any family support judgements or any other liens or loans that are superior. If you see a prior loan was a home equity lien of credit always verify that a reconveyance was recorded. Additionally, if you are intending to flip the property you may also want to check for IRS liens since there is a 120 day redemption period on IRS liens.
If you look in the Forums you will find some great threads on which liens are wiped out at trustee sale.
Do HOA Liens and City liens in junior position get removed after auction
No, nothing is ever "removed" from county records, however, their secured interest in the property is wiped out by the foreclosure. Note that does not necessarily mean they won't still try to collect. I've had problems with both HOA's and with citys in this regard. Regardless you aren't responsible for HOA dues incurred after the mortgage you bought was recorded and prior to your purchase of it at the courthouse, though you might have to arm wrestle them a bit.
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