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Things to keep in mind when looking for a house to buy or live in.

1. Stairs should never face the front door.

2. The back door should not be seen from the entrance.

3. The kitchen should be on the left when looking out from the inside (the same placement as your heart).

4. Avoid homes on steep abrupt hills (gentle grades are better)

5. Avoid homes facing hills, house that back to the hill and look out are good.

6. The road in front of the home should not be higher than the home.

7. Avoid homes where the street dead-ends into the home such as a home at the end of a cul-de-sac or a home at a tee intersection.

8. Look out for homes where the neighboring structures dwarf the home.

9. Look for square or rectangular lots and where the house is built in the center.

10. If the lot slopes the house should be on the higher part.

11. The distance between the street and house should be at least half the front to back length of the house (not too close to the street).

12. Roads that curve and follow natural contours are better than straight streets.

By John Schroder

Clients often ask us, “Is it true. Is it really possible to invest tax free with an offshore account”?

Yes, It is true. But there are some things you need to be aware of when contemplating your investment strategy.

For example, most people do not know that US brokerage accounts titled in the name of a foreign person or entity are exempt from capital gains. As a result, there is no “Tefra” or back-up with- holding on profitable stock trades. Clients of course are required to complete a W-8 form, stating it is a foreign account in order to take advantage of this (if the account is titled directly in the name of offshore structure or foreign client).

However, while the US is a good place to do your stock investing, it is not advisable for “fixed income” investments. Fixed income investments would include any type of interest bearing investment, such as Bonds, Bank Certificates of Deposit, Bank Savings Accounts or Commercial Paper. The reason for this is, while capital gains are exempt, US Banks and Brokerage Firms are required to with-hold up to 30% of any dividend or interest payment at source. Stated another way, any US account coded with a “W-8″, will result in an immediate deduction by the computer system when the interest payment is credited. Banks and Brokerage Firms then in turn must remit this “Tefra” or tax deduction to the IRS within 30 days. You can of course file a tax return the following April, claiming this money back. But with plenty of tax-free higher interest bearing alternatives readily available elsewhere, why even bother?

Many countries do offer special incentives for investors to deposit their money without local
taxation. In some jurisdiction, bank account interest is completely tax-free for both locals and foreigners alike. An example of a so-called “high tax” country that imposes high income taxes on it’s citizens, but absolutely no taxes on bank account interest for foreigners, is the country of Sweden. In fact there are a number of other “high tax” jurisdictions that have this same policy. In these cases, many countries would with-hold income tax payments directly “at source” for their own residents or citizens, but allow foreigners (or a foreign entity such as a Foundation or Company) to enjoy bank account interest 100% tax-free. If an account is coded as “foreign”, it does not even get included in the reporting information the bank would send to the local government. So in essence, you have a tax-free bank account in a country not even considered to be a tax haven, (but for you as a foreigner, it is).

The other option is to do your banking in a country that offers completely tax-free banking, regardless if you are a local resident or not. Such countries on this list would include Panama and the Dominican Republic. In the case of the Dominican Republic especially, investors have the opportunity to earn up to 8% or more with US Dollar Bank Certificates of Deposit or 90 day commercial paper. Since the only reason why any financial institution would report bank account information is for the assessment of taxes, and there is no local taxation on bank account interest in these two countries, there is no local reporting that takes place. With that said, there certainly is no reporting to foreign governments as well.

Setting Up An Anonymous Brokerage Account

Almost all non US or “Offshore” Banks maintain a relationship with a US Bank or US Stock Broker for the purpose of providing access to the US markets for their clients. There are two ways that this is done. One of these ways is known as a “fully disclosed” basis, where in effect all accounts carried with the US Bank or Broker are directly in the name of client.

In essence, the foreign or offshore bank is really acting as a sort of branch office in this regard. With this type of relationship, the client would receive a statement directly from the US Bank or Brokerage Firm, since of course “they know who you are”. Not necessarily the best route to take, if confidentiality and privacy are your goals.

The other and more common type of relationship, is through what is known as an “Omnibus Account” or “Custodial Account”. With this type of relationship, the client is not disclosed to the US Bank or Brokerage Firm at all. Instead, the foreign or offshore bank has one master account, titled in the name of the bank, which is being used to execute and carry all investment activities of the bank’s clients. Your brokerage account is then directly carried with the offshore bank, and any statements would come from them. In reality, your offshore bank is really performing what is called “sub-accounting”, which means that they are “breaking down” the master-account and are issuing a monthly statement to you with your holdings and activities. The US Bank or Broker does not know who the underlying clients are, or what investments each client owns. They simply know that they have a “custodial account” or “omnibus account” with “ABC Offshore Bank”, that happens to be valued at say ten million dollars.

This really is the best route to take, because what you in essence have is an anonymous US brokerage account (just remember what we said earlier about capital gains vs. interest or dividends) with the same SPIC or insurance protection of any other direct client that maintains an account with them.

The only down side to some offshore banks or offshore brokers are the fees involved. In the past, anyone that has dealt with some of banks in the Bahamas or Europe can tell you that full service brokerage fees look like a good deal after getting a rate schedule from some of the offshore banks offering similar brokerage services. The good news is, that is starting to change, and there are some very good banks in both Panama and The Dominican Republic offering very very competitive fee schedules.

For additional information about establishing an offshore account or offshore structure for tax-free investing, please contact our office.

by Dyches Boddiford

Trusts have been used as an entity to hold assets, such as real estate for hundreds, if not thousands, of years. Obviously, it’s old stuff. But, with each generation’s trials and tribulations, trusts evolve to meet new challenges. High Taxes and aggressive litigation are today’s motivators. Tax risks range from income tax to draconian death taxes that consume up to 55% of the assets a person leaves behind. Trusts are often used along with more modern adaptations of other old entities, such as partnership aberrations, to include family limited partnerships and limited liability companies. The quest is to keep what you have accumulated and to have some extended control of it, even after death.

A perfect example of using ingenuity to keep one’s assets away from the grips of the tax man was a trust established by Maria Cristofani in 1984. Maria established a trust and transferred to it real estate with a value of $70,000. The primary beneficiaries were her two children and, as contingent beneficiaries, 5 grandchildren should the two primary beneficiaries die within 120 days of Maria. All was fine until Maria died and the IRS audited her estate tax return.

Naturally, the IRS wanted more money. They claimed that Maria failed to file a gift tax return and owed back gift taxes. The IRS argued that Maria was entitled to give $10,000 per year to the two primary beneficiaries, but that taxes were owed on the $50,000 not excluded. The estate disagreed, claiming that the 5 contingent beneficiaries did have an interest in the trust. The trust had a Crummey power and, in accordance with that power, the trustee had given written notice to all 7 beneficiaries of their right to withdraw. Thus, the full $70,000 was excludable.

This means that multiple-beneficiary trusts now can be used to expand the fit-tax exclusion. It took someone with a tolerance for risk to mix old law, and an old trust entity with a new way of looking at the old to save Maria’s family substantial wealth. Over the years trusts have been used extensively in the attempt to control how much the government inherits. Some of the more familiar trust names include: Bypass Trust; Marital Deduction Trust; Generation Skipping Trust; Grantor Retained Income Trust; Insurance Trust; etc. The common thread for all of these trusts is to legally avoid paying the majority of the deceased’s wealth to the government. Failure to act is to assure that the estate will pay the highest possible tax.

A Need For Privacy

Real Estate Investors often use trusts as business devices. It is hard persons never being in business to understand, but business can be war. There is an ever growing number of enemy soldiers attempting to invade and plunder the investor’s castle of wealth. Sometimes this is accomplished by out and out illegal means, such as thieves that rob and destroy property or those who embezzle by not paying rent. The cruelest enemy is he who uses the law to plunder. Today, lawsuits are treated as a lottery.

Enemy troops look for excuses to sue; it is nearly a guaranteed profit. If a person can find some excuse to sue, even if very flimsy, the defendant will almost always settle for at least a few thousand dollars because it is cheaper to settle than to incur the cost of legal defense. It has become so bad that in some cities, such as Buffalo, NY, unscrupulous people publish lists of landlords and divulge such things as the number of properties, the number of units and the total value of real estate owned. Why? Because contingency fee lawyers will not spend the time and money to go after someone with minimum assets. They look for the ‘fatted lamb’.

Land Trusts

A result of this attack is a defense system. Trusts are used by some investors as a key part of their defense. The most common trust used in real estate investing is referred to as an Illinois style land trust. The primary purpose is to remove the legal title from the investor’s name. The title is held in the name of a trustee and the investor is both the grantor and the beneficiary to the trust. the trust does not offer the same kinds of protection a corporation or limited liability company can, but it has a place in the castle’s defense and is the most economical of all entities to set up and maintain.

Legal advisors often recommend trusts be used in conjunction with other business entities assuming the amount of wealth involved is sufficient to justify the cost of the business entity. Trusts, on the other hand, are usually very economical. An attorney prepares the original trust and it can be duplicated for additional use. The fee to have a knowledgeable attorney prepare a land trust can range from $300 to $1,000. Some of us do our own trusts, but a great deal of knowledge must be obtained before you consider doing this. There are no additional expenses, such as franchise fees or income tax returns. A land trust is reported on the beneficiary’s tax return as if the beneficiary personally owned the property.

Other Trusts

There are numerous possibilities for the name given to a trust. Such names are often chosen to reflect the primary function of the trust:

Education Trust;
Wealth Replacement Trust;
Charitable Remainder Trust;
Spendthrift Dynasty Trust,
etc.

Since names are assigned to trusts the public can get the wrong impression. It is often assumed that a named trust is like any other consumer good, such as the name ‘car’ or ‘truck’. A person wants to buy, say, a car but not a truck. They want a Spendthrift, but not an Education Trust. Actually all trusts are just trusts. The primary thing that differentiates them are clauses written into the trusts. For example, a single clause will turn an education trust into a spendthrift education trust.

The point is not to let names become confusing. The fundamentals of trusts are simple to comprehend. First, all trusts are either inter vivos or Testamentary. Inter vivos trusts are set up while the grantor is alive and are often referred to as a ‘living trust’. The testamentary trust, on the other hand, is set up after the person’s death by authority written in the deceased’s will. All trusts will be either an inter vivos or a testamentary trust.

Revocable & Irrevocable Trusts

Inter vivos trusts are either revocable or irrevocable. Revocable means the grantor can either revoke the trust or else maintain some significant power to maintain control of the trustee or use of the trust assets. Irrevocable means the grantor totally gives up rights and powers and walks away entrusting to the trustee all of the assets in the trust, referred to as the ‘corpus’.

The government treats most inter vivos revocable trusts as grantor trusts. As previously mentioned, grantor trusts are reported on the grantor’s tax return. Irrevocable trusts have more complex tax returns. in a nut shell, they are either a simple trust or a complex trust for tax reporting purposes. These returns are best prepared by professionals.

Most investors will be dealing with inter vivos or living trusts. Trusts used to hold operational real estate will generally be revocable, grantor trusts. These trusts are more for operational purposes that estate tax planning purposes. In general irrevocable trusts will be used to deal with estate tax planning.

Depending on the client’s objective, the attorney will draft a base trust to emphasize certain objectives, such as children’s education , or a land trust. Examples would be an education trust that is an irrevocable inter vivos trust and the land trust that is a revocable inter vivos trust.

Common Characteristics

Some common characteristics of the living trust are:

Assignment - In certain cases trusts can be assigned to third parties without changing the public records. Thought we do not recommend it, some real estate investors have used this feature in dealing with due on sale clauses of mortgage contracts.

Assurance - The trust may provide greater assurance that the grantor’s wishes will be met. Wills are more easily contested by disgruntled heirs and “want to be” heirs.

Avoids Guardianship of the Assets - Using a Trust the grantor/beneficiary has greater assurance that his assets will be managed in a manner prescribed by him and will be spent as he instructs in the trust document. If a trust does not exist and a guardian is appointed by the courts, then the courts and guardian make these decisions with no input from the incapacitated party. A guardianship is more expensive to administer than a trust since the Court usually requires a periodic accounting by the guardian.

Incapacitation of Trustee - If the owner of the property becomes incapacitated, managing assets can become a problem. A trust allows for an alternate trustee to step into the shoes of an incapacitated trustee without affecting management of the property.

Limited Liability - There is no significant liability protection. At best, the trust provides greater privacy as to who is the beneficiary. In most states living trusts are treated as the alter ego of the grantor. As such, liability may be attributed to the grantor.

Privacy At Death - Ownership transferred upon the death of the grantor/beneficiary of a trust is private when contingent beneficiaries are listed. Unlike a will, which is probated, a trust document does not become public record. Land trusts typically do not have contingent beneficiaries and, therefore, any property held in the trust would simply be included in the deceased’s probated estate.

Privacy While Living - Some real estate investors wisely seek privacy regarding the ownership of their real estate. They do not want their name as the owner of the public property records which would allow anyone to know how much wealth they owned in real estate and where that real estate is located. It can also cause a serious operational problem. For example, a judgment against the investor even for a small amount would give the judgment holder immense leverage diminishing the investor’s opportunity to negotiate a lower settlement on the judgment. The judgment attaches to all of the investor’s real estate. This would prohibit the investor from selling any real estate without first paying the judgment in full.

Probate - Where a trust has contingent beneficiaries listed, costs associated with probate are avoided since the trust is not probated at death.

Taxes (Income) - There is no tax benefit. The tax information is reported on the grantor’s personal tax return.

Taxes (Estate) - The Irrevocable trust, Insurance trust, Bypass trust and Marital Deduction trust are the most common trusts used to save estate taxes. Note that an irrevocable trust is a book trust and can be used for many purposes, such as the trust names indicate, Charitable Remainder Trust and Spendthrift Dynasty Trust. The revocable land trust saves no estate taxes.

As a landlord who has acquired several new properties in the past several years, I have found nothing makes renters more nervous than a change in management. Fears of rent hikes, added fees and new rules are just some of the concerns tenants wonder about when there is a change in management.

If you are thinking of selling a rental property anytime soon, help ease your tenants’ transition by keeping them informed during the process and reassuring them of the new owner’s obligations.

First, tell them all rental agreements in place at the time of the sale are still legally valid until the end of each lease term. The new landlord cannot change the terms of any existing leases or move for an eviction without proper cause.

Second, rent cannot be increased in the middle of a lease just because the new owner wants to raise the rent. New owners must abide by the rental rate in the current lease.

Third, no changes can be made in lease provisions regarding policies concerning pets, number of occupants or anything else stipulated in the current agreement.

As the seller, once you have accepted an offer and have a deposit, you should begin sharing information on the property and tenants with the new owner. Let your tenants know you are selling the property as soon as you are confident the sale will go through. Keep tenants in the loop throughout the process by providing any important dates to them (inspections, closing, etc.).

Once the sale is final, send a farewell letter to each tenant introducing the new owner, providing the new landlord’s contact information and any other items needed for a smooth transition. Often times, the new owner will probably want to meet the tenants and inspect their units.

The final step is the closing, where you’ll turn over all keys, deposits and paperwork to the new owner. After this, you no longer own the building and can walk away knowing you have treated your tenants with respect and helped them to transition smoothly with their new landlord.

Your rental property sold and the closing went off without a hitch. Time to celebrate, right? Not just yet. Uncle Sam may be waiting for his share of the profits.

Capital gains taxes are a part of all real estate transactions realizing a gain (unless you are rolling the profits into another investment vehicle through a tax-deferred 1031 exchange). Property sales taxes are due at the time of sale. Of course, if the sale shows a loss, there is no tax liability.

Here is a closer look at the different tax scenarios of selling a rental property:

Capital Gains – After a building has been owned for more than 1 year, it is considered a long-term investment. Sellers pay capital gains on the amount of the selling price minus selling costs and adjusted basis in the property. The tax on this amount (the capital gain) is calculated at the capital gains rates, which is lower than the regular income tax rate.

Capital Loss – If you lose money on the sale, you may get a tax break in the form of a capital loss. Keep in mind a paper loss–a decrease in the property’s value below its purchase price–does not instantly qualify as a loss. The loss must be calculated on the sale or exchange of the property. You can then use this loss against capital gains or against regular income when paying your taxes, depending on tax rules.

Like-Kind Exchange – If you want to defer capital gains taxes, you can roll the profits on your sale into another investment property under a federal 1031 exchange, also known as a like-kind exchange.

Here is how it works: The proceeds from your first investment property are held by a third party until you purchase another investment property within a specific time frame. Specific rules must be followed such as type of property, value, etc. Assuming the transaction meets all IRS requirements, any capital gains are deferred until you sell the new property.

Importantly, you can continue to build equity by transacting one like-kind exchange after another. Many property investors use like-kind exchanges to build their rental property holdings.

By: Grace Bloodwell

In real estate, a short sale is a sale that happens when the outstanding loan against a property is greater than the market value of the property itself. A short sale represents a solution for a homeowner who cannot pay his mortgage and wants to walk away from the property without blemishing his credit and financial profile through a foreclosure or bankruptcy declaration. Not all banks will consider the short sale, but many will. You will need a willing lender/bank and buyer to complete a short sale. Here is how you do it.

1. Value. Confirm the value of the property by having a real estate agent perform a Comparative Market Analysis (CMA).

2. Costs associated with sale of property. Figure out what you will spend on selling the property. Total up advertising costs, any broker fees/commissions you may incur, as well as the closing costs for the deal. Ask your mortgage broker about the fees associated with closing. Be sure to include any legal fees in your calculations.

3. Total loan value. Total up all loans against the property.

4. Do the math. Subtract the total amount of money owed against the property from the expected earnings of the sale. The number remaining represents the “short” of the short sale. The lender will factor this number into consideration when deciding whether or not a short sale is appropriate.

5. Legal assistance. You may want to consider hiring a lawyer or having a family friend who is in the legal profession assist you with the deal. This article can give you a general idea about the short sale, but cannot substitute for legal advice.

6. Accountant. It is a good idea to get an accountant’s input on the short sale before you proceed. There are tax implications in the short sale, just as in any real estate transaction. You need to know exactly what you will owe before getting into a short sale scenario.

7. Find a buyer. In order to do a short sale, you’ll need to come up with a buyer to pay off the amount of money your lender will accept. The new buyer will not assume your mortgage, rather, the sale of the property will result in you paying off the mortgage directly and the buyer having his own new mortgage on the property.

8. Contact lenders. It is now time to get a lender involved with the deal. Indicate to him that you are interested in a short sale, and share the information on your specific property with him. Depending on what percent of the estimated value you offer the bank, the lender may accept your deal or not. It can be difficult to find a lender with the authority to accept a discounted amount for the loan payoff, so do not think the first broker you call will jump on the case.

9. Proving insolvency. You must prove that you are incapable of paying off the entire mortgage and/or staying current with payments month to month. The lender will perform another mortgage application process to discover if you are, in fact, incapable of the financial responsibility you agreed to when you got the original mortgage. If the root of your financial woes occurred before you received your first mortgage, the lender may have a case against you for fraud—so beware. Also, know that lenders will almost never do short sales for properties with second mortgages since the lender in the second mortgage will not be happy about forfeiting his investment.

10. Sell the property. Once your lender has okayed the deal, and you have a buyer, you are free to sell the property. The lender will want to see a contract between the seller and the buyer indicating that the sales price is the exact amount of payment that the bank will be receiving from the seller. The bank wants to be sure that you (the seller) are not pocketing extra money off the deal.

11. Benefits for the lender. Lenders and banks routinely put properties into foreclosure in order to get their money back in a situation where the borrower defaults. A short sale may be an attractive alternative to the lender in some cases. In a short sale, the lender does not have to deal with some of the unpleasantries of a foreclosure, including the eviction process, attorney’s fees, costs associated with the resale of the property, damage to the property, and all the delays that are likely to occur in the process. Even though the bank is getting less money, they are getting it “now.”

12. Benefits for the buyer. The buyer gets a property at a discount.

13. Benefits for the seller. The benefit to the seller is that he walks away from the deal without having to declare bankruptcy or having to go into foreclosure. His credit report will be unaffected by this deal as well.

The short sale deal can be a creative way to save your credit and avoid declaring bankruptcy. Be sure you talk to a lawyer, a competent lender, as well as an accountant to verify the details of short selling with particular reference to your situation. Good luck.

Related Articles

* How To Sell Your Own Home
* How To Find a Real Estate Newsletter
* How To Successfully Sell Your Home in a Soft Housing Market

By: David M. Smith

While there are lots of buyers out there searching all over the country for deals on real estate, many are still coming up empty handed, and that can lead to a lot of frustration. However, if you just know where to look in the first place to find consistently low-priced homes, it becomes a lot easier. That is exactly the purpose of a foreclosures list. It gives you access to a huge directory of properties available all over the nation that are available at prices that are below the actual market value of the properties themselves.

Homes on a foreclosure list are special types of properties that have been repossessed by lenders and scheduled for public sale due to the mortgage default of other homeowners. The lenders seek to legally sell these properties as a means of collecting the debt remaining on the loan in question. This poses a very interesting opportunity for buyers however, that can often mean savings of anywhere from 10 to 50% off the market value of lots of apartments, condos, houses and commercial properties.

Often time, lenders will allow foreclosures for sale to go for only the amount remaining in debt on the loan, regardless of how much they would be worth on the open market. This is mostly to encourage quick purchase, as they only need to recover the loan to break even. Using a list of foreclosures, anyone can learn to find all sorts of these discount properties in areas around the country!

However, there are a lot of foreclosure listings out there these days, and it can sometimes be hard to tell the great deals from not so great deals. To be able to make the best investments possible, you have to know how to analyze the homes you find on foreclosure lists, so that you choose to pursue only the properties with the best potential for investment value and profits down the line. For starters, it’s very important to do research into any foreclosure listing that interests you. Find out everything you can, from the property’s sale history, it’s estimated market value, and statistics on the surrounding neighborhood and economy. All of these figures can help you determine not just how much the home is worth now, but whether or not its value is going to increase as time goes on.

Also, learn about the many different options for the kind of homes for sale list you want. There are all sorts of lists that specialize in many different kinds of properties. A bank foreclosure list can help you find great homes available for cheap prices from banks, and the process of buying them can be very accustomed to a beginner in this practice. Conversely, buying Fannie Mae foreclosures can often be a much more involved process that may require more experience.

But no matter what type of distressed properties you end up pursing, be sure you find a reliable foreclosure listing service to help you get your hands on the properties you want. Ideally, you want to find a company that can provide not only a great volume of properties in a foreclosures list, but also up-to-date information and accurate statistics. Look for the companies who update their databases daily, and who have a lot of experience in the business.

All in all, buying homes through a foreclosures list can reap you lots of profits and savings. Just be sure to carefully weigh your options and move ahead on purchases confidently, yet cautiously, and you will be in great shape.

California is known as a title theory state where the property title remains in trust until payment in full occurs for the underlying loan. The document that secures the title is usually called a deed of trust but may also be referred to as a mortgage. California has a complicated set of rules concerning foreclosures and alternate rules for foreclosures; it is generally a consumer friendly state.

How are California mortgages foreclosed?

The primary method of foreclosure in California involves what is known as non-judicial foreclosure. This type of foreclosure does not involve court action. When the deed of trust is initially signed, it will usually contain a provision called a power of sale clause, which upon default allows a trustee to sell the property in order to satisfy the underlying defaulted loan. The trustee acts as a representative of the lender to effectuate the sale, which typically occurs in the form of an auction. Unlike many states where trustees are appointed by lenders, title companies primarily serve as trustees managing foreclosure sales in California. California has a requirement known as the one-action rule. If a foreclosure is completed by non-judicial means, a second action to recover a deficiency judgment is not permitted. Using a judicial foreclosure, a lender may recover a deficiency judgment in certain circumstances. But since this process takes longer than non-judicial foreclosure, it is rarely used. California non-judicial remedies have stringent notice requirements and the mortgage documents are required to contain thepower of sale language in order to use this type of foreclosure method.Judicial foreclosure are permitted in California and these usually occur when no power of sale language is included in the loan documents.

Power of Sale Notice Requirements:

1. A notice of default is recorded after a default occurs in the county in which the property is located. This does not necessarily occur after one or more payments are not met but for logistical reasons may occur after a loan is in substantial default — sometimes six months or more past due. This is known as the redemption period. The foreclosure process does not move forward for a minimum of 60 days. A notice of sale containing the name and address of trustee, certain disclosures (including that the property is about to be lost to foreclosure sale), the name of the beneficiary, and other information must be recorded in the county in which the property is located at least 14 days before any foreclosure sale after that time period. This is known as the publication period.
2. The borrower must receive a twenty (20) day notice before any foreclosure sale, further notice of the foreclosure must: (a) mailed to the defaulting borrower (and other creditors whose liens affect the property) and; (b) be posted at the property being foreclosed upon and in a public place in the county where any sale would occur. The defaulting borrower may prevent the foreclosure sale by paying all arrearages up to five (5) days before the sale. The trustees’ foreclosure sale then occurs at the earliest twenty one (21) days after the first publication.
3. Foreclosure sales must take place on any business day between the hours of 9AM and 5PM and must occur at the location referenced on thenotice of sale. The trustee will auction the property to the highest bidder, including the lender. The borrower is permitted to postpone the sale for one (1) day.

In California, the lenders can also go to court in what is known as a judicial foreclosure proceeding where the court must issue a final judgment of foreclosure. If the deed of trust does not contain the power of sale language, the lender may seek judicial foreclosure. The property is then sold as part of a publicly noticed sale. A complaint is filed in county court along with what is known alis pendens. Alis pendens is a recorded document that provides public notice that the property is being foreclosed upon.
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What are the legal instruments that establish a California mortgage?

The documents are known as the deed of trust,note, and in a commercial transaction, a security agreement. Sometimes the mortgage document is combined with the security agreement. Alternatively, a mortgage is filed to evidence the underlying debt and terms of repayment, which is set forth in the note.

How long does it take to foreclose a property in California?

Depending on the timing of the various required notices, it usually takes a minimum of 120 days to effectuate an uncontested non-judicial foreclosure. This process may be delayed if the borrower contests the action in court, seeks delays and adjournments of sales, or files for bankruptcy.

Is there a right of redemption in California?

California has a complicated statutory right of redemption after the foreclosure sale has occurred, which would allow a party whose property has been foreclosed to reclaim that property by making payment in full of the sum of the unpaid loan plus costs one (1) year after foreclosure sale unless the original lender made a full price bid then that period is shortened to three (3) months. A borrower does have ninety (90) days after the recordation of a notice of default to cure any default and this is commonly referenced as the redemption period although it is not a true statutory redemption. Junior lien holders cannot redeem. There is no statutory right of redemption if a deficiency judgment is waived or prohibited at the time of which effectively negates any possibility of a redemption occurring in the scenario noted above.

Are deficiency judgments permitted in California?

Only in certain circumstances. A deficiency judgment may not be obtained when a property in foreclosure is sold through a non-judicial public sale or if the foreclosure relates to a purchase money mortgage. Different rules apply to guarantors of such loans.

What statutes govern California foreclosures?

The laws that govern California foreclosures are found in California Civil Code, Section 2924. To view these statutes on the Web, you can visit:

http://www.leginfo.ca.gov

There are two primary points to consider. The first is that all of the debt that encumbers the preforeclosure property remains against the property until it is sold at the foreclosure auction. This means that any “junior” or subordinate debt stays in place, including trusts, second and perhaps even third mortgages, tax liens, assessments, and judgments. Any of these debts incurred by the owner and secured by the real estate, which may exist against the property, must be paid off. Most of the time, there is only one trust deed or mortgage on a property; however, it is of vital importance that you find out about any other possible indebtedness before you spend too much time and money pursuing a purchase of the property.

The second issue is that only the individuals who are named on the title can sell the property. This seems obvious, but it can go overlooked and valuable time can be wasted. All of the owners of the property must agree to sell it to you before a legal sales transaction can be completed. Make sure that you know who ALL the owners are and that they are all interested in selling before you start negotiating a deal. Most homes are owned by individuals or couples, so finding them and negotiating with them should be straightforward. Owners who have co-signors or non-resident partners, and owners who have abandoned the property and may have moved out of the area will obviously take additional time and effort to locate, negotiate with, and get documents signed. Just remember that even one deal that nets you thousands of dollars will make your time well spent.

You must submit a written contract directly to the owners in order to buy a preforeclosure, since the property still belongs to them during this stage. You can initiate contact with the owners by mail, by phone, or by visiting them, depending on your personal preference. When you make contact, find out all you can about the physical and financial details of the property in addition to the information you have from our database. For example, find out the condition of the property and its major systems (e.g., roof, plumbing, heating/air conditioning, appliances, and foundation). You are there as a problem-solver, and you MUST learn the full extent of the problems. Also find out the number of liens, type of liens, loan balances, and total amount of arrears. Ask to see any correspondence from the lender(s) that will fill in the details the owners may not be fully aware of or may not full understand. The sooner you can establish yourself as a true professional who needs the complete and honest cooperation of the owners, the sooner you can make a reasonable offer that will help them, and enable you to achieve a profit.

You will need all this physical and financial information to do your research and to determine whether the property represents a good deal, given what you (and your partners, if any) want to do with it. Once you have made the determination, you can then prepare a written contract and submit it to the owners. When you have successfully negotiated the purchase, you must then inform the foreclosure attorney to stop the foreclosure process during the time necessary to proceed to closing and settlement of the purchase transaction.