Q: Our family sold a residential property to a couple but they have defaulted on the loan. We assisted with financing and have the first trust deed. A foreclosure may not result in recovering the entire loan, so we have been told to consider a judicial foreclosure. What is recommended?
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W.B., Burbank
A: A nonjudicial foreclosure is certainly the most common. There is a process to be followed. Many hire a third party to handle the nonjudicial foreclosure process and sale. It tends to be less time consuming than a judicial foreclosure (as explained further below), is usually less costly, and no court action is required. But there frequently is no deficiency judgment after the foreclosure sale.
Judicial foreclosure means your family files a lawsuit asking the court to foreclose your deed of trust. The lawsuit is served on the borrower. There is a possible deficiency judgment in some commercial situations. It is slower (typically) than the nonjudicial process and often costs more. The borrower has a statutory right of redemption for a period of time after the sale. But no deficiency judgment is allowed on certain purchase-money obligations.
Bottom line, this column can give you an overview, but you certainly should talk out your choices with a qualified person. Show him or her your loan paperwork and deed of trust; the prudent decision should come from that discussion and analysis.
Q: We have had some financial setbacks but are working to straighten things out, and believe that we can do so. Our house is in foreclosure, but has equity. Can you provide any suggestions on how to deal with this?
L.B., Gardena
A: You say there is equity in your home. Even though your financial situation could make it challenging, at least look into what option(s) you have to refinance.
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Some other possibilities: Have you given thought to selling the property? Or can you find your way to bridge financing? This is a short-term loan until longtime financing can be obtained. Bankruptcy has to at least be mentioned here, but this is something to talk out with a qualified attorney. Research further suggests you should consider working with a HUD-approved housing counselor (in other words, a foreclosure-prevention counselor), or with a California foreclosure/loan modification attorney. A reputable foreclosure/loan modification consultant, someone well-versed in real estate and financing, such as a mortgage broker, could also help.
Lastly, have you reached out to the lender to explore what possibility there may of a work out? It might make sense for you to have an attorney assist you in this effort.
Q: I am going to a foreclosure sale of a real property. What can I pay with if my bid is accepted?
D.H., San Clemente
A: Under California Civil Code § 2924h, the trustee can require payment by cash, a cashier’s check from a state or national bank, a check from a qualifying state or federal credit union, a check from a qualifying savings and loan or savings association bank, or another cash equivalent if and only if the trustee has so designated.
Ron Sokol has been a practicing attorney for over 40 years, and has also served many times as a judge pro tem, mediator and arbitrator. It is important to keep in mind that this column presents a summary of the law, and is not to be treated or considered legal advice, let alone a substitute for actual consultation with a qualified professional.
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