Bidding at Foreclosure
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BIDDING AT FORECLOSURE SALE

Subject to Liens. It is rare for an assessment lien foreclosure to go all the way to sale. In the event it does, the bidding on a property at a foreclosure sale will generally open at the amount owed to the foreclosing creditor only. This means that if the association is owed $5,000, and there is a $100,000 senior lien (mortgage), the opening bid is still $5,000. However, the successful bidder takes title "subject to" the senior lien.

Cash or Cashier's Check. Any outside bidder present at the foreclosure sale must bring cash or cashier's checks to bid with. This means that if you wish to offer a bid at any foreclosure sale, you must present cashier's checks or cash in an amount in excess of the opening bid. The association itself does not need to bring cash or cashier's checks to bid at the sale. As the foreclosing creditor, the association has a "credit bid" for the amount it is owed.

Senate Bill 1079. In an effort to create more affordable housing, the California Legislature enacted Senate Bill 1079 which went into effect January 1, 2021. The statute modifies procedures for the sale of residential property through nonjudicial foreclosure. The goal is to assist eligible bidders in finding affordable housing and stem the flow of foreclosures snapped up by lenders and real estate investors.

Eligible Bidders Defined. Eligible bidders will be able to bid on foreclosed residential properties after the foreclosure sale has taken place. An “eligible bidder” will be defined as (1) a qualifying tenant who is already occupying the foreclosed property, (2) a person who is willing to move into the property for at least one year, and (3) certain nonprofit housing agencies. These eligible bidders can take ownership of the foreclosed properties away from successful bidders at foreclosure sales.

Procedure. Eligible bidders will have 15 days after the sale to give notice to the foreclosure trustee of their intent to bid on the property and 45 days from the sale date to tender payment. After-sale tenant buyers only have to match the highest bid at the foreclosure sale while owner-occupants and non-profits will have to exceed the successful bid. Responsibility for administering post-sale procedures will fall to foreclosure trustees who handle the original sales.

Right of Redemption. In addition to eligible bidders, title is subject to the foreclosed owner's 90-day right of redemption.  The right of redemption applies to assessment lien foreclosures only, not trust deed foreclosures.

Administering Post-Sale Procedures. The responsibility for administering these new post-sale procedures will fall to the foreclosure trustees who handled the original sales.

ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.

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