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Article of the Month for August 2001

Repossession/Management

The successful bidder at a trustee's sale only receives the bare legal title to the foreclosed property from the trustee. It's then up to the bidder to acquire the equitable title (right to possession) to the property. Most of the time that's accomplished informally by giving the ex-owners a little extra time to vacate. But if the holdover owners are the stubborn type then an eviction lawsuit will have to be implemented–a process that usually takes about 25 to 30 days. The process of acquiring possession is as follows:

1) Record your Trustee's Deed as soon as you can because the code [California Civil Procedure 1161a(b)(3)] requires that your title be "duly perfected" prior to giving the holdover occupants the requisite 3 day or 30 day Notice to Quit. (Make sure you get two certified copies of your newly recorded deed too). Note, if IRS has a 120 day Right of Redemption it would be prudent to delay doing anything until it expires. Collect some rent if you can, but don't vacate it or fix it up in any way because you won't be reimbursed for any fix-up costs if they elect to redeem.

2) If the occupants are ex-owners serve them with the 3 day Notice to Quit. If they were tenants then you'll have to serve them with the 30 day Notice to Quit. To establish and preserve all of your legal rights you should automatically, without exception, serve the requisite Notice to Quit on the occupants (regardless of their apparent cooperation with you). Talk your way into the house when you go out to meet them. Once you've established the move-out date, and have congenially served the notice, ask to be shown the rest of the house. Take photos as you go from room to room to establish the post-sale condition of the premises and to inhibit any potential vandalism. Also, get agreement that it's OK for you to start working on the exterior while they are still in residence. That way you'll be able to observe if they're really packing up or not. If they're not preparing to move out then instruct your landlord/tenant attorney to file an Unlawful Detainer action against them–suing them for possession and the fair market rental value of the premises.
3) When you win your case you'll be given a writ of possession that empowers the Sheriff or Marshal to physically remove the defendants from your property. The Sheriff or Marshal will warn them 5 days in advance and by that time they will almost always be gone. But if they're not he will want you and your locksmith present when he goes out. The locksmith will open the place up and the Sheriff will enter to make sure no one is inside and escort anyone he does find away from the property. He will wait until the locks have been changed and then give you a Receipt of Possession and post the premises off limits to the previous occupants.
4) Once you gain possession, regardless of how you accomplish it, go through the property, room by room, and take photographs of the entire place inside and out (and especially don't miss any personal property left behind). If there is any personal property send out the required "Notice of Right to Reclaim Abandoned Personal Property". If the owner doesn't respond promptly then follow up with the public sale of the stuff if, in your opinion, it is worth more than $300 dollars.

Another issue that occassionally pops up when taking title at a trustee's sale, subject to a remaining senior lien, is trying to avoid the effect of the "due on sale" clause contained therein. By custom most lenders will allow you to simply continue making the regular monthly payments (once you have reinstated their delinquent loan) without further hassle. But even so, you just might want to try to create a situation wherein the lender effectively waived its right to call their senior loan because they delayed too long calling the loan after being put on actual notice that a sale (the trustee's sale) had taken place and you're the new owner.

Information provided by this website is for informational purposes only and is not a substitute for professional advice. Please consult your investment advisor and/or attorney before entering into any transaction. Read our privacy policy.

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