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Buying homes in foreclosure...



The promise of built in equity has lead many people to believe that they want to purchase property in foreclosure. This notion has been fueled, in part, by television infomercials promising fast, easy money buying distressed property.

The truth is it's not that easy and there is substantial legal liability. If you, acting as an investor, are trying to buy property from people in foreclosure or are trying to make loans to people in foreclosure, then you are most likely going to meet the State of California's definition of a "Foreclosure Consultant." There is nothing illegal in being a foreclosure consultant (sometimes known in the trade as a "Shark") but both the Congress and California legislature recognize that the field has been fraught with predatory practices toward people in foreclosure. In fact, section 2945 of the California Civil Code starts off by saying, "The Legislature finds and declares that homeowners whose residences are in foreclosure are subject to fraud, deception, harassment, and unfair dealing by foreclosure consultants from the time a Notice of Default is recorded ..."

Foreclosure consultants are also getting more attention from law enforcement. The manager of a Yuba City title company recently told me they had received two visits from the FBI in the last three months as part of investigations of foreclosure consultants.

There are people who have made lots of money buying property in foreclosure but it's a competitive and legally tricky business. In addition to the foreclosure consultant issues, there are a number of title issues. At the foreclosure sale (known as a Trustee's Sale), there is no escrow company to protect you and there is no title insurance to protect you. That means you have to do your own title searching to know if the deed of trust in foreclosure is a first deed of trust or a junior deed of trust. You also need to know if there are any delinquent real estate taxes or any IRS tax liens. Also, if you are the successful bidder, you have to be willing to turn over the amount of your bid to a stranger (the trustee) and trust that they will record a deed putting the property into your name in a week or two. The whole process can be pretty nerve racking.

If you still want to try it, then let me suggest that you start by sticking to the foreclosure sales and avoid contacting people in foreclosure before the trustee's sales. Most sales for Yuba and Sutter counties will be advertised in the "Legal Notices" section of the Appeal-Democrat. The "Notice of Trustee's Sale" will give the time and the place of the sale.

You can learn more about foreclosure consultants by reading section 2945 of the California Civil Code. This section can be found by clicking on the link below and then running a search for "2945" in the Civil Code section.

http://www.leginfo.ca.gov/calaw.html

Last updated 1/14/2006


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quotes"I have nothing but great things to say about Lloyd and his wife, Tracy. They sold my home in four days and helped us get the home that we wanted. He followed up on all details above and beyond anything I expected. He has my highest recommendation.
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Contact

Lloyd Leighton Realtors

Address: 1212 Highland Avenue
Yuba City, CA 95991-6115

Phone: (530) 671-6152
Fax: (530) 671-3904

Cal BRE Lic. #00951505