Legal Question in Real Estate Law in California

I represent investors, or speculators, who bid at trustees' sales. If the property owners aren't brain-dead, they will fiie for bankruptcy and stop the sale. If you were to buy the property you would take free of the 2nd but you would have to evict the occupants. It's also possible your purchase could be tied up in lawsuits forever.

Before getting involved in this sometimes very tricky type of investment, you need to do a lot of research, reading of legal books [Nolo Press has them for lay people] and information web sites [not real estate guru sites, where the so called advice either does not work, assumes different facts then you will encounter, or is only partial], go to trustee sales, and speak to experts. Very few properties are bought at sales because you need all cash or something equal, people try t buy properties before then to to sale, those people who show up are among a select few experts who prefer to freeze others out, you never get the best purchase price at the sale, especially if the property is under water, you never want to pay all cash for a property unless you have a lot of cash or the property is going for a bargain price [not likely], etc.

Filing for bankruptcy delays the process a little but the mortgage holder can get relief from it; when the senior forecloses that wipes out from the property all juniors lien holders.

The foreclosure of the senior deed of trust wipes out the junior deed of trust. That is because the title the trustee conveys to the highest bidder at the trustee's sale (the auction) relates to the state of title at the time the deed of trust was executed. (In other words, there were no other deeds of trust at the time the senior was executed.)

The lender, who is the holder of the second is then what is known as a frozen out junior lienholder. The lender is then permitted, subject to several exceptions, to sue the original trustor/ debtor for breach of contract on the promissory note. The new owner, who purchased at the trustee's sale is not liable on the note, and the property is no longer subject to the second deed of trust.

Trustee's sales are public auctions. The rules governing the handling of the auctions is set forth in Civil Code sections 2924g-2924h. You can read those sections here: http://law.onecle.com/california/civil/2924g.html

http://law.onecle.com/california/civil/2924h.html

The majority of lawsuits filed to set aside foreclosure sales are frivolous. Additionally, a third party purchaser at the foreclosure sale is often protected by a conclusive presumption of the validity of sale as a "bona fide purchaser."