Legal Question in Real Estate Law in California

Re: Default on Deed of Trust-no note-have contract

From what you have described, you can't foreclose on the first deed of trust since you are not the lender. You should be able to foreclose on the second deed of trust since no payments have been made. By foreclosing on the second deed of trust, you would become the owners (assuming you are the successful bidder at the sale) subject to the first deed of trust. You may have a problem, however, with the statute of limitations. See an attorney for more details.

Re: Default on Deed of Trust-no note-have contract

Chances are that it is too late to sue and recover for the past due payments and other damages, but you should be able to foreclose on the 2nd deed of trust. You should take your contract and a copy of the deed of trust to an attorney to confirm that you can foreclose on the 2nd. By the way, using a private foreclosure trustee to perform a nonjudicial foreclosure is much quicker and cheaper than a foreclosure lawsuit.

If you are the successful bidder, you would own the property subject to the 1st deed of trust. You will then wnat to retain an attorney to handle the eviction lawsuit that will probably necessary to get them out of the house.

Re: Default on Deed of Trust-no note-have contract

There are a couple other things that can be added to the previous answers as footnotes.

First, California has "antideficiency" statutes that limit the lender, on a purchase-money loan, to looking to the collateral alone, without recourse to the defaulting borrower in a suit to recover losses not covered by the proceeds of sale of the collateral.

There are some exceptions. One that might fit your case is that the secured lender can sue the defaulting borrower for the tort of "waste," if the borrower has negligently or deliberately caused or allowed the collateral to lose value, e.g. by not fixing a leaky roof or by cutting down and selling the 500-year-old redwoods in the front yard.

This leads me to suggest that you examine the physical condition of the property as well as the quality of title, i.e., look for unpaid taxes, liens, etc. before foreclosing. You might want to try to get an appraisal, but of course access to the property is an issue.

Also see whether the house has been rented. If the buyers don't occupy it, you may have additional claims, costs and legal problems.

This will probably turn out to be a long-term poor investment for you; it's sort of like owning a rental property and getting zero rent. Hopefully, it hasn't become too dilapidated, and will appraise and sell for more than the sum of the two loans. The first is the one of real concern, since it's owed to an outsider.

Re: Default on Deed of Trust-no note-have contract

If your paperwork is in order, our firm can assist you with a non-judicial foreclosure action. We handle cases throughout California.