Legal Question in Real Estate Law in California

Usually you can't reverse a foreclosure once it has occurred, but if it was "illegal" you could possibly sue for damages (you would still lose possession of the property). Prudent people facing foreclosures have their lawyers stop them, which is relatively easy to do beforehand.

It depends on what your legal theory is that the foreclosure was illegal.

Foreclosures that are "illegal" can be improper for a variety of reasons and the result can be, as Mr. Stone says, a situation where you can't set aside the sale but you can recover money damages. Or, the sale itself may be "voidable" or "void." If the sale is void, I'd assume you have five years (the adverse possession period) within which to recover possession. However, there are a lot of laws and cases upholding the finality of foreclosures.

An example of a void sale is one conducted despite the automatic stay of a valid bankruptcy proceeding. A purported sale by someone who had no power or authority to sell would also be void. Most sales conducted despite a procedural irregularity would be voidable by the trustor (borrower/owner), but not strictly void.

The first issue is whether the property was sold to a bona fide purchaser (BFP) or to the note beneficiary (bank). A sale to a BFP will stand up despite illegalities unless it was void, and you would be limited to money damages, not setting aside the sale.

Anyone considering filing suit to set aside a trustee's sale should consider two additional factors: (1) even if you win, the court will expect you to reinstate your loan by paying the reinstatement amount then due; and (2) if there is an attorney-fee provision in the loan documents and you lose, you'll be liable for the defense legal fees.