Legal Question in Real Estate Law in California

Re: real estate foreclosure

If you are going to pay off the loan in default, then you have until the date of the sale. If you are in escrow, approved for your loan, etc., the chances are that the lender will await your closing date. Yes you can and should have an attorney represent you in arbitration, and very possibly before, with the seller and the foreclosing lender.

Re: real estate foreclosure

The foreclosing lender would probably be happy to delay the sale if an escrow were close to closing, especially if the proposed sale would pay off or come very close to paying off the defaulted loan, since such a sale is a better result for the lender.

With residential foreclosures, the sale is usually about 30 days after the 90-day NOD period runs out; it can be a little less and sometimes is more, so the trustor and you may have more time than you suspect.

You might possibly be better off bidding at the foreclosure sale, but I think all concerned should try to avoid foreclosure and negotiate for the time needed to do a normal sale, especially if title is otherwise clean.

If the beneficiary and trustee proceed with a foreclosure sale before you close escrow and pay them off, the sale wipes out the trustor's ownership position and she has nothing to sell you; so your offer, contract, etc. can no longer be carried out or enforced. Whether you would have a claim for damages, or need to go to arbitration, or need an attorney, is somewhat doubtful unless the seller/trustor concealed the default and pending foreclosure from you, which would of course be an improper failure to disclose, perhaps fraud. However, in these days where preliminary title reports are obtained so early in the game for purchase-money loans, and for other reasons, I doubt you were uninformed about the default when you negotiated the purchase, and if so, no claim for failure to disclose would hold water.

This deal is messy enough so that you should have a lawyer's assistance, but the focus should be on getting the deal closed before foreclosure, rather than on unpleasant stuff like going to arbitration.

At this point, I'd be trying to work with the lender to get whatever time is necessary to close the sale in escrow. Is the trustor/seller in communication with her lender?

Re: real estate foreclosure

If the property sells at the foreclosure sale, your rights are wiped out. Period. So, you need to focus on ways to buy the property before the foreclosure sale date. An attorney probably would not be the best place to look for emergency financing. However, an attorney may be able to help you postpone the sale. There are several ways this can be done, legally. One, you can form a corporation, the seller can transfer title to the corporation pending the close of escrow, and the corporation could file a chapter 11 bankruptcy. The drawback to this approach is that it would be very expensive. The second approach is that the seller could file a bankruptcy, which would temporarily stop the sale, not cost much, but cause damage to his credit report. Another way would be a lawsuit filed against the bank and a request for a temporary stay. You would only be able to pursue this avenue if the bank has acted in bad faith, which, by the way is not too uncommon. For example, the bank may lead you down the rosey path of pretending that they are working with you and will "do everything in their power to delay the sale," which is code language for "Sucker."