California homeowners have new, powerful rights to stop a foreclosure sale and sell their homes themselves. The new law became effective January 1, 2025.
When you’re faced with a foreclosure sale date and a Chapter 13 bankruptcy case won’t work, the CA legislature has created an opportunity for you to put off the foreclosure so you can sell your property in the normal fashion. And put your equity in your pocket.
You’re likely to get far more money for the property on the open market than a bidder at a foreclosure sale would pay. And assuming that there are no junior lien holders, like HELOC’s and judgment liens, the balance after paying the foreclosing creditor goes to you.
In many foreclosure sales before AB 2424, the only bidder at a foreclosure sale was the foreclosing creditor. That’s so even when there appears to be significant value over and above the mortgage debt. In the absence of bidders who offer more than the creditor is owed, the creditor gets title to the house and the equity in excess of its debt as well. The homeowner gets nothing.
In a standard, voluntary sale, the price is usually greater than buyers would pay at foreclosure sale. In a standard sale, the property is widely marketed. Prospective purchasers can inspect the interior of the house and review disclosures and inspections, none of which a buyer at a foreclosure sale gets to do. Buyers with good information about the property are confident in paying more, because they know what they’re getting.
So, how do you use the new law to stop a foreclosure sale?
How to stop foreclosure
To invoke the new protections against foreclosure,
- List the property for sale with a real estate agent
- At least 5 business days before the date set for foreclosure, provide the trustee conducting the sale with a copy of the listing agreement.
You then have 45 days to get a buyer under contract to purchase the property.
If you provide the trustee a copy of the purchase agreement at least 5 business days before the rescheduled sale, you have another 45 days from the date the trustee receives the agreement to close the sale.
Don’t wait til the last minute
Too many homes are lost by homeowners who take no action until the sale is days away. Whether you elect to use these new state law rights, or to file bankruptcy to stop a foreclosure sale, be proactive. You will have more choices of professionals to support you in salvaging a bad situation the earlier you act.
