Acquiring Property - SB 1079

Putting property in the hands of people, not corporations

What is SB1079 in a nutshell

• Senate Bill 1079 was passed in California to put property into the hands of the people, not corporations.
• It basically is a 2nd sealed bid auction that takes place AFTER the property has sold at an in person foreclosure sale (on the courthouse steps).
• Allows regular people to bid over the price, and potentially steal it away from the in person winning bidder, who is typically an investor.
• The requirement is that you must buy it with cash, move into the property within 60 days as your principal residence, and stay for 1 year.
• The rewards, however, can be extremely lucrative

Timelines

Notice of Default

Sale Scheduled

1st Auction

15 Days for notice of intent

45 Days Final Bid

The foreclosure notice is sent to the homeowner who is delinquent in their mortgage payments

The sale of the property is scheduled 3 months later at the earliest

Roughly a minimum of a month later, the auction takes place, and the property is slated go to either the bidder, or the bank

There is a 15 day waiting period after the auction to wait for a Notice of Intent to bid. If no intents are registered, then the property goes to the original bidder or bank

45 days from the auction, if bids are received, the highest bidder is awarded the Trustee’s Deed Upon Sale (TDUS). Bids are made in the form of a cashier's check to the Trustee. If there are no further bids, it goes to the original bidder.

End Result

Usually within a week, if you are the winning bidder, you will receive the TDUS in the mail. If not, your check is returned to you.

Timeline Considerations

• The original auction takes place and either an investor purchased it, or it went back to the bank.
• Land and commercial properties are not subject to SB 1079 and go to the highest bidder at the auction.
• You must register an intent to bid (NOI) within 15 days of the original auction with tracking to prove delivery to the Trustee
• After submitting the NOI, you should do your due diligence to minimize risk (we will help and provide expert guidance).
• Within 45 days, you must send the Trustee the full amount of your bid in the form of a cashier's check, also using tracking.
• There may be other bidders like you, so knowing the value of the property is very important
• If you are the highest bidder, the Trustee will send you a “Trustee’s Deed Upon Sale” that you will need to record with the county (it’s easy). Note: there is a county transfer tax to be paid ($1.1 per thousand of your bid). If you are not, they will return your cashier’s check.

Risks and Diligence

Loan Position - The loan position dictates the order in which lien holders are paid. We only advise bidding on 1st position loans.

e.g. if you bid on a 2nd position loan foreclosure, the property is yours but the 1st position loan is still owed money. If you bid on a first position loan, any other lien get’s what is left over from your bid after paying out the first position loan with some notable exceptions.

Basically, any lien from a gov’t entity will persist after the foreclosure and be attached to the property. Property Tax being the biggest risk to mitigate, but that information is readily available.

We provide expert guidance including title reports and title research to ascertain loan position.

Risks and Diligence

Proper diligence will look into who is in the house, and the condition.

People

• Renters - on a month to month basis are to be given a 90 day notice to vacate
• Leases on the property need to be honored to the completion of the lease

Condition

• You should plan on driving by the property to view it’s condition at minimum.
• You won’t normally have access to the inside of a property, and it is illegal to trespass. It is perfectly fine to knock on the door and ask if you can peek inside. However, you may not be met with a friendly face.
• You need to consider the property condition and budget repairs into your bid amount

Risks and Diligence

We provide Property Profile reports from our title company that will show many details on information that is publicly available and attached to the property.

However, to be certain there aren’t any lawsuits or other liens affecting the property, HK Team will assist in researching at the county level including optional title reports.

Bid Strategy and Making the bid

Once you’ve taken all the risks into consideration, costs of repairs, and have a good value assessment on the property, you are ready to make your bid.

The bid amount, in the form of a cashier’s check from a reputable bank, needs to be sent to the Trustee. Yes, it is unnerving to send such a check out, but these companies are bound by law and procedure to handle the money correctly.

Winning the Bid and Recording

The Trustee’s Deed Upon Sale (TDUS) is issued to the winning bidder. It’ll usually arrive by mail in about a week, but you can call the trustee and make arrangements to have it sent sooner (at your cost).

However, you must go down to the county recorder and record the deed yourself. They will charge you a county transfer tax of $0.55 per each $500 of your bid which you must pay, plus it is a good idea to get a certified copy right then. They will mail you the original which should arrive in a couple of days.

Record the deed BEFORE talking to the occupants of the property

Dealing with the Former Owner or Occupant

There are two approaches to dealing with a former owner.

1. The easiest is to enter into a “cash for keys” deal with the owner. It’s going to cost you ~$3000 to evict, so that’s a good starting point. To go higher is at your discretion.
2. Eviction will take time. I would would estimate at least 2 months. Retaining a legal firm will typically cost you the $3000 in an uncontested case, or you could use a paralegal to fill out the forms, and bring the case to the court. This is must less cost but involves more of your time.

As previously mentioned, a tenant gets a 90 day notice, and a leaseholder has the right to remain for the remainder of their lease

The Role of HK Team

We provide you with timely information on foreclosures that are available for this process. Information from multiple sources is distilled down into a spreadsheet that is updated weekly on Fridays. It includes relevant information on the property as well as initial valuation estimates and margin.

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The Role of HK Team

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As experienced real estate professionals, we can provide valuation estimates of market values for properties, to assist you in finalizing your bid.

With years of experience with foreclosures, we provide expert guidance at every step of the way, including authoring the “notice of intent” with the required legal verbiage.

The Role of HK Team

We provide property profile reports on properties from a Title Company to investigate liens and provide diligence on matters that might affect title.

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Is the right for you?

• Let us know if you think you might want to go down this path
• We will provide you weekly reports on available properties
• You decide whether you want to make a Notice of Intent
• We help you with your diligence
• With some luck, you can win a property worth potentially hundreds of thousands of dollars less than market value.