Understanding California foreclosure

02 Apr Understanding California foreclosure

California foreclosure procedures provide that any secured creditor who uses the power of sale in a deed of trust to conduct a foreclosure sale gives up any claim against the borrower for a deficiency. So, a creditor who chooses a quick and relatively cheap non judicial foreclosure cannot pursue the property owner for more money after the sale.

The thinking behind this provision of California law is that in non judicial foreclosure (one not involving the court), there is no assurance that the foreclosing creditor is getting the property’s value at the foreclosure auction. It would be manifestly unfair for the creditor to bid $10 at the public auction, get the house and then chase the borrower for the balance.

This principle, called an election of remedies, applies to any foreclosure sale conducted under the terms of the power of sale. The property can be a home or an investment property; the debt can be purchase money or a refinance. Hold a foreclosure sale and surrender all rights against the borrower.

It may be small comfort if you are facing a foreclosure, but it does reduce the number of worries that survive the sale.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.
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