SB 1079 became effective on January 1, 2021 and was passed in order to provide potential homeowners an advantage over real estate investors who usually were the prevailing parties at real estate foreclosure auctions.
Here is everything you need to know about SB 1079, which was codified as Civil Code Section 2924m:
SB 1079 DOES NOT EFFECT OWNER-OCCUPIERS WHO BID AT THE FORECLOSURE AUCTION
If you’re purchasing a home at a foreclosure auction and intend to be the owner-occupier, then you do not need to worry about SB 1079.
Your winning bid at the auction is final and you’ll get title to the property after the requisite post-foreclosure redemption period expires, assuming the previous owner does not exercise their right to redemption.
SB 1079 PROVIDES A POST-AUCTION PROCEDURE TO PURCHASE REAL PROPERTY
If the property sold at the foreclosure is a 1-4 unit property and the winning bid was not from an owner-occupier, SB 1079 is triggered.
So, for example if the winning bid comes from a corporation or investor who wants to flip the property instead of actually live in it, SB 1079 provides for a fifteen (15) day window for eligible parties to submit a bid to purchase the property.
That means, after the foreclosure auction a prospective purchaser can swoop in and purchase the property even if they did not attend the auction or even if they did attend the auction but their bid was not the winning bid.
This allows individuals to purchase property after a foreclosure auction has been completed, even if there was a “winner” at the auction.
However, there are only certain types of people or entities that can use SB 1079 to their advantage:
Potential owner-occupants
The current tenant of the property which was foreclosed upon
A government entity (i.e., the California Regents)
California based non-profits whose primary purpose is to promote affordable housing
If you fall into one of the categories above, you must take affirmative steps in order to preserve your rights under SB 1079. The eligible party must, within fifteen (15) calendar days after the auction is completed, send in a written non-binding notice of intent to bid via certified mail to the trustee detailing all the following parts
A signed affidavit stating that you fall within one of the categories listed above.
A written letter of intent to purchase the property at a higher value than the winning bid at the foreclosure auction within the next thirty (30) days. The price can be just $1 more than the winning bid. However, if you’re the current tenant, you do not need to exceed the winning bid at the foreclosure auction, you can simply match the winning auction bid and you’ll prevail.
This written letter of intent must be sent via traceable mail.
The foreclosure at this point in time is complete, and all subordinate liens on the property are wiped out with the foreclosure, however any and all superior liens on the property will still exist.
So, be aware when purchasing a property in a foreclosure auction that, even though the property was foreclosed upon, there could still be existing liens on the property which can be foreclosed upon.
In fact, typically liens have an acceleration clause stating that if the property is sold without the lien-holder’s approval, that the debt will be immediately due and payable. Meaning, if you cannot pay off the existing lien, say goodbye to that property because it will be foreclosed upon, again. So while you’re buying an asset it may not be “free and clear.”
WHAT DOES 1079 MEAN FOR INVESTORS WHO WIN AT AUCTION?
If you’re the investor or corporation who “won” at the auction, you’ll now need to wait up to forty-five (45) days to determine if you will officially become the title holder to the property. That’s because there is first a fifteen (15) day period to allow for eligible individuals and entities to send in the non-binding letter of intent to be sent to the trustee.
Then, if any valid letter of intent is received during those fifteen (15) days, there will then be another thirty (30) days for that party who sent in a letter of intent to pay via certified funds the purchase price of the property.
During this time, the investor who “won” at the auction will have their money tied up in an escrow account. Thus, SB 1079 has now started to dissuade investors from bidding at auction because they do not want to have their money tied up for forty-five (45) days.
HOW YOU CAN TAKE ADVANTAGE OF SB 1079
Under SB 1079 trustees now need to have a website showing:
Date of the sale
Price that it was sold for at the auction and
A mailing address to send in the letter of intent.
If you’re interested in purchasing a property in foreclosure, contact our office today to discuss the process with one of our attorneys and to request a title report to be ordered on your behalf: +1 (800) 233-8521.
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