Short Sale vs. Foreclosure: The Notice of Default
In California, a Notice of Default will typically be filed by the lender after the third missed payment. Once a Notice of Default is filed, the lender has begun the formal process of foreclosure. Three months after a Notice of Default is filed, the lender may file a Notice of Trustee’s Sale setting a foreclosure sale date. The Notice of Trustee’s Sale can be posted 21 days before the foreclosure auction sale date. So, in California, once a Notice of Default is filed, the foreclosure process can be concluded in just under 4 months.
One of the biggest mistakes I see homeowners in default make is ignoring a Notice of Default or minimizing its importance. The typical scenario I encounter is where the homeowner is in the process of applying for or negotiating a loan modification and the lender files a Notice of Default. The homeowner ignores the notice believing that the loan modification will resolve the issue. The negotiations stretch on for months more and the homeowner is lulled into a false sense of normalcy about their situation. Then, one day a Notice of Trustee’s Sale is posted on their door. Now the homeowner may have just under three weeks to come up with a new plan. Worse yet, the homeowner may get accustomed to requesting extensions of the foreclosure auction date, and then one day (probably a week or so before the new auction date) they realize they aren’t getting another extension and the rug is pulled out from under them.
Clearly, once a Notice of Trustee’s Sale is posted, the homeowner is living on borrowed time and it may indeed be too late for a short sale of their property. If you have received a Notice of Default and you are serious about a short sale of your home vs. a foreclosure, clearly you should begin your research about that process sooner rather than later. A Notice of Default begins your foreclosure time clock, and you should take it seriously. Once you receive a Notice of Default, if you have not already, you should immediately take action and seek the advice of legal and tax professionals to determine your best course of action, whether that be foreclosure, short sale, deed in lieu foreclosure, bankruptcy, etc.
Before deciding whether to short sell your home, it is essential that you obtain legal and tax advice, and consult with an experienced local short sale agent. If you are considering a short sale of your home and would like a free consultation, please call my office to schedule a meeting or a telephone consultation at 800-310-8145.