A Cautionary note to investors looking to purchase pre-foreclosures real estate. The state of California calls these transactions equity sales. As a buyer, you must use a special form that gives the seller the right to cancel the transaction up to 5 days after signing the contract or 8:00 am of the day the property is scheduled for Foreclosure sale, which ever comes first. In addition, as a buyer, you should not offer the seller any money or inducements to sign the contract during the cancellation time period.
If you violate these laws, the seller may have the right to rescind the sale for up to 2 years. In addition, the buyer may face criminal penalties including jail time and substantial fines. Please be very careful when entering into these transactions. These laws are not new, but in the last 8 years there have been very few situations when the sellers were desperate. This was due to rapidly rising home values in south Orange County. Now that the market has normalized, sellers may become in default of their mortgages. This law only applies to buyers that do not intend to owner occupy the property. In order to safely navigate this law, we have made it standard procedure to screen the property against the notice of default list prior to making a non-owner occupied “investor” type offer. For more information, call John at (949)481-7358