Generally speaking, “foreclosure” is a process by which someone you borrowed money from and cannot repay it, takes legal steps to sell your property (which was used to secure the loan) in order to repay the loan.

When you fall behind on payments to a your lender.  When that happens, a lender will start the “foreclosure” process by recording a Notice of Default with the County Recorder where the property is located and sending you a copy of that notice.  In California, the Notice of Default gives you 90 days within which to make up all payments in arrears, plus recording costs and additional attorney fees, to reinstate year loan and get you out of default (commonly referred to as “foreclosure”).

If you are unable to make up the back payments and other “foreclosure” costs, the lender has the right to record a Notice of Sale with the County Recorder, and send you a copy of that notice.  The Notice of Sale basically advises you and the rest of the world that the property will be sold at a future date, that will be no less than 21 days from the date of the recording of that notice (in other words, a minimum of three weeks before they can sell your property).

Was important to remember is that during the Notice of Sale, you still have up to five days before the sale of the property to make up all of your back payments and arrearages, plus foreclosure costs, to reinstate your loan and save your property.

In the last five days before the scheduled sale of the property, the lender is not required by law to allow you to reinstate your loan.  In other words, the lender may, if it chooses, to reject any partial payments on your loan and may insist they you pay the entire amount of your loan in full.  As a practical matter, most lenders will still allow you to make up all of your arrearages and reinstate your loan, although they are not legally required to do so.  If you are unable to get out of foreclosure, the lender may sell your property as scheduled on the notice sent to you. 

At the sale (which is commonly referred to as a Trustee Sale), your property will be sold to the highest bidder who shows up at the auction.  If the amount of property is sold for is greater then the amount you owe on the property, including all past-due payments and foreclosure costs, the trustee  will send you a check for that amount.  If the property is sold for the amount you owe, or less, you will not be getting any money from the sale.

Either way, you are very likely to lose all, or substantially all of the equity a you have in your property if it is sold.

A common “last ditch” procedure to stop such a sale is the filing of a bankruptcy proceeding.  This is only a short-term solution because the lender will immediately filed papers in the Bankruptcy Court to allow the sale of your property to proceed.

Another thing you should know about your property being in foreclosure is that it is public knowledge.  As result, most lenders will not refinance your property while you are in foreclosure.  Also, if you are attempting to sell your property while in foreclosure, the broker for the buyer will most likely also know that you are in foreclosure, which will result in a much lower offer for the purchase of your property then it is worth.  Additionally, and most dangerously, if your property is in escrow to be sold while you are in foreclosure, and for some reason the sale falls through, you may have your house is sold out from under you if you are not in a position to make up all of the back payments and additional costs.

Therefore, the safest to and best course of action would be for you to and stay at a foreclosure, and if you can’t, get out of foreclosure as quickly as you can.