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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 indefault make is ignoring a Notice of Default, or minimizing its importance.  If a lender has no plans to foreclose on a property, they clearly do not have to file a Notice of Default.  Indeed, I have completed short sales where payments have not been made for months or even years and no Notice of Default was ever filed by the lender.  However, I’ve found that in most instances, if they can file one, they will.  And if the lender takes the trouble to file a Notice of Default, they are clearly reserving their right to foreclose on the property, and that has significance.

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 for the most part 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.  Indeed, I have had lenders deny homeowners entry into the HAFA short sale program after a Notice of Trustee’s Sale is filed, and also been told that certain investors will not consider a short sale if the file is within 30 days of a scheduled foreclosure sale.  And, I continue to see short sales fail for that reason — there is simply not enough time by the time the homeowner contacts a short sale agent. If you have received a Notice of Defaultand 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 yourSanta Maria, Orcutt, or Nipomo home and would like a short sale consultation, please call my office to schedule a meeting or a telephone consultation at (805) 938-9950.

Tni LeBlanc is an independent Real Estate Broker, Attorney, and Short Sale Agent. She is a Certified Distressed Property Expert (CDPE), Short Sale and Foreclosure Resource (SFR) and Certified HAFA Specialist (CHS) serving the Santa Maria, Orcutt and Five Cities area of the Central Coast of California.

* Nothing in this article is intended to solicit listings currently under contract with another broker. This article offers no legal or tax advice. Those considering a short sale are advised to consult with their own attorney for legal advice, and their tax professional for tax advice prior to entering into a short sale listing agreement.

Copyright© 2012 Tni LeBlanc *Short Sale vs. Foreclosure:  The Notice of Default*