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Bryan, Home Buyer in California

Can a bank foreclose on a house during closing?

Asked by Bryan, California Sat Jul 7, 2012

I am in contract on a home purchase. The house is a short sale. Both the seller and the bank have approved my offer. The sellers have not been paying the mortgage however. Can the bank foreclose on the property before I close? I have heard stories of this happening but my realtor says there are laws preventing this now.

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They can but it's not in their best interest to do so.

If the listing agent is communicating with the bank, this should not happen, but unfortunately, sometimes it does. You can sometimes tell how close they are to foreclosing by checking the tax record for a filed sale date. My recommendation is to get that thing closed as quickly as possible.
0 votes Thank Flag Link Sat Jul 7, 2012
Don’t freak out because you have heard a story about banks foreclosing in the middle of a short sale. If the short sale lender has already approved your short sale it would be against their best interests to foreclose at this point. One of the jobs incumbent on the short sale listing agent is to stay in touch with the short sale lender’s loss mitigation department and make sure that a foreclosure is not scheduled.

New legislation that impacts what actions can be taken by short sale lenders has been passed in California but does not take effect until Jan. 1st of next year.
0 votes Thank Flag Link Sun Jul 8, 2012
As the others have stated, yes, the bank can foreclose. But, the listing agent should be in constant communication with the lender who is close to foreclosing and usually they will allow the short sale to push forward.

Best.

Tap
0 votes Thank Flag Link Sat Jul 7, 2012
Hi Bryan,

Your Agent is 50% correct regarding the "Dual Tracking" problem in CA. There is an Assembly Bill in the works to rectify the issue.

From CAR:

"AB 1745 (Torres) Dual Tracking – Currently, the banks’ ability to simultaneously process a short sale and a foreclosure on a single property has resulted in the foreclosure sale of homes which have an approved short sale pending. C.A.R. is sponsoring AB 1745 to prohibit a lender from proceeding to a foreclosure sale against a property if that property has been approved for a short sale. This measure will still allow the mortgagee to withdraw its short sale approval due to a change in the conditions under which the approval was granted. The lien holder would be required to provide a written notice at least 3 days before the withdrawal of approval explaining the reason for the retraction.

Status: Senate"

-Steve
0 votes Thank Flag Link Sat Jul 7, 2012
Hi Brian,
My understanding is that the Bank can foreclose on the property at any time up to the Recording date.
Now that being said if the Owner's of the property have applied for one of the Short sale programs like the Home Affordable Foreclosure Alternatives (HAFA) Program, once the Bank(s) agree to this program then the foreclosure process must be halted.

But remember the Banks must agree(in writing) to this and the Listing Agent that represents the sellers should have this information.

Always the Best,
Michael
0 votes Thank Flag Link Sat Jul 7, 2012
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