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Who is responsible for damage under SB1079

That latest show on SB 1079 was eye opening. Mike said that the investor doesn’t own the property until its recorded. You mentioned that just because an eligible buyer puts in their intent to bid, it doesn’t mean they will close. There’s no penalty for them to walk away, right?

So if there’s a fire at the property on day 30 where a real estate investor has purchased at trustee sale but an eligible buyer has placed an intent to bid… who is ultimately responsible for the loss? Investor or bank assuming the edible buyer will walk away.


Daniel - Great Question. The way that title works here is that the original party who won at foreclosure auction would obtain title to the property at the end of the 45 day period because the eligible bidder failed to tender their ultimate bid. Neither the auction winner or the Eligible Bidder would be able to gain possession to the property until a Trustee’s Deed records for the benefit of the auction owner or the eligible bidder after the fact. It would behoove the auction winner to obtain an insurance policy even if they may end up not getting the property.


Hi @danielramos, I’m trying to get a few attorneys in here to answer your question. Nema Daghandan did post a video on their website with a review of some of the ramifications you might find helpful. The Geraci team is very involved in the private lending community. They also created a tear sheet on it.

Neither cover this specific question and I will continue to search.

@FinanceAttorney - Thanks for answering this Nema. Any idea who is responsible for those costs? If the eligible bidder is only required to pay the price that the investor bid at auction, that seems like the investor could be out of pocket title and insurance fees at a minimum with this revised process.

I would suggest the safe course of action: buy insurance immediately after the purchase of the property. Rights of redemption are new in California, so paying a few extra bucks until this is all resolved would be smart.


Hi Nema,
Great seeing you here.
So if there were a fire on day 30 we should assume the loss is to the person who got foreclosed on, title has not changed and therefore that person remains the owner and thus that owner suffers the loss.
Follow up question, if my above assumption is correct, if the property is damaged at day 30, Can the winner of the bid cancel the purchase because the condition of the asset is different to what it was at auction day?

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Aaron - Unfortunately that’s right. You could have a situation where the auction winner pays for insurance for the property but ultimately the property goes to an after the fact 3rd party bidder who bids after the foreclosure sale. The foreclosure auction winner has no recourse here and is out of pocket on the expense.


Wow, that is terrible and incredibly important to know. Not sure how many investors will show up if they spend all that time preparing to bid and then have the real potential to lose money and not even get the property.

Great to see you as well Juan!

Technically what happens is that the Trustee’s Deed reverts back to 8am on day of foreclosure sale so whoever won at foreclosure auction technically “owns” the property on the day of the auction once that TDUS records even though the TDUS doesn’t record for 18-48 days later.

I would definitely obtain hazard insurance if I won at auction despite the fact that a 3rd party could come in and end up owning the property.

The way the new law is written, an Eligible Bidder must submit an “intent to bid” within 15 days. They have until 45 days to actually bring in the cash necessary to complete the bid. So if a fire happened on day 30 and they didn’t pay the trustee the cash then they could simply never pay and not face any penalty. Similarly, if the Eligible Bidder submitted a cashier’s check on day 29, there is no process in place that would let the Eligible Bidder retract their bid at that point. This could lead to a very odd situation where the insured doesn’t actually own the property (assuming the Eligible Bidder never obtained insurance).

My two conclusions on this:
(1) The auction winner should immediately obtain property insurance on day of auction.
(2) Any Eligible Bidder who submits a cashier’s check to the trustee should also obtain insurance.


It’s really a shame and a byproduct of this legislation.


Thank you so much @FinanceAttorney and @ScottTalkov for chiming in.


Good information thanks for sharing

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