For the prior video in this series covering the proper servicing, mailing, posting and publication of a Notice of Judicial Sale, click here.

The certificate of sale

The public sale held by a court-appointed receiver or sheriff is conducted as an auction. The property is sold to the highest bidder. [Calif. Code of Civil Procedures §701.570(b)]

The foreclosing mortgage holder is entitled to make a credit bid up to the full amount of the debt owed to acquire the property at the foreclosure sale. Payment by a successful bidder other than the mortgage holder is made at the time of the public sale:

  • in cash;
  • by certified check; or
  • by a credit transaction as long as the amount is over $5,000, in which case the greater of $5,000 or 10% of the amount bid is due at the time of sale, with the remaining balance plus applicable costs and interest due within ten days after the sale. [CCP §701.590(a), (c)]

If the successful bidder fails to pay the amount bid, the receiver may sell the property to the highest bidder at a subsequent sale. The defaulting bidder is liable for interest, costs and legal fees for their failure to pay their bid. [CCP §701.600]

The foreclosing mortgage holder is often the highest — or only — bidder at a judicial sale. When intending to seek a deficiency judgment, the mortgage holder needs to bid no less than an amount it believes the court will set as the FMV of the property.

Any successful bids for less than the property’s FMV on the date of the sale will generate an uncollectible loss on the mortgage holder. The loss from a below market bid is the spread between the high bid when the owner redeems and the greater FMV.  [Luther Burbank Savings and Loan Association v. Community Construction, Inc. (1998) 64 CA4th 652]

A certificate of sale is issued to the successful bidder on the completion of a judicial foreclosure sale.

Although the bidder purchased the property at the public auction, they will not become the owner of the property or be able to take possession of it until the applicable redemption period expires. [CCP §729.090]

The certificate of sale reflects the owner’s continuing right to redeem the property and avoid losing it to the highest bidder. [CCP §729.020]