The Notice of Trustee’s Sale (NOTS) 

Consider a trust deed lender (beneficiary) who instructs his trustee to record a notice of default (NOD) to start foreclosure proceedings and the running of the three-month NOD period, which the trustee does.

Then, no sooner than five days before the three-month NOD period expires, the trustee records a Notice of Trustee’s Sale (NOTS).  In it, the trustee’s sale is scheduled to take place no sooner than 20 days after expiration of the three-month NOD period. [Calif. Civil Code §2924; see first tuesday Form 474 accompanying this article; see the October 2010 first tuesday Legislative Watch]

The NOTS contains:

  • the trustee’s or his agent’s name, street address and telephone number (or toll-free number if located out of state);
  • the street address or common designation of the property to be sold;
  • the county assessor’s parcel number of the property;
  • the dollar amount of the debt owed, including advances for hazard insurance premiums, property taxes  and foreclosure costs; and
  • a statement informing the owner he is in default. [See Form 474; CC §2924f]

Also, beginning on (or before) April 1, 2012, NOTS are to contain:

  • advice to the property owner about the sources of information on scheduled and postponed sales; and
  • a disclosure to potential bidders of the risks of loss involved in bidding. [See Form 474; see the December 2011 first tuesday Legislative Watch]

Owners are advised of sale postponements

The rules governing trustee’s foreclosure procedures are precisely codified and have been extensively clarified by application in reported cases. But for California homeowners unfamiliar with the process, it is confusing at best unless someone advises them on what to expect before the sheriff knocks on their door to evict them. Thus, enter the NOTS changes.

Homeowners are not typically indoctrinated in the nuances of trustee’s foreclosure proceedings, also known as nonjudicial foreclosures. Thus, they are at particular risk of confusion when noticed foreclosure sales are postponed, a frequent occurrence which motivated part of the change in the NOTS requirements.

If the original trustee’s sale has been postponed less than 365 days, a new NOTS containing the postponed sale date need not be mailed to the owner-in-foreclosure. Instead, the postponement is declared at the time and place set for the originally noticed trustee’s sale and each postponed sale.

Homeowners in foreclosure rarely attend the auction of their former home. Thus, many are left entirely unaware of a postponement if one occurs. The owner’s confusion is compounded if the sale is postponed multiple times. Each postponement adds a forking path for the owner to navigate in the multi-tiered timetables for different activities during the foreclosure process, i.e., reinstatement and redemption periods versus trustee notice periods.

The authors of the bill note that many homeowners who receive the NOTS in the mail are not aware of postponement conditions, particularly if they do not have notice or the assistance of a real estate agent intent on building good-will.

The scenario the authors intend to avoid with the new NOTS requirement occurs when an owner occupies the home but does not attend the auction.  The sale is postponed and the postponement is announced at auction. The owner is unaware of the postponement. After a few days of not receiving further contact or instruction from the trustee, the owner wrongfully concludes he has miraculously avoided foreclosure. It is an unpleasant surprise of the highest order when the postponed sale finally occurs and the foreclosed owner is required to vacate.

Changes to the NOTS require the trustee to inform the property owner that the trustee’s sale date may be postponed. The owner is also advised about the sources of information on scheduled and postponed foreclosure sales. Information about any postponement is available to the public free of charge at a designated website or by phone at a number specified on the NOTS. [See Form 474 page two.]

Both sources of information are accessible 24 hours a day, with the phone number featuring a recording regarding the sale date and postponement information.  With the ready availability of foreclosure information on a property, an agent interested in the property, soliciting owners or already acting on behalf of the owner, can independently keep himself informed as well.

Bidder beware of risk in title

The NOTS has also been revised to inform bidders at the trustee’s sale of the significant risks of bidding on a property without first conducting the proper due diligence investigation into the property and its condition of title.

A common misconception noted among inexperienced bidders at auction when they place the highest/winning bid is that they inherently get a “deal” by purchasing a property at a highly discounted price.

However, individuals at auction who place the highest bid only purchase whatever interest in the property the foreclosing lender/beneficiary held – they are not buying the property from the owner. If the bidder unwittingly purchases a junior lien position held by the lender, they become responsible for satisfying the outstanding senior lien if they are to take title clear of all encumbrances. Thus, the emotional thrill of placing the highest bid soon withers into the dismaying realization that they are now under the yoke of the senior lien holder, and the bidder is at imminent risk of losing their newly acquired title to foreclosure if the bidder can’t pay up.

Editor’s note – The above scenario is avoided if the bidder enters into a single-property fee agreement with an agent experienced in real estate auctions to perform due diligence investigations, advise and represent the bidder at auction. [See first tuesday Form103-1]

The new NOTS requirement specifies:

  • the highest bidder may not receive free and clear ownership of the property;
  • the highest bidder may have to pay off the senior lienholder in order to assume clear title;
  • all bidders at auction would be wise to conduct a thorough investigation into the existence, size and priority of any outstanding liens; and
  • the lender (beneficiary) may hold more than one mortgage (such as a first and a second) on the property in foreclosure, and therefore may be foreclosing on the second/junior lien, not the first.

This legislative change to the NOTS requirement was support by the California Bankers Association and the United Trustees Association, as it provides additional critical information on the foreclosure process which can be “…mystifying to those not conversant with it.”

Trustee’s sale procedures   

20 or more calendar days before the date scheduled for the trustee’s sale, the trustee sends two copies of the completed NOTS to each person who received an NOD. [CC §2924b(c)(3)]

Similar to the NOD, one copy of the NOTS is sent by registered or certified mail, while the other is sent by first-class mail. [CC §2924b(b)(2), (e)]

In addition to mailing the notice to all interested parties of record, the trustee performs all of the following 20 or more calendar days prior to the sale:

  • post a copy of the NOTS in one public place in the city of the sale, or if the sale is not to be held in a city, the judicial  district in which the property is to be sold;
  • post a copy of the NOTS in a conspicuous place on the property to be sold; and
  • start publishing a copy of the NOTS once a week for three consecutive weeks in a newspaper of general circulation in  the city where the property is located.  [CC §2924f(b)(1)]

Additionally, if the billing address for the owner of residential property is different from the property’s address and the property is scheduled for a trustee’s sale, concurrent with the posting of the NOTS on the property, a statutory Notice of Sale must also be posted on the property. [See first tuesday Form 474-1]

The Notice of Sale informs the owner/occupant that foreclosure has begun on the property and provides notice of the occupant’s potential right to a 60-day notice to vacate if they are renting. The statutory Notice of Sale must be in English and five other mandated languages. [See first tuesday Form 474-1; see the April 2009 first tuesday Legislative Watch.]

A copy of the Notice of Sale must also be mailed at the time of posting.

Lastly, the trustee records the NOTS in the county where the property is located at least 20 days before the sale date. [CC §2924f(b)(1); for additional commentary on a trustee’s duties for publicly conducting a foreclosure sale of real estate, see first tuesday’s Real Estate Finance 6th Edition, Chapter 47: Trustee’s foreclosure procedure and the Important corrections and recent updates page accessible under the reading material link for students enrolled in Real Estate Finance; see also the April 2009 first tuesday Legislative Watch and the October 2010 first tuesday Legislative Watch.]

Editor’s note: Current first tuesday students and purchasers of first tuesday Forms-on-CD 4.3 may download a FREE copy of the updated Notice of Trustee’s Sale [See first tuesday Form 474] and digitally fill, print and save it. Log in to your student homepage at using your eight-digit Department of Real Estate (DRE) license number or T-number and click, “first tuesday Forms Downloads and Updates.”