By Robert B. Jacobs
Contra Costa Times Correspondent
Posted: 01/25/2009 12:00:00 AM PST

This is second of two articles concerning foreclosure methods.

Last week's column provided a brief description of some key differences between a judicial and a nonjudicial foreclosure. A "judicial" foreclosure is conducted in the course of a lawsuit, and involves a summons, a complaint, a trial and a judgment. A "nonjudicial" foreclosure does not involve any lawsuit or court action, or any summons, complaint, trial or judgment.

One major difference between the two types of foreclosure is that a lender can obtain a "deficiency" judgment in a judicial foreclosure, whereas no deficiency judgment is possible in a nonjudicial foreclosure. A deficiency judgment is a personal judgment against the borrower for the difference between the loan amount and the property sales price at the foreclose sale.

Borrowers may wonder why a lender would choose nonjudicial foreclosure, when a deficiency judgment would be possible through a judicial foreclosure.

There are several reasons why a nonjudicial foreclosure can be preferable to a judicial foreclosure. The first benefit is time. A nonjudicial foreclosure in California can be conducted in about four months. In contrast, a judicial foreclosure can, if contested, require a year or more to complete. Because borrowers in default usually won't be paying their loan payments, a lender can get possession of the property more quickly through a nonjudicial

foreclosure. This can be appealing to lenders, as they want to get the property either rented or resold. The second benefit is cost. Attorneys most frequently will be hired to conduct a judicial foreclosure, and the legal fees associated with such a proceeding can be sizable. Many foreclosure companies can conduct a nonjudicial foreclosure, however, for a few thousand dollars.

A third benefit is finality. Once a nonjudicial foreclosure sale is done, then so long as the sale was conducted properly, the borrower does not have a right to repurchase the property. However, the situation is far different in a judicial foreclosure. When a property is sold pursuant to a judicial foreclosure, then for a limited time the borrower has a legal right to repurchase the property after the foreclosure sale, even if the new owner doesn't want to sell it. The repurchase price is not determined by the amount of the loan, but is instead determined by the price paid at the foreclosure sale. In a nonjudicial foreclosure, borrowers don't have any right to repurchase the property after the foreclosure sale.

Because of these benefits of time, cost, and finality, many (or most) lenders prefer nonjudicial foreclosures to judicial foreclosures.

Foreclosure law is extremely complex, and most persons who become involved in a foreclosure lack the necessary legal background to fully appreciate the complexities of the law concerning this subject. Persons who want to understand the law or how it is applied should consult an attorney.

Robert B. Jacobs practices real estate, business and construction law in the Bay Area. Reach him at This email address is being protected from spambots. You need JavaScript enabled to view it. or The foregoing article is not a complete discussion of the subject addressed, and should not be relied on. Readers with specific questions or issues should consult an attorney.



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