California’s foreclosure laws make it the land of opportunity for flippers and developers.
That’s because they offer lenders a greater amount of certainty.
That confidence and certainty is then passed on to investors in the form of better terms including efficient timelines and cheaper capital.
Understanding this is critical for ambitious flippers and developers keen to maximize their return on investment.
Foreclosures make a key and often highly lucrative source of inventory for flippers and developers.
Here’s how California’s foreclosure laws can benefit you and what you need to understand to navigate them safely.
Non-judicial vs judicial foreclosures
California is a non-judicial foreclosure state.
That means most foreclosures use a Trustee’s sale process rather than court litigation.
It results in foreclosures taking between 4-6 months from the time of the first notice of default.
Typically, the process involves:
- missed payments
- Notice of Default (NOD) recorded
- minimum 90-day waiting period
- Notice of Trustee’s Sale (NOTS) recorded
- minimum 21 days before sale
- trustee’s sale (auction)
Judicial states such as New York and Florida take much longer to foreclose.
Florida often takes between 8-14 months while New York can take up to three years depending on the backlog with court delays significantly impacting wait periods.
In addition, unlike judicial states, California does not allow post-sale right of redemption after the trustee’s sale and normally will not grant a deficiency judgment.
Impact on hard money and pricing
In non-judicial states, first-position lenders have a predictable enforcement pathway in the event of foreclosures.
This increases their willingness to fund higher LTVs (loan-to-value) compared with judicial states such as Florida and New York.
It’s why California’s foreclosure laws are more inviting for hard money lenders to operate.
They are confident about lending money with lower rates than in judicial states.
First-position hard money rates in California typically land in the range of:
- 9-12% interest
- 1-3 points (depending on the deal, experience level of the developer and their relationship with the lender.)
In contrast, judicial states typically charge rates 1-2% higher because of the risk of litigation which brings timeline uncertainty.
The cost of foreclosures in California
While foreclosures in California may occur more quickly than in judicial states, they still incur costs that include:
- legal fees
- trustee fees
- carrying costs
- property preservation
There is also the potential for the market to soften which can hit your bottom line hard.
Every day, every dollar is important to your bottom line.
While purchasing a foreclosure property carries risk at the start of the project, it is important to keep uncertainty to a minimum at the end of the project – the exit.
The importance of exit strategies
Even in non-judicial states, the importance of having well-crafted, multi-dimensional exit strategies is vitally important when acquiring properties for renovation via foreclosures.
That’s because they are a high-risk, capital-intensive investment, often compressed by strict timelines.
Buying a distressed property at foreclosure means you are also buying timing issues, legal exposure and market risk.
Having multiple exit strategies reduces risk at the back end of the deal because purchasing a foreclosure property comes with the following burdens :
- Cash or hard money is required at trustee sales in California. These sales go ahead without inspection, financing or appraisal contingencies.
- Holding costs (property taxes, insurance, utilities etc) can accumulate quickly in expensive markets like California and even short holding periods can wipe out profit margins.
- They often have hidden risks like title issues, liens, deferred structural damage or may even be occupied by former owners or tenants.
- They are more common in difficult economic times (higher rates, lower demand, credit tightening) which in turn can affect your primary exit strategy (selling).
- Demand for foreclosure properties is high meaning smaller margins and less room for error.
In addition, it is worth noting California’s foreclosure laws can also impact flippers who can lose their property if they default.
Always factor timeline risk into your flip duration if your exit relies on selling the property, refinancing or a bridge to permanent financing.
A contingency of 2-3 months into your hold period is strongly recommended.
What hard money lenders look for in a borrower
California’s foreclosure laws influence the psychology of lenders which in turn affects approvals.
Lenders don’t just underwrite collateral, they underwrite exit probability.
Flippers and developers with multiple well structured exit strategies find capital easier to acquire and enjoy better terms than those without.
When lenders have confidence in the borrower and their ability to complete projects and repay loans on time, they are more likely to offer them capital and return business.
Professional California lenders place a high emphasis on the following:
Days on market (DOM) in submarket – this is an indicator of speed and tells lenders how long comparable homes sit on the market in the specific area of your property, not just the wider area.
Liquidity at that price tier – reveals how much inventory is moving in the price range at which you intend to sell.
Realistic resale comparisons – an analysis of comparable properties to determine your ARV (After Repair Value) and ultimately, how much they are prepared to lend.
Refi qualification strength – a lender’s way of determining how likely you are to successfully refinance out of a short-term flip or bridge loan if the property does not sell quickly. It’s their assessment of the strength of your Plan B.
Get finance and support today
Most flippers think about ARV and construction risk when assessing potential flips.
Fewer think about California’s foreclosure laws and how lien enforcement timelines influence lender behavior, pricing and approval standards.
Foreclosures in California make up a small but significant amount of properties for flippers and developers.
And with foreclosure activity in California rising 27 per cent in 2025, understanding the risks of purchasing these properties is becoming increasingly important.
That’s why working with a trusted funder and mentor like Equidy is so valuable.
Sure, Equidy is a hard money lender that can finance flippers and developers in as little as 48 hours.
Yes, they are a lender that loves to reward entrepreneurship even in difficult economic times and strives to help their clients realize their wealth creation dreams.
But that’s just the half of it.
Equidy has an intimate and personal history with all aspects of property development in California and has done so for more than four decades.
They have a deep knowledge of California’s foreclosure laws and can help their clients develop multiple exit strategies to ensure they maximize the return on their investment without putting themselves at unnecessary financial risk.
Equidy enjoys long and established relationships with serious investors, sellers and real estate professionals while leveraging their reputation and trust, using clear communication to minimize the risk to all parties.
Contact Equidy today to book your free strategy call.
