A Sacramento landlord in pre-foreclosure usually has five options: catch up the missed payments (reinstate), negotiate a workout with the servicer, refinance or bring in short-term financing, sell the property before the trustee's sale, or hand it back through a deed in lieu. California's process takes months, but rental owners get fewer protections than homeowners, so act early.
By Gary Burmaster, California real estate salesperson and CEO of All Inclusive Realty Group, Inc. Updated October 25, 2026. General information only, not legal or tax advice.
Pre-foreclosure is the window between the first missed payment and the trustee's sale. For a rental owner it often starts with something specific: a long vacancy, a tenant who stopped paying, a big repair, an adjustable payment that reset, or a balloon that came due. The good news is that most of the options below work better the earlier you use them. The hard news is that California's strongest borrower protections were written for people living in the home, not for landlords.
Most California home loans are secured by a deed of trust, so most foreclosures are nonjudicial: a trustee sells the property without a court case, following the steps in Civil Code 2924 and the sections after it.
| Stage | What happens | Where it comes from |
|---|---|---|
| Missed payments | The servicer sends late letters and may offer workout options. | Your loan documents and servicer policy |
| Notice of Default | The trustee records a Notice of Default with the Sacramento County Recorder and mails it to you. | Civil Code 2924 |
| Waiting period | At least three months must pass after the Notice of Default is recorded before the sale can be set. | Civil Code 2924 |
| Notice of Trustee's Sale | The sale date is posted on the property, published and recorded, at least 20 days before the sale. | Civil Code 2924f |
| Trustee's sale | The property is auctioned. For one-to-four unit homes, some tenants, owner-occupants and nonprofits get a short window to bid after the auction. | Civil Code 2924m |
You can generally reinstate the loan by paying the past-due amount plus allowed costs until five business days before the sale, under Civil Code 2924c.
Mostly not. The California Homeowner Bill of Rights, including the rules against "dual tracking" a foreclosure while a loan modification is pending, applies to first-lien loans on owner-occupied homes of one to four units (Civil Code 2924.15). If the property is your rental, assume those extra protections do not apply, and do not assume the servicer will pause the sale while it reviews your paperwork. Ask in writing, and keep copies of everything.
Bankruptcy can also pause a foreclosure, but it has serious consequences. Talk to a California bankruptcy attorney before relying on it.
Tenants keep important rights. Under Civil Code 1161b and the federal Protecting Tenants at Foreclosure Act, a bona fide tenant generally gets at least 90 days' written notice after the foreclosure before having to leave, and a tenant with a qualifying lease can often stay through the lease term. Keep collecting rent, keep the property maintained and keep security deposits accounted for under Civil Code 1950.5 while you work on a solution. A tenant's deposit stays a liability that follows the property.
HUD-approved housing counseling agencies offer free or low-cost foreclosure counseling and can help you talk to your servicer. You can find one through the housing counselor search on HUD's website at hud.gov. Watch for foreclosure rescue scams: be cautious of anyone who asks for money up front to "save" your property, asks you to sign over the deed, or tells you to stop talking to your lender.
Possibly. Forgiven debt can be taxable income under Internal Revenue Code Section 61, with exceptions under Section 108, and a foreclosure or deed in lieu is treated as a sale for tax purposes, which can create gain on a rental with a low tax basis. The special exclusion for forgiven debt on a principal residence does not cover a rental. Ask a CPA before you choose a path.
AIRG buys Sacramento rentals as-is, with tenants in place or vacant, including properties with deferred maintenance or code issues. You tell us about the property, Gary reviews it and sends a written cash offer, and you pick the closing date through escrow. Requesting an offer does not commit you; only a signed purchase agreement does. If the property has equity and you would rather keep it, our Direct Lending division makes business-purpose bridge and hard money loans on Sacramento-area investment property, subject to underwriting.
Get a written cash offer before your sale date
A nonjudicial foreclosure requires at least three months after the Notice of Default is recorded, plus a Notice of Trustee's Sale posted and recorded at least 20 days before the sale. In practice it often takes longer, depending on the servicer.
Generally yes. Under Civil Code 2924c, you can reinstate by paying the past-due amount and allowed costs until five business days before the scheduled sale. Get the reinstatement figure in writing.
Mostly no. Those protections apply to first-lien loans on owner-occupied one-to-four unit homes under Civil Code 2924.15. Rental property owners should assume they do not apply.
Not immediately. Bona fide tenants generally get at least 90 days' written notice after the foreclosure, and tenants with qualifying leases can often stay through the lease term.
Yes, until the trustee's sale. A sale that closes before the sale date pays off the loan and keeps your remaining equity. If you owe more than the property is worth, the lender must approve a short sale.
HUD-approved housing counseling agencies provide free or low-cost help. Use the housing counselor search on hud.gov, and avoid anyone who asks for fees up front to stop a foreclosure.
This article is for informational and educational purposes only and is not legal or tax advice. Consult a California attorney about your specific situation.