The terrifying crime happened on Oak Grove Way, near Oak Grove Lane, around 2:30 this morning.
Police arrested four suspects at the scene Friday morning.
They're all from Modesto and are between the ages of 18 and 23.
They are: Ivan Hernandez, Victor Quintero and Emilio Chaparro. Authorities are still searching for a fifth man.
The victims told Action News the robbers pointed large guns at them and their daughter and they feel fortunate they weren't shot.
Witnesses described a chaotic scene in the Atwater neighborhood Friday morning, filled with police, SWAT vehicles and a sheriff's helicopter overhead. One woman who asked Action News not to show her face says she's never seen anything like it.
"My girls came into our room about 5 o'clock crying because they heard the police asking the people to come out of the house with their hands up," the neighbor said.
It all started when a young woman called 9-1-1, saying several armed men forced their way into her home and were demanding money. Action News spoke with her parents off camera, and they told me the suspects broke in through a window and pointed a large gun in the face of their 20-year-old daughter as she tried to call for help.
Their 21-year-old daughter had her bedroom door locked and managed to make the call. Officers arrived minutes later and arrested two suspects they spotted outside the home. Police then called for support from the Merced County SWAT team.
"They told me they had a home invasion robbery, and they believed they had hostages with armed suspects there," Capt. B.J. Jones of the Merced Co. Sheriff's Office said.
Authorities soon convinced two more suspects to come outside and rescued all four family members. But the victims told them a fifth suspect may still be inside. Jones says the SWAT team searched the house and then the surrounding area.
"Ultimately we started searching behind all the homes, behind Buhach Colony High School in the field to the southeast, located other pieces of evidence, firearms, and other things that were either used in the crime or evidence taken from the house," Jones said.
Investigators say they also found more than 200 pounds of pot in the home. That discovery makes it similar to another armed robbery in Merced County less than 24 hours earlier. Two men held a woman at gunpoint in this trailer while they stole a significant amount of marijuana. It's not clear yet if the cases are connected.