A trustee sale is the sale of a property, by a trustee or an agent of a trustee, who is appointedby the lender to carry out the auction for non payment by the homeowner under the terms of the note and deed of trust. This is the lenders only recourse in order to either get paid through a third party’s successful bid at the trustee sale, or when no one bids the lender getting title to the property so they can liquidate. In short, it is a foreclosure sale.

A trustee sale has a number of important characteristics:

• The primary purpose is to recover enough money to settle the outstanding mortgage loan amount.
• There is no guarantee of clear title. It is up to the buyer to do their research on any outstanding liensbefore committing.
• Bidders must meet the trustee’s requirements to show that they are qualified before the auction begins.
• There may not be an opportunity to inspect the property before the sale. If there is, it may be limited and entirely up to the bidders to find out and inspect.
• There is unlikely to be a chance to buy title insurance to protect against outstanding liens.
• Properties are often still occupied and if you are the winning bidder you will have to perform an eviction to get possession of the property.

Tips for bidding on a trustee sale:

• Never bid on a property you have not seenunless you would enjoy having your new property be one of the horror stories told about auction buyers who didn’t know about dramatic deficiencies in the property.
• Always make sure that you know the lien position that is going to sale. You could end up bidding on the second mortgagewith a purchase leaving you responsible for the first mortgage.
• Do a title search. It will show which lienis going to auction that day, if there are tax liens outstanding, and the ramifications of a purchase on outstanding liens. It’s worth a title search fee to avoid having additional thousands of dollars necessary to clear the title after purchase.
• Bid in small increments, never more than $1,000 per bid. Bids in $100 increments may be slow going, but they generally make the most sense.
• Decide your maximum  “bid to” price prior to auction. This is your “walk away” price. Never bid past that number. Don’t allowexcitement or the will to win get the best of you!
• Know that there is no sympathy for buyer’s remorse or mistakes. It is expected that everyone involved is a pro. Don’t expect anyone to fix costly problems you didn’t mean to incur.

Do your research thoroughly both of the trustee sale process and the properties that interest you. Watch an auction without bidding to understand the dynamics. Consider taking advantage of bidding services that will also do pre-auction work such as title searches and property inspections. If ever there was a time for a buyer to beware, trustee sales are it!

When would you want to work with an experienced professional to participate in a trustee sale?

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