Trustee’s sale: A foreclosure sale due to default on the loan made by the lender, who holds a trustee deed on the property.
Trustee’s sale: A foreclosure sale by a property in foreclosure due to default in the loan made from the lender, who holds a trustee deed on the property.
Trustee’s Sale: The Sale of Property and Assets
A trustee’s sale is an alternative to foreclosure for a lender, which allows them to recover a greater amount of money from the defaulted loan.
A notice for a trustee’s sale is filed 90 days before the actual sale with the county recorder to allow homeowners time to get their affairs in order. After filing, the homeowner will receive a notice of sale. Investors often participate in trustee sales to acquire property below market value.
Similar to an auction, a trustee’s sale also includes other assets that have been seized as a result of defaulting on a loan. These may be sold individually or in lots. Buyers usually buy the property without viewing it first, which can a be a risk, but also an opportunity to purchase property at a discount.
In Arizona, for example, “The lender will typically prepare a credit bid, and if no other bidders are present, the lender will become the owner of the home. The highest bidder, other than the credit bidder, must pay the full purchase amount in cash by the next day under Arizona law. If the highest bidder fails to pay on time, the trustee can either reopen the bidding process or offer the property to the next highest bidder at their bid price. The new owner will receive a Trustee’s Deed which will convey title to the property,” Scottsdale attorney Mark D. Chernoff says.
To qualify for a trustee’s sale, buyers must register beforehand and show they have enough funds to bid, either in cash or with a cashier’s check. The benefit for the lender is that they will receive an immediate cash payment.
Homeowners are also allowed to participate in the bidding to recover their assets. Fees at trustee’s sales are usually around one percent, but may vary depending on the state.
“If the previous owner files bankruptcy at any time before the completion of the trustee’s sale, the proceedings must be delayed and relief must be obtained in the Bankruptcy Court. The automatic stay of the Bankruptcy Court prevents any foreclosure actions, and the trustee sale cannot proceed until the Bankruptcy Court issues an order lifting the automatic stay,” Chernoff says.
“The purchaser at the trustee’s sale may allow the occupant to rent the property for a short period of time to give them time to find a new place to live. However, the new owner has the right to give the previous owner or tenant a notice to vacate the property prior to filing a forcible entry and detainer action after five days note. The forcible entry and detainer action determines whether the occupant has the right to possess the property. If the occupant is illegally occupying the premises, the court can order them to leave, and the sheriff can enforce this removal,” he adds.
Homeowners who receive a Notice of Trustee’s Sale can avoid foreclosure by filing bankruptcy.
“After expiration of the above Notice of Default 30-day period, the creditor will mail and post a Notice of Trustee’s Sale and a Notice of Foreclosure; such notices will establish a foreclosure date which must be at least 90 days after the date of such notices as well as at least 270 days from the date of default. So long as you file a bankruptcy before that sale date your foreclosure will not take place on that date as a result of the automatic stay in effect,” Washington attorney Richard D. Granvold says.