The Anatomy of a Trustee Sale

A Trustee Sale can be a good thing or a bad thing, depending on what side of the table you are on. If you're on the "giving side", this type of sale means you're about to lose your home. Bad news. However, if you're on the "receiving end", this type of sale can mean a new home for you and your family. A second plus is that it could mean obtaining a nicer home than you could otherwise afford.

Trustee Sales are often listed in the classified section of newspapers. That's where you can find them in you're searching for a new home or, for a property to rent or resell. This type of sale always involves some parcel of real estate. Whether the real estate is a lot in the city or an acre in the country, once it's seized for nonpayment, all property is treated the same.

Of course, property is seized for two primary reasons: either the owner has failed to pay their real estate taxes. Or, they have failed to keep their mortgage payments current. Unfortunately, with the increased number of people losing their jobs in this country, foreclosures on homes are increasingly more common.

In order to understand the entire Trustee Sale process, let's look at an example. John Smith is looking for a home. He can find a piece of land for sale and build house on it. Or, he can buy a house that's already built. Whichever John chooses to buy, he'll need to acquire a loan from a bank or mortgage company. The financial institution will have John (and his wife, if applicable)
sign loan agreement papers. By signing these papers, John agrees to repay the money, plus any interest and other fees the loaner will add onto the loan.

Finally, the bank or mortgage company gives the money to the existing property owner. The lending institution then takes possession of the mortgage deed, and John takes possession of the property.

Now, John has the responsibility of paying a monthly mortgage payment in exchange for his new home. He also has the responsibility of paying for his house insurance and for the real estate taxes, if these two expenses aren't included in the mortgage payment.

Let's say that John fails to follow his mortgage agreement by not making the monthly loan payments. The lending institution now has the legal right to foreclose on the land. This means that since John has broken his contract, then he must relinquish ownership of the property to the lender.

If John would have failed to pay his property taxes, the county would have placed a lien on his property. After some time, the property would have been legally seized. In this case, since it's the county doing the taking, a trustee -usually the county sheriff- acts on the behalf of the county.

He or she then makes the arrangements to hold a Trustee Sale on a certain date and time. The purpose of the sale is to sell the property in an effort to make back the amount of the loan.

The property is then sold on the date of the sale. It's auctioned off to the highest bidder. A Trustee Sale is held on a "cash only" basis. Therefore, not everyone is eligible to bid. Unless, that is, you have proved to the auctioneer before the sale that you have a sufficient amount of cash or cashier's checks to cover the amount of your bids.

Much of the time, the bidding begins with an amount that is equal to two thirds of the amount that's owed on the property. Most of the time, this amount is less than the actual appraisal of the
property. This allows a buyer to get a "good deal"on a simple parcel of land or on a house and land.

Finally, when a Trustee Sale ends, and the winning bidder has paid for the property, he or she
receives a deed from the trustee.

If you're searching for real estate at this type of sale, keep in mind that the package is sold "as is" without any type of warranty or guarantee. Because of this, before you offer a bid, you should inspect the house and/or property thoroughly. Keep a mental tally of repairs that need to be made, as well as an estimated cost for each.