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What Is a Trustee Sale?

Foreclosed or seized properties are auctioned off during trustee sales.
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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 19 October 2014
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A trustee sale is a public auction at which a piece of real estate is sold. These sales are held when people default on their mortgages and the lenders take possession of the property, and they are also held when people fail to pay their property taxes and the taxing authority takes the property. Such sales are usually listed in the newspaper so that members of the public are aware of the fact that property is available for sale.

In the case of mortgaged properties, when someone mortgages a property, part of the agreement involves a clause that allows the lender to foreclose on it if the borrower does not pay. When property is foreclosed, a person is appointed to act as a trustee to handle the repossession of the property and the sale at auction. The purpose of the sale is to collect the balance of the loan. Tax auctions are held for similar reasons.

A property cannot be sold in a trustee sale without warning. The person in default is usually sent a series of notices providing opportunities to get current on the account. If the person fails to get current or to work out a deal which allows for a payment plan, the sale can move forward and a final notice about the sale will be sent. People should be aware that when property is sold in this way, the buyer usually gets the right to immediate possession.

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When the sale is held, the trustee starts the bidding at a price deemed reasonable. He or she may also determine that the property will not be sold unless the bids pass a certain amount, such as the amount outstanding on the mortgage loan. If no bids reach this level, the property will not be sold, and the trustee will pursue other avenues, such as listing the property with a real estate agent.

At a trustee sale, bidders buy the property as-is. Sometimes it is possible to arrange for an inspection before the sale, but in other cases, it may not be. The title may also not be clear. Furthermore, buyers need to be able to pay in cash for the property and may be required to put down a deposit before they are allowed to bid so that the trustee can be confident that they will make good on their final offer.

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Bertie68
Post 4

I believe there are two ways of handling property that has a large amount of tax due. If the owner doesn't pay his taxes after several notices, the tax people will take over the property and sell it at a trustee sale. A notice must appear publicly to let people know that it will be auctioned off.

There's another way, at least in some states. The tax agency keeps a list of properties that have a tax lien against them and the owner can't pay. You can go to the tax place and get a list of the properties. I think you can get the address so you can look at the outside of the house. At the auction, if they are the highest bidder over the tax amount, (I think this is correct) they own the property.

Misscoco
Post 3

It is a very sad situation when a family or individual's house is foreclosed and it is put up to be put up for auction at a trustee sale. In my state, the bidding takes place on the courthouse stairs. The thought of your home being sold on the steps of the courthouse seems really demeaning.

There are some entrepreneurs, who make their living by buying these foreclosed homes at a bargain price. They either fix them up minimally to sell or rent. One disadvantage is that buyers are usually not able to see the inside of the house before the trustee auction.

I hate to see one person's terrible loss become big profits for others.

OeKc05
Post 2

The saddest thing in the world was watching my cousin’s house get sold at a trustee sale. She and her husband both lost their jobs months prior, and they had no income with which to pay off their mortgage.

Depression and anxiety mounted for them as they received notice after notice of the impending foreclosure. They had no option but to simply let it go. Their savings were depleted.

They have since both found jobs and rented a place. They are very frugal, and I have no doubt they will soon be able to purchase another home. I’m sure they will never forget the utter helplessness they felt at the trustee sale, though.

seag47
Post 1

When my sister-in-law moved to New York, she and her husband got a good deal on a house at auction. They bought it through a trustee sale.

The cool thing is that they were the only bidders. The house was kind of old but in generally good condition. It also sat way out in the country. They preferred a fixer-upper, so they got just what they needed.

Since they were the sole bidders, they got the house for the asking price, which was just what the seller needed to cover the costs. They were able to use more of their money toward remodeling and furniture.

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