Facts About Trustee Sales

Trustee Sale Procedures

First off, the beneficiary must authorize Trustee to proceed with foreclosure. The next thing to happen is the Trustee records a Notice of Default and mails it to the borrower/s and all lien holders. Then there is a Period of Equitable Redemption Trustor can reinstate. Three months after recording the notice of default, the trustee is required to publish a notice of sale, which must run in a newspaper of general circulation for at least 20 days. In addition the notice of sale must be recorded, posted on the security property and sent to everyone who received a Notice of Default. Then the Trustee sale cannot take place until at least 20 days after the first day of publication of the notice of sale, so typically 21 days out. The borrower can reinstate the loan and stop the foreclosure proceedings under a deed of trust up to 5 business days before the trustee sale. Generally, this means there instatement period is at least 3 months and 15 days.

All Cash Required

If you are not able to reinstate your loan the only acceptable bids at a trustee's sale (other than the foreclosing beneficiary's opening bid) are those that can be paid in full by the bidder with cash or bank checks in hand. Therefore bidders must qualify as an individual with the auctioneer before the Trustee sale-showing them the total amount of money each bidder brought to bid at the sale. Bidders are no allowed to bid more than the amount of cash they actually brought to the sale. The bidding is done by a vocally by the bidders themselves.

In various other states junior lienors may be allowed to "credit bid" their unpaid balances at the foreclosure sale of a senior lien, but that is NOT the case in California.

No Property Inspection or Title Report

There are no provisions in the foreclosure process to allow a preview of property interiors prior to a trustee's sale. As a rule most experienced bidders expect that the condition of the interiors will be similar in nature to that of the exteriors. Contrary to popular belief, it's rare for foreclosed owners to trash or purposely damage their lost property out of spite or in anger. However, we are seeing this more often and sometimes common in the states of Arizona and Nevada. Typically, it's more cosmetic than structural when found.

Since trustees when doing a foreclosure auction do NOT make title reports available to bidders on upcoming foreclosures it is important to beware when purchasing a foreclosed property. Bidders are advised to do a thorough title search at the county recorder's office or purchase similar foreclosure related software.

Finality of Sale/Sale Effect/Trustee's Deed

If you are involved with purchasing a foreclosure at auction there are typically no grounds for rescinding a valid trustee's sale. All sales are unequivocally FINAL unless rescinded by the previous title holder from a bankruptcy or wrongful foreclosure. There are generally no warranties of any type concerning the property and/or the state of its title. In fact, there are specific statutory exceptions absolving the trustee from having to comply with any disclosure requirements concerning the condition of title or the property itself but not an illegal foreclosure!

The effect of a trustee's sale is the absolute extinguishment of the foreclosing lien and any and all junior (later recorded or non-recorded) liens and title interests pertaining to the specific property. A junior lien may continue to exist (especially an involuntary lien) after the trustee's sale-but not against the foreclosed property. Since real property taxes are always the most senior claim against the title to any property they are not wiped out by any foreclosure. But don't confuse property taxes with income taxes. State and federal income tax liens in junior priority are cleared off the title to property by a foreclosing senior lien. This issue is sometimes confusing because the Feds have a "redemption right" for a limited time (120 days) that allows them to buy out the new foreclosure owners for the price they paid for a property and take title to the property for the purpose of selling it themselves for even more money (in order to collect something towards the foreclosed owners' delinquent federal income taxes).

A trustee's deed is the equivalent of a quitclaim deed and as such only purports to transfer whatever title interest the trustee might have had-if any. In addition, successful bidders do not automatically acquire any possessory right to foreclosed property via a trustee's sale. Possession is perfected afterward, usually via a voluntary abandonment or surrender of the premises by the occupants. An eviction lawsuit can be resorted to if they prove to be intransigent and that will usually take about 30 days or so.