BUYING PROPERTY AT A TRUSTEE SALE
For many buyers the process of a "Trustee Sale" is completely foreign. Hopefully we will try and guide you through the process and after reading this article you should have a much better understanding of the mystique of a Trustee Sale.
Trustee Sales or foreclosure sale’s are held every weekday at various locations in Phoenix. The number of people attending these sales have increased dramatically over the past few years.
To explain the process, when a homeowner finds themselves falling behind on their mortgage payments, their lender will send notices asking for payment. After a period of time (varies from lender) the lender sends a notice identifying that the loan is in default. In Arizona, a lender must appoint a "trustee", a person or entity that has the legal right to sell the home in a Trustee Sale.
A Notice of Sale will be recorded by the Trustee with the Maricopa County Recorder. The homeowner along with any other invested parties will receive a copy of the Notice of Sale. This is a legal notice that sets the time and place of the sale. This can be no sooner than 90 days from the recording of the notice with the county recorder. The notice is physically posted on the property and published for 4 consecutive weeks in a newspaper of general circulation within the county that the property is located.
The homeowner has options to reinstate the loan, however if not the trustee will conduct the sale. In Maricopa County the Trustee’s Sale takes place at various locations around downtown Phoenix. The times for the sale can vary but usually at 9:30 AM, 10;00 AM, 11;00 AM, Noon and 2:30 PM. These sales operate daily except for holidays.
During the auction process the lender usually sets a minimum bid and the property is sold to the highest bidder, if no bids are offered the property goes back to the lender. Each bidder is required to provide a $10,000 deposit when bidding on a home. If a bidder is successful the $10,000 deposit is collected by the Trustee and the bidder has until 5:00 PM the next business day to pay the remaining balance in cash or other acceptable form of payment to the trustee. Should the bidder fail to pay the remaining balance by the time allowed, their $10,000 is forfeited and the second highest bidder is given until 5:00PM the following day to complete the sale. The original bidder would be liable to any person who suffered a loss or incurred any epense as a result of the forfeiture including attorney fees.
The winning bidder has title conveyed through a trustee’s deed. This relinquishes any right that the previous owner has to the property. It also clears the title of any liens or encumbrances that are junior to the trust deed with one exception, property taxes.
Now that you have an idea on how the trustee sale works, how do you find properties that are going to sale. There are a number of ways of locating foreclosure properties including; 1) newspapers, 2) subscription websites, 3) bidder’s, 4) county records and 5) Realtors. Once you have your list you should evaluate the properties based on, resale value, estimated cost of repairs, minimum acceptable profit if you were going to re-sell the property and what your maximum bid should be. Understand that in many cases you will not know what the opening or minimum bid is on the property until the day before or the morning of the actual sale.
Prior to determining a value of a property you will want to drive the property and determine as much information as to the condition as possible. Many of the properties will be vacant with the window coverings closed so it will be very difficult to access the interior condition of the property. One of the most important things to determine is the value of the property prior to offering a bid. If you work with a bidding company they will give you a valuation on the property. The limitation of these valuations are that they rarely include any information from the local MLS service. Most of their valuations come from information gained from the county records and in many cases they have not driven the property.
There are some internet companies that claim to provide accurate valuations on properties. Be careful as they base their valuation on computer generated information without consideration for upgrades, features and condition of the neighborhood. They will give you a general feeling as to the value but not enough to base a buying decision. Realtors are your best bet, they have access to the most current information, details and descriptions of upgrades and neighborhood characteristics.
We have purchased numerous homes through the trustee sale process over the past few years and would be happy to answer any questions you might have about the process, just give us a call.
