A Guide for Investors on Trustee Sales

In the beginning of your real estate investment career, you could believe that purchasing a desirable property at an auction will give you an advantage over the competitors and result in a successful sale. But a trustee’s sale, often known as a public real estate auction, can be riskier than you might imagine. Furthermore, purchasing a home through a trustee sale differs significantly from doing so through a conventional transaction.  

Let's examine trustee sales in more detail and discuss the advantages and disadvantages of buying real estate in this situation. By the end, you'll be able to decide if buying properties through trustee sales is a good idea for your investing objectives.

What is a Trustee Sale?

Real estate is sold at a public auction at a trustee’s sale. Trustee sales are typically only available when homeowners are experiencing a financial crisis, such as when a homeowner stops making mortgage payments and the house goes into foreclosure. In other cases, homeowners who owe a significant amount in unpaid property taxes may have their homes auctioned through a trustee sale.  

Trustee sales are typically one of the final phases in the foreclosure process in the typical scenario. The highest bidder will take ownership of the trustee-sold property after the auction is over. If no high bidder is found for the property at auction, the lender for the asset assumes ownership and must pursue additional options to recover the debt.

Remember that trustee sales are not the same as "trust sales," which take place in court and concern assets from estates undergoing the probate procedure.

In 4 Steps, Perform A Trustee Sale:

You could believe that buying houses at trustee sales is a smart move. Let's go over the trustee sale procedure step by step so you can understand what you're getting into with these deals.

·         Homeowners Default

·         Notice of Trustee Sale

·         Presale Period

·         Auction

Figure 1: Trustee's Sales

As you can see, trustee’s sales are exciting and potentially profitable opportunities to acquire real estate at great prices and through a somewhat unusual route. However, you should be aware that depending on the specifics of the house and the mortgage's former borrower, trustee sales have their own baggage, restrictions, and potential drawbacks.  

Instead of only buying new real estate investments through auctions, for the best returns, think about whether a certain home at a trustee sale is worth your time and money. The more money and experience you have, the more reliably you can use trustee sales to buy cheap homes and diversify your portfolio.

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