When you get behind on your mortgage payment, your lender may initiate a trustee sale. A trustee runs a public auction to try to sell the home to give the lender their money back. The trustee sale is the last resort, after all other attempts to get you current on your mortgage occurred.
Before the Trustee Sale
Before the trustee sale, the lender typically tries to work with you. They see if there are payment arrangements or other ways to get you caught up. It’s in your best interest to work with the lender the moment you realize you can’t make your payment on time. If you let too much time pass, letting your payment get close to 90 days past due, the lender may start the trustee sale.
The trustee typically calls or publicizes the trustee sale 90 days before the sale date. This gives you time to make good on your debt, if you can. If not, you receive a notice of the sale and may have to be out of the home shortly after it.
Registering for the Trustee Sale
Once the trustee sale is made public, potential bidders must register. Many sales require the bidders to make a deposit. If they don’t win the bid, they get the deposit back. Each state has different deposit requirements. Sellers can inquire about the requirements when registering for the sale.
Viewing the Home
Typically, bidders don’t see the inside of a home going for trustee sale. Buyers bid sight unseen. The trustee sells the home ‘as is’ too. Unlike a personal sale, buyers can’t pay for an inspection and cancel the sale because they don’t like the condition of the home. Whatever is wrong with the home becomes the buyer’s responsibility.
Who Can Bid?
Everyone must register for the sale if they plan to bid. You can’t just show up and bid. In addition, you must prove ownership of the funds to buy the home. Because you pay for the home right away, there’s no time for financing. You must prove you have funds available right away.
The Starting Bid
The lender gives the trustee the starting bid amount. It depends on the amount past due and the balance on the mortgage. Most trustees let the public know the starting bid before the day of the sale.
After the starting bid, participants can bid in any increment. The trustee keeps the bidding going until there are no more bids. The final bid receives three calls before it’s a done deal. The highest bidder must have the cash (cashier’s check) for the bid amount.
Completing the Sale
After the sale, you must vacate the property. The winning bidder, after paying for the property, owns it right away. The county records the deed in his or her name and the owner takes possession of the home. The new owners do have the right to evict you from the home, if you don’t vacate it.
The trustee sale is usually the last resort after you default on your mortgage. If you don’t stay in touch with your lender, you run the risk of losing your home in this sale. Banks like trustee sales because they present immediate cash. There isn’t time for financing or sales falling through. But, the last thing a bank wants to do is take your home. They’d rather you made good on your debt. If you are in trouble, talk to your bank and get a payment arraignment going.