The Basics of Purchasing Property at Trustee Sale
BY DANE BRIGGS
Inventory is low, prices are climbing, and buyers are desperately looking to their REALTOR® for new ways to purchase homes. For years, savvy investors have been purchasing properties through trustee sales and helping their clients find those diamonds in the rough. According to Michael Orr’s latest report, completed trustee sales are down 52% from last year, but the number of foreclosures that are reverting back to the lenders is down 71%. This is because more and more investors and agents are buying properties at the trustee sales. While it doesn’t appear that there is another “wave” of foreclosures, new notices of trustee sales have been on the increase with May seeing a 5.2% increase over last year. This means that there will be more properties being sold at trustee sale in the next 90 days.
The problem is that many real estate agents do not fully understand what it takes to purchase properties at trustee sales. Agents looking to help their clients purchase properties through trustee sales need to understand the necessary precautions and the massive risks involved in doing so. While there are bidding companies that provide a service to help people purchase, many agents are looking at doing this themselves.
The basic steps in purchasing properties at trustee sales are as follows:
• Find the property you want to bid on and the opening bid.
• Have a title company check the title history to make sure the first lien is the one foreclosing.
• Attend the auction with a $10,000 cashier’s check made out to the right person.
• Bid on the property and pay the balance by the end of the next business day.
• If occupied, negotiate with or evict the occupant.
Some areas of caution that many agents don’t fully understand:
• The trustee sale only eliminates junior liens.
• There is not an inspection period on properties purchased at trustee sales.
• The buyer is responsible for all back taxes on the property.
• There is not enough time to get a loan. If the property is not paid in full the following business day, the buyer will lose their $10,000 deposit.
• If the occupant is a tenant, they could be entitled to live out the remainder of their lease.
There are many additional pitfalls and risks associated with purchasing at trustee sale, but the better educated you are, the better you can protect your client. If you are interested in learning about how to help your clients purchase properties at trustee sales, I am teaching a class at the Phoenix Association of REALTORS® on Thursday, July 19 from 11:30am – 1:00pm. The class is complimentary to all PAR members and $25 for non-members. We will discuss everything you need to know about trustee sales and give you the tools you need to be a successful bidder on properties. Register here.
Dane Briggs has lived in the Phoenix area for over 20 years and was a full-time real estate agent from 2007-2012. He now works for Lawyers Title as a Sales Executive helping agents grow their business. Dane was the chairperson for AAR’s Young Professionals Network where he helped young REALTORS® learn more about leadership roles in the real estate industry. He also has taught numerous classes on trustee sales, teaching REALTORS® the ins and outs of buying properties at the courthouse steps in Arizona.
Tags: buyers, courthouse steps, investors, trustee sales