How Does a Trustee Sale Work?

A trustee sale is a public auction to sell foreclosure property.

A trustee sale is a public auction that takes place as the final step in a mortgage or lien foreclosure action. Any member of the public can attend the trustee sale and bid to purchase the foreclosure property. The high bidder at the auction becomes the new owner of the property.

Notice of Sale

The first step in a trustee sale is the publication of a public notice of sale by the foreclosing creditor. The notice of sale will identify the date, time and location of the public auction where the foreclosure property is selling. Additionally, the foreclosing creditor may include additional information related to the sale, such as the opening bid, minimum bid amount, cash deposit requirement, and pay-off timeline.

Trustee

The foreclosing lender will hire an independent person, called the trustee, to run the trustee sale. The trustee is typically an attorney, title company or foreclosure servicing company. The trustee has a legal duty to use its best efforts to produce the highest foreclosure sales price as possible. The trustee is prohibited from taking any actions that might reduce or chill bidding on the foreclosure property.

Auction

The trustee sale will begin at the time advertised in the notice of sale. The trustee can open the bidding at any price the trustee thinks appropriate, but generally bidding will open at the amount necessary to pay off the lien being foreclosed on. The trustee will then accept bids from anybody in attendance. Bidding continues until nobody present is willing to bid any higher, at which point the bidding will close and the high bidder receives the right and obligation to purchase the property for the bid amount.

Title Transfer

After the high bidder provides cash to the trustee to cover the bid price, the trustee will issue a trustee's deed to the property. The trustee's deed creates a new chain of title on the property. Any previous deeds on the property become invalid and unenforceable. However, if the property was subject to any liens that were senior in right to the lien foreclosed on, the property title will remain subject to those senior liens even after the issuance of a trustee's deed. The property will not remain subject to any junior liens, however.

References

• "Foreclosure Law 101"; Dr. Vook, Ph.D.; 2011