“I want to buy properties on the courthouse steps,” said an investor client of mine.
He thinks the best deals on properties are to be found at the county auctions held every weekday, excluding holidays, on the courthouse steps of the county seat. For example Alameda County holds trustee sales at 1225 Fallon for all the cities in the county. San Francisco has sales at City Hall.
If this were any other client he would be gently led back to reality but this is a special client and he is adamant. “What can be so hard about buying property on the courthouse steps?” he asks. “What’s so different than buying a bank owned property?”
A lot is different.
First things first, what is a trustee sale?
A trustee sale, or auction, of a property is the second stage of the foreclosure process. It is after the notice of default has been filed but prior to the property becoming real estate owned, REO, by a bank. A trustee sale must occur between the time that the homeowner loses their property and a bank takes possession.
The process of foreclosure is a long one and varies from state to state. In California it takes longer than the 90 days from the date of a property receiving a notice of default. Eventually the property owner will receive a notice of trustee sale. The property is then added to a calendar of properties to be sold on the courthouse steps.
At some point, approximately 28 days from the notice of trustee sale, a date will be set for the sale. This date can and is frequently delayed or canceled. This is because many times a homeowner will cure the notice of default, get the house under contract as a short sale or regular sale, file bankruptcy or convince the lender to temporarily postpone or cancel the trustee sale.
Once a property is confirmed to be auctioned on a particular day the rules are simple. Bids are all cash and the winning bid is payable immediately after the winning bid is confirmed. Properties are sold as-is, subject to existing liens and with no guarantees as to condition. Title insurance is not available and the property may or may not be vacant.
In a nut shell, buyer beware because you do not know exactly what you’ll be getting for your money and there is no way to get the money back if you decide you don’t want the house.
Want more information about what to expect when heading to the courthouse steps? Email me at firstname.lastname@example.org.