A trustee sale is a public auction at which a piece of real estate is sold. These sales are held when people default on their mortgages and the lenders take possession of the property, and they are also held when people fail to pay their property taxes and the taxing authority takes the property. Such sales are usually listed in the newspaper so that members of the public are aware of the fact that property is available for sale.
In the case of mortgaged properties, when someone mortgages a property, part of the agreement involves a clause that allows the lender to foreclose on it if the borrower does not pay. When property is foreclosed, a person is appointed to act as a trustee to handle the repossession of the property and the sale at auction. The purpose of the sale is to collect the balance of the loan. Tax auctions are held for similar reasons.
A property cannot be sold in a trustee sale without warning. The person in default is usually sent a series of notices providing opportunities to get current on the account. If the person fails to get current or to work out a deal which allows for a payment plan, the sale can move forward and a final notice about the sale will be sent. People should be aware that when property is sold in this way, the buyer usually gets the right to immediate possession.
When the sale is held, the trustee starts the bidding at a price deemed reasonable. He or she may also determine that the property will not be sold unless the bids pass a certain amount, such as the amount outstanding on the mortgage loan. If no bids reach this level, the property will not be sold, and the trustee will pursue other avenues, such as listing the property with a real estate agent.
At a trustee sale, bidders buy the property as-is. Sometimes it is possible to arrange for an inspection before the sale, but in other cases, it may not be. The title may also not be clear. Furthermore, buyers need to be able to pay in cash for the property and may be required to put down a deposit before they are allowed to bid so that the trustee can be confident that they will make good on their final offer.