Trustee Sale: How It Works and All You Need To Know

Trustee Sale
Trustee Sale

In the early days of real estate investing, you might have believed that buying a prime property at auction would give you an advantage over the competition and result in a quick sale. However, a public real estate auction, also known as a trustee sale, can be riskier than you think. Furthermore, buying a house through a trustee sale is not the same as buying a house through a normal transaction. Let’s go over the notice of trustee sale in California and the successor trustee sale in greater detail, as well as the benefits and drawbacks of purchasing property in this situation. By the end, you’ll know whether you should buy properties through a trustee sale for your investment goals.

What is a Trustee Sale

A trustee sale is a public auction in which property is sold. These sales take place when people default on their mortgages and the lenders seize the property, as well as when people fail to pay their property taxes and the taxing authority seizes the property. These types of sales are usually advertised in the newspaper so that people know what is for sale.

When a person mortgages a property, part of the agreement includes a clause that allows the lender to foreclose on it if the borrower does not pay. When a property goes into foreclosure, a trustee is chosen to take it back and sell it at auction. The sale is being held to collect the loan balance. Tax auctions take place for the same reasons.

Notice of Trustee Sale

A Notice of Trustee Sale is a written notice of a public auction of foreclosed real estate that includes the date, time, and location. It is a legal document that is archived.

The Notice of Trustee Sale (or Notice of Trustee’s Sale) is a legal notice that informs the borrower (or borrowers) about the foreclosure sale. It is mailed to the borrower (or borrowers) via first-class and certified mail. The grantor’s name, the current beneficiary of the deed of trust, the current trustee, the current mortgage servicer, and the parcel number of the property will all be listed on the Notice of Trustee Sale.

The public auction, which is usually the last step in the non-judicial foreclosure process, is known as a “Trustee’s Sale.” (In states where foreclosure is handled judicially, such as California, you will most likely not receive a Notice of Trustee Sale.)

The trustee is the beneficiary of your loan and works on behalf of your lender. The Trustee executes the Trustee Sale legally. Before the Notice of Trustee’s Sale is sent out, the trustee who was put in charge of your deed when you got your mortgage is usually replaced by another trustee. Most of the time, the Substitute Trustee is a local law firm (or company) that runs foreclosure sales.

In most states, your lender and trustee are required to send you preforeclosure notices before the Notice of Trustee’s Sale. These notices tell you that you haven’t made your mortgage payments on time and that you need to do something to stop the trustee sale.

How to Perform a Trustee Sale in 4 Steps

You may believe that purchasing homes through trustee sales is a fantastic idea. Let’s go over the trustee sale process step by step so you know what you’re getting yourself into with these transactions.

#1. Default of homeowners

In other types of real estate, to qualify for a trustee sale, the borrower or homeowner must be in financial distress. This usually happens when a homeowner falls behind on their mortgage payments. A loan servicer usually sends at least one notice of default to the homeowner before beginning the trustee sale process. The homeowner is then allowed to repair the problem or work with their lender to find a solution so that they do not lose their home. If the homeowner can’t fix his or her money problems, the lender will start the process of a trustee sale.

#2. Notice of trustee sale

A loan servicer will then give the homeowner or borrower between 60 and 120 days to bring their mortgage current. The precise timeline varies by state. If a homeowner continues to miss mortgage payments and fails to contact the lender, the lender or banking institution will send a “notice of trustee sale” to both the homeowner and the County Clerk’s office. This notice informs the homeowner that their home will be auctioned off soon. Lenders usually put ads in local newspapers or on the internet telling people when and where an auction will be held, as well as important details like the date and time of the auction.

#3.  Pre-sale period

During the presale period, anyone who might be interested, including the lender and possible investors, gets ready for the auction. To set the opening bid, the loan servicer for the home hires a neutral third party, who usually works for a title company or escrow company. The bid is set at a fair or reasonable price for the property and includes any additional payments that must be made, such as judgment fees or liens.

Investors who want to take part in the trustee sale must first sign up and show that they have enough money. Typically, investors cannot use loans to purchase properties at auction. The highest bidder, on the other hand, must leave the auction site with a cashier’s check for a certain percentage of the total amount of bids. The balance must be paid soon after the auction concludes.

#4. Auction

The trustee sale can begin once all the ducks in the auction are in a row. Qualified investors are intimidating—assemble on the day of the sale. The trustee makes an opening bid, and the price rises based on the amount of interest in the property in question.

When the highest bidder is identified, the bidding process comes to an end. The winning bidder receives the trustee’s deed. They are then designated as the new property owners. If no one bids at the trustee sale, the house becomes an REO (real estate-owned property), and ownership is transferred to the lender. The lender can then use other methods to sell the home, such as advertising on the MLS, or multiple listing service.

Successor Trustee Sale

A trust can help strengthen your estate plan by giving you more control over how your assets are distributed. Depending on your specific needs, there are several types, but most will require you to appoint a successor trustee sale. The Successor Trustee, like the Executor of a Will, will manage the trust after your death.

One option is to be chosen as a successor trustee sale by a loved one. Whether you are deciding who should be in charge of your Trust or have been appointed to administer someone else’s, understanding the role of a Successor Trustee can be beneficial.

What does a Successor Trustee Sale entail?

A Successor Trustee is a person in charge of administering and settling a trust after the creator (known as the Grantor) passes away. A successor trustee sale is also in charge of the trust if the grantor becomes incapacitated or unable to make decisions. The exact responsibilities of a successor trustee will vary depending on the grantor’s instructions.

When establishing a Revocable Living Trust, the definition of Successor Trustee is especially important. In a Living Trust, the Grantor is often the initial Trustee until their death, but they will eventually need a successor to take over. Grantors can appoint a close relative, a family friend, or even a financial institution to serve as Successor Trustee.

A grantor will name their successor trustee in a document called a Declaration of Trust, which will also explain their role. In some cases, the Successor Trustee will be required to oversee the trust for several years, such as if the beneficiaries are minor children who must reach the age of majority before assets can be distributed. Because of this, being a Successor Trustee is a big job that often takes a lot of time.

What Is the Difference Between Trustee Sale and Successor Trustee?

A trustee sale and a successor trustee have similar responsibilities, but they occur on different timetables. A trustee is appointed to oversee any property held by the trust as soon as it is established. They legally own their assets and have to follow the terms of the Declaration of Trust. The grantor is usually the trustee in a revocable living trust. When establishing an irrevocable trust, the grantor must appoint someone else as a trustee.

A Successor Trustee is almost always named to ensure that the trust is still managed after the grantor or initial trustee dies. The successor’s responsibilities will be the same as those of the trustee, with the additional task of settling the trust.

Trustee Sale in California

A notice of trustee sale is the final-written notice that a lender has scheduled a date to sell a home in a foreclosure auction in California and many other states. When a borrower receives a notice of default or a notice of trustee sale, there is still time to take steps to stop the foreclosure process, but legal action must be taken quickly and decisively to save a home from foreclosure.

When a borrower stops making mortgage payments, the lender has the right in most states, including California, to issue a notice of foreclosure sale and proceed with a mortgage foreclosure sale. Furthermore, when a borrower misses three or more monthly mortgage payments, a notice of default is sent to the home, and the foreclosure process begins.

If you don’t respond to the notice by calling the lender or getting the mortgage back on track, the trustee sale notice will almost certainly be sent. Hiring a good foreclosure attorney is the best way to stop the notice of foreclosure sale.

If you receive a foreclosure sale notice, it is best to go through the courts to use legal methods to stop the foreclosure sale date. When you receive the first notice from the lender, you must understand how much time you have to respond. Receiving a notice of default does not mean you will lose your home right away, and you can still stop the sale date using a variety of legal options.

Benefits and Drawbacks of Trustee Sale in California

For new investors, determining whether trustee sales are a good idea can be difficult. There are definitely some pros to think about, but investors should also be aware of some cons before bidding.


The majority of homes for sale at trustee sales are offered at pitiful prices. In most cases, lenders and third-party trustors set opening bid prices based on what they owe for the property rather than market value. As a result, if investors attend these auctions quickly enough, they may be able to purchase excellent properties for less than market value. This can result in significant profit margins, particularly for fix-and-flip investors.

Real estate auctions are held all over the country, and if investors know where to look, they can find a steady stream of leads. Also, many real estate investors have less competition when they buy a property outside their usual channels. Remember that you can’t use traditional financing at trustee sales, so you must have enough money to pay the forfeit deposit. This immediately excludes some investors.


The opposite of the first benefit is that new investors may find it hard to take part in trustee sales because they need to pay a forfeit deposit. That being said, if you can purchase the property in cash, you will lose a significant portion of your funds all at once. This must be taken into account if you intend to flip the property.

Furthermore, if you purchase a home at an auction, you agree to buy the property as is. You don’t get to negotiate for repairs, inspect the property, or do anything else, which means you have to accept any title issues, tax liens, or other burdens that may exist, reducing your potential profits.

If the home’s tenant or previous borrower is still living in the property at the time of the sale, the buyer of a home at auction may be responsible for carrying out any eviction proceedings.


As you can see, trustee sales are interesting and could be a good way to buy cheap real estate differently. But you should know that trustee sales come with conditions, requirements, and possible problems that depend on the home and the person who had the mortgage before you.

Instead of relying solely on auctions to acquire new real estate investments, consider whether a specific home at a trustee sale is worth your time and money. As your wealth and experience grow, you will be able to more consistently use trustee sales to scoop up low-priced properties and add them to your portfolio.

Frequently Asked Questions

What Happens At a Trustee Sale?

Once the notice of sale is published, the property can be bid on by a variety of bidders. These could be financial institutions, real estate firms, or even individual buyers. In most cases, interested parties must deposit a check, either for a small sum or for the entire property. Checks are returned to any bidder who fails to purchase the property.

What Happens After a Trustee Sale?

The property deed is immediately signed over to the new owner after a trustee sale is completed. If the tenants have not left, they may rent the property to the current tenants or file for formal eviction.

What’s the Difference Between a Trustee’s Sale and a Foreclosure?

The Trustee Sale is a formal auction of foreclosed properties that takes place at the county courthouse. When a property is foreclosed, it is sold at the trustee’s sale.

Trustee sales are auctions that occur when someone fails to pay their mortgage on time. It’s a method for the bank to try to recoup their loan.

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