Trustee’s Sale The Trustee’s Sale, also known as a Foreclosure Auction or County Sheriff Sale, is a public auction that is open to all bidders. It is basically the end result of the foreclosure process, but before a property can be auctioned off, there are several steps that happen preceding it. 1. First, after a mortgagor (borrower) has fallen behind in their mortgage payments, typically about 3-6 months, the mortgagee (lender) would have a Trustee record a Notice of Default (NOD) at the County of Recorder’s Office in the county in which the property is located. 2. When the NOD is recorded, the property owner is put on notice that they face foreclosure and a reinstatement period has begun. This period in most cases runs until five days before the property goes up for auction giving the property owner time to cure the default. 3. If the default hasn’t been corrected and the loan brought current, the property owner will receive a Notice of Sale. The notice must be sent at least 25 days prior to the sale, and must be sent by certified mail or registered mail. This notice will also be posted on the property and recorded in the County Recorder’s Office. 4. The Notice of Sale is also published in the local newspaper once a week for three weeks. The publication of the notice must begin at least twenty-one days prior to the sale. In the ad will be: a. All the names listed as owners on the Deed to the property b. The property Address c. Date, time and location of the auction d. A legal description of the property e. The County Registry book & page numbers f. Reason for auction g. Amount of deposit required at time of bid h. Amount of time the remaining balance will need to be paid in In the state of New Hampshire the Foreclosure Auction usually occurs at the property in question, unless the power of sale clause specifies a different location. The date and location of the upcoming auction will be posted in the Notice of Sale. The opening bid is set by the foreclosing lender and is usually equal to the outstanding loan balance, interest accrued, and any additional fees and attorney fees associated with the Trustee Sale. In some cases the opening bid can be set around 70-85% of the properties fair market value. When the property is auctioned off to the public, the highest bidder buys the property with no guarantee of title, no inspection and usually for cash only. The purchaser will typically need to put down a deposit up front and pay the remainder within the specified time frame such as 30 days or before. After full payment has been made, they then would receive a trustee’s deed to the property. If there are no bids higher than the opening bid, the property will be purchased by the trustee or attorney conducting the sale for the lender. If this occurs, the property would then become an REO or Real Estate Owned property. Not surprisingly, over 90% of these properties sold at these auctions revert back to the lender, mostly because they are worth less than the total amount owed to the bank or lender. When a property is purchased at a trustee sale from the foreclosure of a Senior Lien holder, all junior liens such as a second or third mortgage lien or mechanics liens are wiped out. The only junior lien that wouldn’t be wiped out would be State Property Tax Liens, they always have a senior position and always get paid first. An IRS Tax Lien would not have seniority if in a junior position but they do have Redemptive Rights. They have a certain amount of time to redeem the property after the auction such as 120 days if they so choose. They usually don’t exercise this right but if the property has enough equity in it they might. The Priority of Liens is determined by the date of recording and is very important when purchasing at these auctions. If the property is being foreclosed on from the second or third lien holder’s position, the purchaser may be responsible for all senior liens if the amount paid at the auction does not satisfy them all in full. In the state of New Hampshire, the mortgagor has no Right of Redemption and may have a Deficiency Judgment against them if the sale price is not of a sufficient amount to pay the loan balance due plus costs. It’s a good idea to investigate for liens and their priority on any property you might be interested in before the auction. This information can found in local county records or through a Title Company. For more information on Trustee sales, call me today at (603) 610-8595 and I would be more than happy to assist you! Paul Martin GRI e-PRO Realtor
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