I need some advice for buying a house at a trustee sale

[JonT]

Need some practical advice on buying a home that is being foreclosed and sold through a trustee sale auction. This will be our primary residence and not an investment property. Anything I need to watch out for? Any practical advice from experience would be appreciated.

[stomachmonkey]

Get the home inspected 10 ways till Sunday.

Personally go to the local town hall and spend the $10-20 for copies of the plans and any permits that were filed.

As was established in an earlier thread, the estate may not be legally bound to disclose anything.

[duncan1437]

you might be interested in this news video about the legal risks of purchasing a foreclosed property. essentially the issue is that in areas with high foreclosures, a lot of the legal paperwork might be deficient.

the legal risk starts about 4 minutes into the video:

CBC News - The National - In Depth & Analysis - Florida's Foreclosure Fiasco

not sure if it applies in your area

[Eric Coffey]

It can be a risky proposition if you have no prior knowledge of the home. Unless it's still occupied and you can get a tour thru the home prior to the auction, you will be buying sight (of interior)-unseen. Investors buy homes this way at trustee sales all the time with no more than a "curbside" view/evaluation. Most never see the interior, and just roll the dice, as they have average/potential rehab budgets factored into their bid cap. Sometimes there is a lot more "fix" involved in fix-n-flip properties. Though, sometimes there is none, at it's gravy. Just know that you will be buying the home as-is, with no warranties or repairs to be made, and without the opportunity for a home inspection prior (again, unless you know the current residents, and can arrange such prior).

Also know that you will likely have to come to the table with a sizeable deposit, just to be able to bid. Here in PHX, you need a $10k deposit for each house you wish to bid on. Then any winning bidders need to have the balance paid in full by end-of-biz the next day, for each property. So basically you have to be a cash buyer to play.

If you are only interested in one property, it makes it a little easier. However, it can still drag on and on. Frequently, properties are taken off the auction calendar (often at the last minute/morning of auction) or rescheduled due to all sorts of reasons (accepted short-sale offers, short-sale approval extensions, BK, loan mod approvals, etc.). So, be sure to confirm that it really is on the list before driving down to the courthouse/trustee's office. Sometimes you will get a nice suprise with last minute "drop bids" as well, where the lender approves a lower minimum bid.

Also, beware that things go VERY fast at these auctions. I would strongly recommend attending a couple before your target property goes up, just to get a feel of the process.

Then there can be the issue of resident/tenant eviction. If it is still occupied, and you become the owner, then you will be responsible for evicting the current resident/tenant. Here in PHX, they have up to 90 days to vacate if you intend to occupy as your primary residence (regardless of any bona-fide lease). If it will not be your primary residence initially, and if the tenants have a bona-fide lease, you are required to honor the full lease term/length. You can do what the banks do and offer "cash for keys" as an incentive for early move-out. Usually, they will give people 30 days to vacate (without stripping/damaging the home, and cleaning it out prior to leaving) in exchange for anywhere between $500-$2000.

Good Luck!

[charlesbahn]

Be sure to check for liens and tax lien sales on the property.

[Dantilla]

Originally Posted by charlesbahn

Be sure to check for liens and tax lien sales on the property.

+1.

Get a title report.

The auctions I have attended require payment in full upon close of the auction. You must present a cashier's check for at least the minimum bid in order to bid on the property, and any funds over the final amount will be refunded at closing.

There are companies now that auction off homes for the banks that guarentee clean titles. The downside is that after the auction, the lender has the option to approve or reject the high offer.

[MBAtarga]

Purchase an owners' title policy - which protects you in case someone (previous lendor/owner) comes back and claims they hold title to the home/property.

[JonT]

Update. I have a title commitment that lists the liens on the house and the terms are 5k cash upon auction that morning then full payment at the end of the day. So here is my prob--financing. Apparently the bridge loan regulators have made it more difficult to get such a loan even though my wife and I have excellent credit and our combined income shouldnt be a problem to qualify. I need to know some creative ways folks can finance such a purchase legitimately. If there is someone in banking that has experience I would love to talk to you on the phone to get some ideas or what to expect. I am also meeting with my banker Thursday to discuss. Appreciate the help. PM me if possible.