What Happens at a Trustee's Sale of a Home?

A trustee sale is a public auction of real estate in which the owner is in default on the mortgage. The trustee facilitates the foreclosure process on behalf of the lender or mortgage company. A trustee sale typically marks the end of the foreclosure process. After the sale, ownership of the property is transferred to the highest bidder.

Before a trustee sale can take place, the property owner must be in default on his mortgage. After a mortgage payment is missed, the creditor has the right to initiate foreclosure proceedings to collect what is owed. The creditor must record a default notice with the courts and send a copy to the borrower and other interested parties.

If the account isn't brought current, the lender has the right to proceed with the property sale. The lender must record a notice of the upcoming sale in the county where the property is. In most states, a trustee sale typically occurs 90 days after the creditor records the trustee sale notice.

A trustee sale usually occurs at the county courthouse. Parties interested in bidding on a prospective property must register with their name, phone number and a cashier's check for a deposit. Some states require a small deposit such as $10,000, while others require an amount large enough to cover the entire price of the property. The check is returned if the bidder doesn't buy the property.

The creditor must provide the trustee a bid amount. This amount consists of the principal, interest, taxes and fees owed on the property. The bid amount is usually made available to the public the day of the sale or the day before the sale. Bidding for the property starts at this amount.

When bidding begins, the person conducting the sale introduces a property and asks if anyone would like to place a bid. If an interested party is present, he may start the bidding at any amount above the opening bid. Bids can increase in any increment. The property is sold on the third call of the highest bid. The person with the highest bid must make a check for the bidding amount to the trustee within a certain time frame, which varies by state.

Once the trustee sale is complete, the property deed is recorded in the new owner's name. The winning bidder can take immediate possession of the property. If the previous owner or rental tenants are present, they must vacate the property and remove all personal belongings. If the current occupants fail to leave the premises, the new owner has the right to begin an eviction process and have them removed.

The original borrower may reinstate the mortgage by bringing the mortgage current. If the property owner does this before the trustee sale, the foreclosure process ends and the original borrower can remain in the home. Once the mortgage is reinstated, the lender must notify the trustee. The trustee must then terminate the property sale.