Buying Foreclosure at Trustee Sales and Auctions – Scott Cheng

San Diego County has quite a bit of foreclosure opportunities for investors.  Many investors go down to the court house steps in order to purchase foreclosure properties.  There are three locations in San Diego where foreclosures are purchased.  The first is downtown San Diego. The second is in El Cajon. The third is in Oceanside.  Recently, auctions.com has started to sell trust deeds at the Sheraton Hotel on Harbor Island.

 

When a property is sold at the public auction.  Many people make the mistake of thinking they can finance the purchase of trust deeds.  The reality is that sale of trust deeds are all cash.  The investor or buyer needs to have cash or cashier’s check in order to purchase any property.  And the funds must be paid in full at the time of sale.  This mistake is usually made by novice buyers who haven’t been to any foreclosure auctions before.  Once auction is complete, the winning bid will then sign over the cashier’s checks to the auctioneer and the auctioneer will give a handwritten receipt for the sale.  For those who haven’t bought any trustee properties before, it can be a bit unnerving to hand over hundreds of thousands of dollars only to get a handwritten piece of paper.

Another important factor when purchasing a trust deed is to make sure you are buying the property you bidding on. This might sound silly at first.  But if you listen to the auctioneer, they don’t warranty that the address they are announcing is guaranteed. The address is purported to be; this means that the address the auctioneer is announcing may or may not be absolutely correct.  It is up to buyer to check the county records office and make certain the legal description of the property matches the trust deed being sold.  Even APN numbers are not a sure way to guaranteeing correctness.  Only the legal description is valid.

 

Making sure the position of the trust deed is also extremely important.  If you purchase the wrong one. It can be a very expensive mistake.  For example, if during the course of purchasing a property at the trustee sale.  You purchase a property relying on information that told you it was a first lien, but later you find out that there was another lien that was recorded earlier than the lien you just bought.  There is not reconveyance on the lien earlier lien.  You had not checked title correctly.  Now you are stuck paying off the first lien if you want to take possession of the property. Otherwise, you will lose all the money you sent buying your currently lien. This is a very expensive mistake.

 

During the auction, most auctioneers will read off the postponements and cancellations first.  Next the auctioneer will proceed to sell off any active trust deeds where the trustee has given them an opening bid.  All properties sold at the auction do not have any guarantees or warranties.  Basically, the property is sold as is, with any property taxes, mechanics liens, and any superior lien to the subject deed going to sale.  The lender also will not be responsible for any issues related to the property such as rehab, crack foundations, leaks, etc. They will not evict or remove any current occupant in the property for you. All of this is the responsibility of the buyers.  The auctioneer will then read off any disclosures, property address, trustee sales number related to the property.  The opening bid will be announced for the property and buyers who wish to bid on the property will then need to be qualified by the auctioneer before beginning.

 

For those who are thinking about buying any property at the trustee sale.  It is strongly advised that you be very carefully and know what you are doing. The is the potential to make a lot of money, but the risk can sometimes out weight the benefits. And any mistake you make will be a costly one.

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