Although people generally use the term “mortgage” to mean any loan secured by real property, most property loans in California are made with a Deed of Trust.
When a borrower (”trustor”) defaults on a Deed of Trust, the “trustee” acting on behalf of the lender (”beneficiary”) has the power to sell the property to satisfy the debt.
The “trustee sale” is a verbal auction usually conducted on the exterior steps of the local courthouse, or at the trustee’s office. The successful bidder will receive title via a “trustee’s deed”.
To purchase a property at a trustee sale, be aware that:
The only acceptable bid is all cash. Each individual bidder must qualify with the auctioneer before the sale by showing the auctioneer cash or cashier’s checks. You will not be allowed to bid more than the actual amount of cash or cashier’s checks that you have on hand.
There are no provisions for viewing the property, or inspecting the property prior to the trustee sale. You will have driven by the property, and viewed the exterior. You are hoping that the interior condition is about the same level as the exterior condition. You are buying as-is, without any recourse.
The trustee’s deed does not give you an automatic right of possession. After you receive title, you must negotiate with any occupants of the property to arrange a voluntary surrender of the property. If the property occupants do not voluntarily surrender possession, you must resort to an eviction lawsuit.
The trustee sale wipes out the foreclosing lien. If the foreclosing lien was a second mortage, the first mortgage is still due. Property taxes are always considered the most senior lien, so all unpaid property taxes will also still be due.