Checks Or Cash For Purchasing At Auction

Lending & Financing
1

I’m planning to buy a house at the trustee auction, but the house is priced low enough that I think there will be others there bidding as well. I can have a cashier’s check made for the minimum bid, but what if the amount goes $10-30,000 over? How can you possibly pay by cash or cashier’s check when you don’t know the final price? I can’t imagine people bring a $30,000 wad of cash with them. Will they give you a few minutes to run to the bank to get a cashier’s check for the remaining amount? ?One more question…in California, from what I understand, all liens are released at a trustee auction except for IRS liens. What’s the best way to find out if there are IRS liens on the property? Thanks for all your posts above…lots of good info.

2
  1. You do not need the exact amount. If you over pay the trustee will refund the difference in 1 to 2 weeks typically. Be sure to bring enough for your maximum bid.
  2. All liens are NOT released, only “junior” liens. If you buy a 2nd at trustee sale, you will still owe the first. IRS liens are also wiped out, however, the IRS has a 120 day right of redemption. Also note that past due property taxes are ALWAYS senior, so you’ll have to pay them. The two primary ways to find IRS liens is to do a search at the county recorders office, or get a preliminary title report from a title company.
3

OK, thanks. How does one find out for sure if the trustee auction is regarding the first or second mortgage? Is there a record filed somewhere? I can see the trustee is a first mortgage on ForeclosureRadar.com, but I’d like to see a document in person before taking the plunge. What a horrible prospect to accidentally buy a worthless second mortgage!

Thanks again for your help.

4

There is actually no way to know “for sure”. That is the reason you get title insurance when you buy a home… just in case there is a claim in the future.

The issue with buying at trustee sale is that you can’t get title insurance. As such you have to decide how much risk you are willing to take. If the answer is none, then don’t buy at trustee sale.

Position is based on the order (with some exceptions) in which documents (loans, liens, etc) are recorded at the county recorders office.

Given that your goal is to minimize, not eliminate, the risk, there are things you can do in order from least risky to most risky:

  1. Have a title company prepare a preliminary title report on the property. Title companies are good at this. The problem is that they may charge you as much as $300 to do it, so this solution really doesn’t work if you plan to buy often.
  2. Hire an abstractor (google it), they will do a current owner title search for maybe $60. If you find someone good it should give you a real good idea.
  3. Go down to the county recorder and do a name search and review the title history. You’ll need to learn some of the rules of title to do this.
  4. Just use common sense (the house sold for $500k, the loan is $400k it is probably a first). This is how we >GUESS< at loan positions. Note our disclaimers, we don’t recommend buying based on these guesses.

Hope that helps. You’ll find a lot more details on researching title here in the forums.

5

Sean,

You mentioned that there is no “title insurance” for trust sale. So if I won a TS, recorded the deed and sold the property to a third party after 120 days elapsed, will a title company issue the third party an insurance policy? Thanks.

6

Yes they would. And the 120 days only applies if there is an IRS lien - otherwise they would likely insure a subsequent buyer anytime after your trustees deed is recorded.