What Is a Trustee Sale? How Foreclosure Sales Work Without a Court

A trustee sale is the sale of a home by a neutral third party, the trustee, to repay a loan the owner stopped paying. When someone buys a home with a deed of trust, three parties sign: the borrower, the lender and a trustee. The deed of trust gives the trustee the power to sell the home if the borrower defaults. That "power of sale" is what lets the foreclosure skip the courts.

You'll also see it called a trustee's sale, a foreclosure auction or a non-judicial foreclosure sale.

The difference is who orders the sale. A trustee sale is run by the trustee under the loan documents. A sheriff's sale follows a court case, and the court orders the sheriff to sell. Which one applies depends on the state and the loan.

Our guide to how foreclosure auctions work covers both in more detail.

In California, the trustee sale is the last step of a process with fixed notices. According to the California courts' self-help guide:

1. Notice of default. The lender records it in the county where the home is. It starts the public part of the process.
2. Time to catch up. The owner has at least 90 days to cure the default before a notice of sale can be recorded.
3. Notice of trustee sale. It gives the date, time and place of the auction, and opens with a warning in capital letters: "You are in default under a deed of trust." It's mailed to the owner, posted on the property and in a public place, and published in a local newspaper for three weeks in a row.
4. The auction. The home can be sold about three weeks after the notice of sale is recorded. Sale dates are often postponed, sometimes more than once.

Other non-judicial states use similar steps with their own timelines.

The trustee offers the home at a public auction, often on the steps of the county courthouse and sometimes online, and the highest qualified bidder wins. The lender often opens with a bid close to what it's owed. If nobody bids more, the home goes back to the lender.

Trustee sales move fast. The California courts note that the winning bidder at a California trustee sale pays the full amount right away, in cash or a cashier's check, and receives a trustee's deed. Most first-time buyers aren't set up to pay that way on the spot, which is why many wait for the bank-owned stage.

Yes, up to a point. In California, the owner can usually bring the loan current until five business days before the sale, and can pay off the whole loan up to the sale itself. After a non-judicial sale in California, the former owner generally has no right to buy the home back. Other states have different rules, and some let the former owner buy the home back for a set time after the sale.

You're buying a house you probably haven't been inside, along with whatever comes with it. Know these four risks before you bid:

• Condition. Homes are sold as-is, usually without an inside viewing. Budget for the worst, not the best.
• Title. A trustee's deed doesn't promise a clean title. Order a title search through a title company or a real estate attorney before the sale.
• Occupancy. If someone still lives in the home, the new owner has to follow the state's legal process to take possession, which takes time.
• Postponements. A sale you prepared for can move or be cancelled at the last minute.

They become bank-owned (REO) properties. The lender takes the home back, often deals with some of the title and occupancy questions, and sells it later through an agent or an online platform such as Vihara. Many buyers prefer this stage: there's usually more information, and nobody is rushing them. What a bank-owned home is.

On Vihara, every property shows its starting price next to an estimate. Find a property deal in Northern California, or talk to a Vihara advisor about a specific home, at no cost.