A Notice of Trustee’s Sale informs homeowners and mortgage borrowers of record that their home will be sold at a trustee’s sale on a specific date and at a specific location. The actual sale typically completes a non-judicial foreclosure in states allowing this type of foreclosure process. The highest bidder at a trustee’s sale receives title to the property being sold; if no one bids, title to the property reverts to the foreclosing mortgage lender.
Foreclosure Process Determined by State Law
Home-loan foreclosure procedures are governed by state law. In general, there are two types of foreclosures. Judicial foreclosures fall under court jurisdiction, while non-judicial foreclosures are overseen by third-party entities including title or escrow companies appointed as trustees. States may allow either or both types of foreclosure proceedings. Mortgage lenders typically foreclose mortgage loans based on non-payment or other default of a mortgage loan according to terms outlined in a recorded document, such as a Mortgage or Deed of Trust.
The Role of a Foreclosure Trustee
In non-judicial foreclosures, a third-party entity known as a trustee conducts the foreclosure based on documentation and information submitted by the mortgage lender. The trustee files a Notice of Default, which is a document that establishes the mortgage default and names parties who took out the home loan being foreclosed. This notice is recorded with the county where the property is located and typically specifies a time limit for mortgage borrowers or other interested parties to respond or reinstate the mortgage by paying past-due payments, late fees and trustee fees. The time frame between filing a Notice of Default and a Notice of Trustee’s Sale varies between 60 days to several months depending on state laws and the volume of foreclosures being processed by the trustee.
Notice of Trustee’s Sale
If the mortgage borrowers or current homeowners don’t cure the default as outlined in the Notice of Default, the foreclosure trustee will prepare and record a Notice of Trustee’s Sale. This document establishes where and when the property being foreclosed will be sold and provides the minimum opening bid for the property. The Notice of Trustee’s Sale is published in a newspaper local to the property being foreclosed, and it also is mailed to the borrowers of record and posted on the subject property. Tenants of property posted with a Notice of Trustee’s Sale must be prepared to vacate the property prior to the date of the trustee’s sale because they may be subject to eviction.
Foreclosure and Tenants
Tenants of a home being sold through a trustee’s sale may wish to obtain legal advice or contact the trustee for more information about their rights and responsibilities. When the trustee’s sale is completed, title to the property typically is transferred from the homeowners (the tenants’ landlord) to either the foreclosing lender or the winning bidder at the trustee’s sale. Tenants can attempt to negotiate a rental agreement with the property’s new owner, but success can’t be guaranteed.
How Do Trustee’s Sales Work?
A trustee’s sale is one option that a lender has if you get behind on your mortgage and default on your payments. Foreclosure is usually the second option. The two differ only slightly in what they entail, as the trustee’s sale is often chosen because of the potential for the lender to recover more of the money that has been lost from the defaulted loan.
Presale
A trustee’s sale is usually called at least 90 days before the sale is actually held. This occurs so that the person who is in default on his home loan still has time to get his financial situation straightened out to recover any potentially lost assets. When the lender decides to use a trustee’s sale, a notice is generally filed with the county recorder’s office and the borrower is presented with a notice of sale indicating when the sale is going to take place. Investors go to trustee’s sales with the idea of buying property for less than market value so that they can turn around and resell it at a profit.
Sale
A trustee’s sale is much like an auction, except the property being sold is property that has been seized as a result of someone’s failure to pay her bills. The property is auctioned off along with any remaining possessions that have been seized. These are either sold individually or in lots. Generally, the buyer has to purchase the property sight unseen and is taking a significant risk in doing so. However, the possibility of buying real property or other items at significantly less-than-market value is enticing enough for many investors.
Stipulations
Some stipulations generally exist that you must qualify for before you can participate in a trustee’s sale. You cannot simply show up and start bidding without registering for the sale first. You also have to show that you have sufficient funds to bid on the items you intend to win in the auction. This must typically be in the form of cash or a cashier’s check. This is one reason the lender may choose the trustee’s sale in the first place — it will receive immediate cash payment for the property being auctioned off.
Bidding
Once bidding begins for the property, the person who has lost the property will be subject to the same bidding rules as everyone else involved in the sale. Bidding can begin as low as one penny over the asking price by the lender. The winning bidder can generally expect to pay some fees if he has the winning bid. This fee is somewhere around 1 percent but can vary depending upon the state in which the auction is held.
How to Postpone a Trustee’s Auction
When discussing real estate, auctions are referred to as a “trustee’s auction” or “trustee’s sale date.” To postpone this sort or auction, the borrower must first be in default—meaning the borrower is not making mortgage payments. Borrowers who stop making mortgage payments will sooner or later cause the bank to foreclose. How that foreclosure is handled depends on state law, but more than half of the states in the U.S. are trust deed states, and the trustee handles foreclosures.
Before Postponing the Auction
• After a borrower stops making the mortgage payments, the lender notifies the trustee to initiate foreclosure proceedings. The trustee is a third party to the trust deed, a position some call “holding a naked title.”
• Although there is no required period before filing a Notice of Default, most lenders prefer to try to collect during the first 60 to 45 days that a borrower falls into arrears, rather than jump into foreclosure proceedings.
• Some states such as Utah require the lender to give the borrower at least 30 days’ notice before filing a Notice of Default.
• Once the Notice of Default is filed, a borrower has 90 days to reinstate the loan by making up the back payments and paying late charges, which include the trustee’s fees. There are a few methods that can be used in postponing an auction.
Redeem the Mortgage
Although people refer to reinstating a mortgage and redeeming a mortgage interchangeably, they are different. To redeem a mortgage is to pay off the mortgage; reinstating requires bringing the mortgage current. During the final days of a non-judicial foreclosure process, a lender is not required to accept a reinstatement but must allow redemption.
Apply for a Loan Modification
Lenders are also not required to postpone an auction in exchange for a loan modification, but most banks will try to work out a temporary repayment schedule. This does not mean the bank will not send the home to auction, so be careful; borrowers may want to ask the bank for a written promise not to move forward with the auction. If accepted, banks will grant a temporary loan modification, and after three to six months, tell the borrower they are filing foreclosure because the borrower does not qualify for a permanent loan modification.
File for Bankruptcy
A bankruptcy filing does not permanently stop an auction, but it could postpone the auction for a while. When a debtor files for bankruptcy, the court issues an order known as an automatic stay that stops attempts from creditors to collect money—including postponing an auction.6 However, the lender can then file a motion to lift the automatic stay, especially if the Notice of Default was already filed.
File a Temporary Restraining Order
Most people associate a temporary restraining order with domestic abuse, but petitioning the court for protection from abuse can also include a request to postpone an auction. Borrowers will need to hire a lawyer to file a temporary restraining order, and that lawyer might need to find a reason based on fraud or some wrongdoing on the lender’s part. Even if the lawyer is successful and wins the argument, the restraining order is not permanent.
Attempt to Make a Short Sale
Telling a lender that the borrower is attempting to make a short sale is generally not enough; the borrower must submit an offer to the bank from a qualified buyer. The real estate agent or lawyer handling the negotiation for the borrower then calls the bank’s negotiator and requests a postponement of the auction. Often, banks will not consider a request for a postponement until the auction is a few days away. In Utah, and many other states, a notice of trustee sale is the final written notice that a lender has scheduled a date to sell a home in a foreclosure auction. When a borrower receives a notice of default or a notice of trustee sale, there is time remaining to take steps to stop the foreclosure process, but quick and decisive legal action must be taken to save a home from foreclosure. In most states, the lender has the right to issue the notice of foreclosure sale and move forward with a mortgage foreclosure sale when a borrower stops making their mortgage payments. The foreclosure process is formally started when the notice of default is sent to the home after a borrower misses 3 or more monthly mortgage payments. Any failure to answer the notice by either contacting the lender or reinstating the mortgage will likely to lead to the notice of trustee sale being sent.
The best way to stop the notice of foreclosure sale is to hire a very good foreclosure attorney. Once you receive a notice of foreclosure sale, it is best to go through the courts to use legal methods to stop the foreclosure sale date. It is really important to understand how much time you have to when you receive the first notice from the lender. Receiving a notice of default does not mean you will lose your house immediately and you can still stop the sale date through number of different legal methods. The foreclosure attorneys at Consumer Action Law Group prepare lawsuits to save houses that are being illegally foreclosed, and their foreclosure lawyers file bankruptcy to stop and fight the foreclosure process as well. Another method that homeowners can attempt is to contact the lender to apply for a loan modification. If a loan modification is being reviewed and the foreclosure process is moving forward, it is best to immediately contact a foreclosure lawyer and discuss a potential lawsuit. It is also possible to negotiate a deed in lieu from the lender if the goal is to walk away from the house without owing any money. The deed in lieu will stop both the foreclosure and may wipe out any claims for deficiency. If all else fails, you can seek help from a real estate attorney that help with short sale to sell the home with approval from the lender.
Difference Between A Notice Of Default And Notice Of Sale In Foreclosure
In a non-judicial foreclosure, borrowers sometimes receive a Notice of Default and a Notice of Sale, depending on state law. Read on to learn the difference between these two documents and under what circumstances you might receive them.
Initiation of a Non-judicial Foreclosure
When you take out a loan in a state that allows non-judicial foreclosures, you will likely sign a deed of trust or a mortgage, which contains a power of sale clause. This clause gives the trustee a third party that manages the non-judicial foreclosure process in certain states the right to sell the home though an out-of-court process if you stop making payments.
Notice of Default
Sometimes, depending on state law, a non-judicial foreclosure process begins when the trustee records a Notice of Default (NOD) at the county recorder’s office.
The NOD serves as public notice that the borrower is in default. The NOD often contains:
• the name and address of the borrowers
• the name and address of the lender
• the name and address of the trustee
• the address and/or legal description of the mortgaged property
• a description of the default
• the action required to cure the default
• the date by which the default must be cured, and
• a statement that if the default is not cured by the deadline, the lender intends to sell the mortgaged property at a public sale.
If the borrower does not “cure” the default by bringing the payments up to date—including late charges and foreclosure fees—the trustee might (again, depending on state law) then prepare and file a Notice of Sale for the property.
Notice of Sale
The Notice of Sale (NOS) generally states:
• the property address and/or legal description
• a statement that the property will be sold at a public auction, and
• the date, time, and location of the foreclosure sale.
The NOS might be recorded in the county land records, mailed to the borrower, published in a newspaper of general circulation in the county where the home is located, as well as posted on the property and/or in a public place.
Differences from State to State
While you might get both a Notice of Default and a Notice of Sale as part of the non-judicial foreclosure process where you live, foreclosure procedures and the documents you will receive do vary widely from state to state. You might get:
• a Notice of Default followed by a Notice of Sale
• a combined Notice of Default and Sale (or similar document)
• a Notice of Sale stating that the property will be sold on a certain date, or
• notice by publication in a newspaper and posting on the property or in a public place.
Call Ascent Law LLC
If you’re facing a foreclosure and want to learn the specific procedures in your state, as well as about your rights during the process and whether you have any potential defenses to the foreclosure, consider talking to an attorney.
Notice of Trustee Sale Attorney
When you need an Attorney for a Notice of Trustee Sale, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you!
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
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