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Barbara John…, Other/Just Looking in San Francisco, CA

How risky is it buying a property at Trustee Auction when you haven't viewed the title?

Asked by Barbara Johnston, San Francisco, CA Fri Oct 24, 2008

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One of the biggest but also the most interesting risk is you can not find the creditor/lender (rather than the borrower).

0 votes Thank Flag Link Tue Aug 9, 2011
In a word...extremely. There are other issues, such as an IRS lien, an easement, a partial conveyance of the property, etc., that you wouldn't know about, but coudl en up inheriting, if you just buy at the block without looking at the title. I'd bought many properties over the years at auction...NEVER without a title search and a thorough look at the property.

Good luck!
0 votes Thank Flag Link Fri Aug 5, 2011
You definitely need to review the title!! If you are working with an agent, your agent can get a property profile from a title company which should include copies of the trust deeds on the property as well as any back property taxes that might be due. You can also go to the Marin County website and run the name of the owner to see if any additional liens have been filed that might be recorded on the property. You also should have a good idea of the current market value of the property before even thinking about bidding on a property.
Are you aware of the fact that you need to have a cashier's check for the amount that you are planning to bid???
There are people in the county that are experienced buyers at trustee sales who do all of their homework and show up at the sales of properties that they think are worthwhile. They have money readily available to buy properties and are prepared to outbid other bidders if they feel that the property is a good buy.
Unless you absolutely know what you're doing, I would recommend looking at REO properties, which are usually priced competitively. Short sales can be good buys too, but they take a lot more patience. They are sometimes risky because some listing agents aren't experienced at dealing with short sales, which can turn the transactions into a disaster.
0 votes Thank Flag Link Fri Oct 24, 2008
Hi Barbara,

Great answers below, purchasing without knowing title issues can be more spooky than Halloween! There are plenty of Bank Owned, Short Sales, and motivated sellers. As a buyer, you are in the driver seat. If you are completely in love with this property, it may not sell at the Auction, and you can pick it up when it goes bank owned(i.e. if there is a loan on it). Good luck. -Greg
0 votes Thank Flag Link Fri Oct 24, 2008
Hello Barbara. How risky is crossing a busy street without first looking left, right, left? I think you get the point? When you buy at a trustee sale, you don't get title insurance from anybody and you don't know whether there will be any liens that might pop up after the trustee sale (I am particularly thinking of IRS liens that also trigger a right of redemption). While banks usually give the necessary notice to the IRS to avoid issues with IRS liens later, you don't know whether the bank did give such notice when you purchase at the IRS.
Not only may you have title issues, but you will also most likely not have had the opportunity to thoroughly inspect the property prior to making your bid at the trustee sale. The sales at the trustee sale are final, no inspection contingencies and you'll have to pay the full amount on the day of the auction.

Furthermore, most properties that you can buy at the trustee sale are not worth the money they are asking for as the minimum bid which is usually the outstanding loan amount.

Sorry to paint such a dark picture of purchasing at the trustee sale, but based on what I know, it's not a good idea these days and since you can't get any real deals that way anyway (for the most part), I don't see any reason why anybody would want to go that route. There are so many properties that are already bank owned and when you buy one of those that are listed through the MLS, you'll get a title insurance policy, clear title, non-recurring closing costs paid and an inspection period. Why bother with the trustee sale? Just my opinion.
Web Reference:
0 votes Thank Flag Link Fri Oct 24, 2008
Ute Ferdig -…, Real Estate Pro in New Castle, DE
Very risky, and I am not just saying that. You really need to know what's owe to all lien holders - for the ones that are super bargain, it could very well be 2nd mortgage, there could be 1st, mechanic liens, HOA liens, etc. Some title companies will not insure properties that are bought via auction. That probably gives you a pretty good indication on how risky that is.

Sylvia Barry
Marin Realtor
0 votes Thank Flag Link Fri Oct 24, 2008
Sylvia Barry,…, Real Estate Pro in Marin, CA
VERY, you are responsible for any leins including 2nd mortgages, tax bills or mechanics leins. do not bid without a title search at best. good luck with your purchase.,
Web Reference:
0 votes Thank Flag Link Fri Oct 24, 2008
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