Knowing some initial steps to take prior to an Arizona Trustee Sale will lower your risks dramatically. You have an opportunity to buy a home with immediate equity which is a huge benefit that can outweigh the risks and possible ramifications.

When you purchase a home at the Trustee Sale, you are buying a lien, not a property. If you don’t do your research, you could accidentally buy a second position lien in which case you will have bought an obligation to pay off any first position lien.

Researching a chain of title to determine your lien position, as well as any liens that are not extinguished at the trustee sale, such as property tax and IRS liens are crucial. Once you’ve established your position and are comfortable with the existing liens that are valid, you can move forward to the next step.

We’ve all heard the term “As-Is”. You can rest assured when buying a home through a Trustee Sale, the property will be sold “As-Is”. That means there will be no inspections, home or termite, and no buyer or seller warranties. There will also be no title insurance.

Once you win a Trustee Sale bid, there are financial requirements. First you must place an earnest deposit in the amount of $10,000 with a cashier’s check to the trustee. You also must have the remaining funds to pay the note in full within 24 hours after you win the bid. Failure to close the transaction the following day you will automatically lose your earnest deposit and possibly face additional legal ramifications.

Getting around the cash needed in 24 hours is usually done thru a pre-determined hard money lender. The interest rates are high but you don’t need the money for long. Usually less than 30 days as you will refinance out of the hard money into a conventional loan. And yes, you do need a down payment.

Most homes that you purchase at the Trustee sale will need at least paint, carpet and miscellaneous repairs. However, when purchasing at the Trustee sale you are buying a property for under today’s market value and have already calculated the potential work that needs to bring the home up to standard.

Most investors or buyers will not pay over 70% of market value. Keep in mind if you refinance the note using a conventional mortgage they only lend 80% of value.

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