Risks To Consider And Funds Required When Buying At A Trustee Sale

Arizona Trustee sales have several benefits that outweigh the risks. Mastering the first step in winning a successful bid at a Trustee Sale can place you in a positive equity position.

There are several types of liens that can show on title of a property. First you have the mortgage liens, possibly 1st and 2nd mortgages. There could also be property tax liens, mechanic liens and IRS liens. Be sure you research all title history before bidding on a home at the Trustee Sale. If there is a lien that you’ve overlooked you will be responsible for it along with the mortgage liens.

The chain of title will determine all liens on a given property. This will show the mortgage liens in addition to any property tax and/or IRS liens. Do you research carefully as this is a crucial step in the process before bidding on a property. Don’t proceed to the next step until you feel comfortable with the valid liens and you’ve established your position.

Remember you are buying the property in an “As-Is” condition. There will be no inspection periods, no termite inspections, no home or seller warranties and 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.

Once you purchase the home chances are they will require some maintenance. Most repairs will be cosmetic such as paint, carpet and drywall repair. You will need to bring the home up to standards before renting or selling the home. A percentage of the costs of repairs is usually decided or allotted prior to placing the bid and keep in mind you are buying a home with instant equity.

The purchase price you pay for the home is never more than 70% of market value. If you refinance the property through a conventional mortgage they will only lend at 80% of market value.

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