Understanding the Trustee’s Sale Process

The trustee’s sale is used by a lender who has a security interest in real property through a deed of trust. If the borrower defaults on payments or is otherwise in default under the deed of trust, the lender can begin the foreclosure process. In practice, a lender will usually give the borrower a chance to catch up on payments or send a letter demanding payment first. Then, if the borrower does not correct the default, the lender will begin the foreclosure process.

The lender must file a Notice of Trustee Sale with the County Recorder where the property is situated, with the sale happening at least 90 days after the filing. The borrower has a chance to become current on their payments up to the time of the sale, but cannot cure the default after the sale in Arizona.

The lender will typically prepare a credit bid, and if no other bidders are present, the lender will become the owner of the home. The highest bidder, other than the credit bidder, must pay the full purchase amount in cash by the next day under Arizona law. If the highest bidder fails to pay on time, the trustee can either reopen the bidding process or offer the property to the next highest bidder at their bid price. The new owner will receive a Trustee’s Deed which will convey title to the property.

If the previous owner files bankruptcy at any time before the completion of the trustee’s sale, the proceedings must be delayed and relief must be obtained in the Bankruptcy Court. The automatic stay of the Bankruptcy Court prevents any foreclosure actions, and the trustee sale cannot proceed until the Bankruptcy Court issues an order lifting the automatic stay.

The purchaser at the trustee’s sale may allow the occupant to rent the property for a short period of time to give them time to find a new place to live. However, the new owner has the right to give the previous owner or tenant a notice to vacate the property prior to filing a forcible entry and detainer action after five days note. The forcible entry and detainer action determines whether the occupant has the right to possess the property. If the occupant is illegally occupying the premises, the court can order them to leave, and the sheriff can enforce this removal.

Chernoff Law handles real estate litigation matters throughout Arizona. Contact us by calling 480-719-7307 to discuss your real estate matters.