You’ve Received a Notice of Trustee Sale…Now What?

I have received several questions over the last few weeks from homeowners who have been informed that a Notice of Trustee Sale (NOT) has been filed on their home.  In Arizona, many properties are purchased using a Deed of Trust.  In a nutshell, a Deed of Trust is security instrument in which you, the borrower (Trustor) grant legal title to the home you are purchasing to a Trustee, usually a Title Company, who holds it for the benefit of the lender (Beneficiary).  

You, the borrower, retain possession of the property, but if you default on the loan,  the lender can instruct the Trustee to sell the property at a Trustee Sale. The proceeds from the sale are given to the lender.  Most often, the home does not sell at the Trustee Sale in which case the lender buys back the property and takes ownership – the property is now bank-owned.  This method of securing the loan is much easier to facilitate than a true mortgage because the Trustee Sale can occur without court supervision.  

Here in Arizona, a typical scenario in the case of default is when the homeowner is 60 days behind on their loan payment. In most cases, after an account is more than 60 days behind, the Beneficiary (the lender) can order the Trustee to sell the property.  A 90-day notice (NOT) must be filed with the county and published in a public forum such as a newspaper before the sale can occur.  During this 90-day period the Trustor (homeowner) can work with the bank to bring the account back to current status by paying the late payments, late fees and penalties, and the fees associated with the Trustee’s actions.  If not, the home will be sold at the Trustee Sale.  

Unfortunately, most homeowners do not hear about the NOT from their lender – they hear about it from solicitors who monitor the filings of these NOT’s and contact the owner.  Most of these solicitors are investors looking to use the homeowner’s hardship their advantage.  They may offer to buy the home, or present some plan to avoid foreclosure, but too often these plans do not protect the interests of the homeowner.

So what do you do if you receive an NOT? You basically have three options:

1. Pay the bank what you owe them and bring the account back to current status.

2. Sell the house, most likely as a short sale.

3. Do nothing and allow the bank to foreclose on the home.

Each of these options presents advantages and disadvantages so you need to decide which course of action is best for you.  If you haven’t already, contact your lender to start discussing your options.  You might also want to contact a Realtor, HUD counselor, real estate attorney or other objective professional who can help you sort through these options.  It is always better to make an intentional decision than to just let things happen.  Know your options and choose the best path for your situation.

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