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.
You are buying liens not properties when you purchasing through a Trustee Sale. If research is not done properly you could be buying additional liens in addition to the first lien and would have the obligations of paying all liens in full.
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.
When purchasing a Trustee sale, you are also buying the home in AS-IS condition and must have the purchase paid for in cash within 24 hours. AS-IS is just that. There is no inspection period, no title insurance, no termite inspection, no home warranty and certainly no seller warranties.
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.
There is really only two ways to obtain the cash needed to purchase the property. You either have the cash in the bank or you will have to use a hard money lender. Hard money lenders charge high fees and interest rates but the loan is usually for a 30 day time frame and then you can refinance at that time. Keep in mind you will need an additional down payment when you refinance the home.
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.