So you want to buy at a trustee sale....

Be prepared. For first-timers, it can be an intimidating event. Why? Because you are more than likely competing with seasoned investors who have lots of money to burn.

What is a trustee sale (aka sheriff's sale)? When a homeowner defaults on a mortgage (i.e. he/she has not paid the mortgage in months), the lender forecloses on the property. The lender will sell the home at an auction held at the steps of the county courthouse. Trustee sales are published in a newspaper about three weeks prior to the sale date. Anyone can attend these events but only those with lots of $$$ can buy the properties. Depending on your location, you will either have to pay in full at the event or put an earnest deposit with a short time period to pay in full.

Here are a few tips to keep in mind when buying at a trustee sale:

1. Do your homework. Do a title search for the property. A title search will list the liens (Mechanics liens, IRS liens, unpaid taxes and HOA) and encumbrances (claims, liabilities, charges) attached to the property. If there are existing liens and encumbrances, you will more than likely be responsible to pay for them.

2. Be prepared to tap into your savings. Usually, the form of payment is a cashiers check. A payment in full may be required at the event for the property. Or an earnest deposit may be allowed with a requirement that you pay in full within a very short time period.

3. Inspect the home prior to the sale, IF you can. All foreclosed properties will be sold in As-Is condition. This means, "What you see is what you get". Whatever the condition of the home, is what you will be buying. If you can bring a contractor or home inspector to inspect the property, I strongly suggest you do it. A professional should be able to tell you if there are defects and damages to the property. This will help you determine if it's worth buying at all and how much it the fix will cost if you purchase the house.

4. Check out the neighborhood. Location, location, location. Are there a lot of foreclosed properties? If so, prices in that neighborhood will continue to decline. If you're going to turnaround and resell the home, buying a home in a neighborhood with lots of foreclosures is not a worthy short-term investment. If you're planning to keep the home as a rental for a long time, then it will be worth it.

Buying a property at a trustee sale can certainly get you a great bargain. If you keep these tips in mind and have lots of money to spare, a trustee sale may be the place for you to shop around for a home.