What is a trustee's sale?
A trustee's sale is a non-judicial foreclosure auction conducted by a third-party trustee appointed under a deed of trust to sell mortgaged property when the borrower defaults.
In non-judicial foreclosure states, a trustee's sale is the public auction of a property held by an independent trustee who was named in the deed of trust at the time the loan was originated. When a borrower defaults, the lender instructs the trustee to conduct the sale, typically at a courthouse steps or designated public location. The trustee is responsible for providing notice to the borrower and other interested parties, advertising the sale, and conducting the auction.
Unlike a sheriff's sale, which is ordered by a court following a judicial foreclosure process, a trustee's sale bypasses the court system entirely. This makes it faster and less expensive for lenders, often taking 60 to 120 days from notice to auction. New Jersey, however, is a judicial foreclosure state, meaning foreclosures proceed through the courts rather than through trustee's sales. Buyers at a trustee's sale typically must pay the full bid amount in cash within hours or days, and winning bidders receive the property subject to whatever rights the trustee's deed conveys.
The sale proceeds are used to pay off the debt, trustee fees, costs, and any junior liens. If funds remain after satisfying these obligations, surplus money goes to the borrower. If the sale price is insufficient, the lender may pursue a deficiency judgment against the borrower for the shortfall, depending on state law and loan type. Property owners facing foreclosure often benefit from consulting with foreclosure defense attorneys to understand their options and rights before a sale is scheduled.