What is a Trustee's deed?

2 Replies

I am reviewing a listing in the MLS and it contains this statement:

"Subject to bankruptcy court approval. Trustee's deed and sold as is where is."

What is a trustee's deed and what impact would it have on me purchasing the property?  From my prospective, will it cost me additional $ to get a clear title?   Any information on trustee deeds would be great.  I have searched the forums and have a little understanding of them.  Just want to be better educated before jumping into a deal like this. 

The asset is involved in a bankruptcy case.  The owner of the asset has surrendered the asset to the bankruptcy trustee who in turn is charged with selling the asset to use the proceeds to pay down creditors involved in the bankruptcy case.  

As Is Where Is - no warranty pertaining to the subject property is expressly given or implied by the Seller (BK Trustee empowered by the BK plan) as to the condition of the subject property or title.  Essentially buyer beware.  Do your due diligence. 

The power of sale is held by the trustee who does not know of the history of the property nor any defects the property may have either physical or legal (in title) outside of customary and ordinary sale means.  They will provide a Special Warranty Deed opposed to a Warrant Deed meaning they will not defend title against claims made to title prior to their administration of the asset.  This is common not uncommon in real property and is not a cause for concern in and of itself.

It does not mean expressly that title will be clouded.  So you will get clear title which they believe is marketable.  However, a historical party could come forward and make claim to title which you would have to defend on your own.  You should purchase title insurance (always) which is your sole defense if such an event were to occur.  

Nothing in that statement would suggest that you should not pursue further if you find the deal attractive.  Just do due diligence properly and thoroughly.

@Dion DePaoli  

Thanks for the information.  It makes sense.  I found out from talking to the agent that the court will make sure that the title is clean and clear as part of the deal.  I will be getting title insurance if I make the deal.  The deal does have some extra steps because of the bankruptcy and closing will take allot longer than normal  (but not as long as a short sale).  It's all a learning experience.  Thanks again.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you