Buying at an Idaho foreclosure sale: trustee’s sale or sheriff’s sale

Open the legal notices in the Coeur d’Alene Press or the Bonner County Daily Bee on almost any weekday and there is a foreclosure sale in them. They read interchangeably — a legal description, a date, a time, an address in the county. They are not. Two of those notices can describe sales that give a buyer completely different things, and the difference is not in the notice. It is in the parcel.

Idaho has two foreclosure sales, and the land picks which one

A deed of trust is foreclosed by the trustee, out of court, on a statutory timetable. A mortgage is foreclosed by a lawsuit, and Idaho Code § 6-101 allows only one action for the recovery of a debt secured by real estate, which means the judicial route with a judge, a decree and a sheriff’s sale at the end of it.

Borrowers tend to assume the lender chose. Mostly it could not. Idaho Code § 45-1502(5) limits what a deed of trust may cover to three categories: real property inside an incorporated city or village at the time of the transfer; real property not exceeding eighty acres regardless of location, provided it is not principally used for the agricultural production of crops, livestock, dairy or aquatic goods; and real property not exceeding forty acres regardless of its use or location.

Read that against an actual map of this state and the consequence is large. A warehouse in Post Falls, a storefront in Sandpoint, a shop building inside Boise city limits — all comfortably inside the first category, all secured by deeds of trust, all heading for a trustee’s sale if they fail. A three-hundred-acre farm outside Caldwell is in none of the three. It was mortgaged, and it will be foreclosed judicially, with everything that follows from that.

The trustee’s sale: fast, public, and final

The timetable in Idaho Code § 45-1506 is generous to everyone watching. Notice of the sale must be mailed at least one hundred and twenty days before the sale date, and published in a newspaper of general circulation in each county where the property sits, once a week for four successive weeks. The sale is held at a designated place in the county, after nine in the morning and before four in the afternoon. There is no shortage of warning.

The trustee running it is not an anonymous office. Under § 45-1504 a trustee must be a member of the Idaho state bar, a bank or savings and loan authorised here, a chartered trust institution, or a licensed title insurance agent or title company. In practice that means a title company or a law firm — someone specific to telephone about the terms of a particular sale rather than guessing from the notice.

Any person may bid, including the beneficiary under the trust deed — the lender itself. And then the sentence that governs everything about how you prepare: the purchaser at the sale shall forthwith pay the price bid, and upon receipt of payment the trustee delivers the trustee’s deed.

Forthwith is doing a great deal of work there. There is no financing contingency, no three-week close, no appraisal condition, no inspection period. There is a price and there is payment. Two more features follow from the same statute and both cost money if you have not planned for them. The trustee may postpone the sale at the beneficiary’s request by announcing it publicly, to a date no more than thirty days later — and may do so again. Your money has to stay available through that, which is not free. And under § 45-1508 the sale forecloses and terminates all interest in the property covered by the trust deed, and the persons given notice have no right to redeem the property from the purchaser. Once you have paid, it is yours.

Which is why the financing question has an unwelcome answer

People ask whether a bridge loan can be used to buy at a trustee’s sale. The honest answer is that it rarely can, and the reason is arithmetic rather than appetite. A short-term lender funds against a property it has valued and a title position it has confirmed. At a trustee’s sale you cannot get inside the building, the figure is set by other bidders in the room, and payment is due immediately rather than after a lender’s file is complete. The product and the event do not line up.

What actually works is one of three things. Funds already in hand, which is how most Idaho auction purchases are made. A lender who has looked at that specific parcel in advance, set a ceiling and committed to fund on the day — which exists, costs more, and starts weeks before the sale rather than the night before. Or buying the property afterwards, from the lender.

That third route is the one most people should take and the one nobody asks about. When no third-party bid clears what the lender is owed, the lender ends up with the property and lists it. The same building reappears with a key, an inspection, a title commitment and a closing period — all the things a bridge loan or a conventional lender needs in order to exist. You will probably pay more than the auction price, and you will be buying a property rather than a legal description. Where a bridge loan earns its cost in this corner of the market, it is usually there: buying a bank-owned building quickly, then refinancing or selling out of it.

The sheriff’s sale: you bought a certificate, not a building

Now the other notice. At the sale ending a judicial foreclosure, the officer gives the purchaser a certificate of sale describing the property and the price bid, and § 11-310 requires that when the property is subject to redemption, the certificate must say so. It usually is.

Idaho Code § 11-402 sets the window, and it turns on acreage again: one year after the sale if the tract was more than twenty acres, six months if it was twenty acres or less. During that period the borrower or a junior lienholder can redeem by paying the purchaser the sum paid, with interest at the rate allowed in § 28-22-104(1), plus any assessments or taxes the purchaser paid and the amount of any prior liens the redemptioner holds. Only if no redemption is made within that window is the purchaser entitled to a conveyance.

So for six months or a year you hold a redeemable interest. You are entitled to the rents from a tenant in possession in the meantime, but those rents are credited against the redemption money, so collecting them does not accumulate to you the way an owner’s income does. Meanwhile the thing you own is not financeable on ordinary terms and not insurable on ordinary terms, because what you have is a certificate with a statutory clock attached.

The practical trap is improvement. Put a new roof and a tenant into a building you bought at a sheriff’s sale in month two, and a redemption in month five hands the property back on payment of your purchase price and interest. The statute does not reimburse your judgement about what the property needed. On a large rural parcel — exactly the kind of property the forty and eighty-acre tests push out of the deed of trust system — that clock runs a full year.

What survives either sale

A foreclosure sale clears the foreclosing lien and everything junior to it — not everything. These three are where Idaho buyers discover they bought more than they bid on.

• Property taxes. Idaho Code § 63-206 makes property taxes levied on real property a first and prior lien upon that property, attaching as of the first day of January, and states that the liens are perpetual and continuous. They do not wash off at a foreclosure sale. Check them at the county treasurer before you bid, not after.
• Senior liens. If the deed of trust being foreclosed is a second, the first survives and you take the property subject to it. Nothing in the notice announces this helpfully; it is a title question and it needs a title search rather than a reading of the advertisement.
• Construction liens. Under § 45-506 a mechanic’s or materialman’s lien is preferred to any encumbrance that attached after the work was commenced or the materials began to be furnished, and liens in the same class stand on equal footing without reference to when each claim was filed. A half-finished building where subcontractors went unpaid is the dangerous purchase in Idaho, because a lien claim can relate back ahead of the deed of trust that is being foreclosed and therefore survive the sale.

And in both cases you are buying as-is, unseen, possibly occupied, with no seller to make a representation and no one to pursue if the roof is gone.

Who you are bidding against, and why they may bid low

One more piece of the statute explains the behaviour in the room. Under § 45-1512, a money judgment for the balance still owed after a trustee’s sale must be sought within three months of the sale, and the court may not render judgment for more than the amount by which the indebtedness at the time of sale exceeds the property’s fair market value at that time.

A lender that intends to pursue the borrower for a shortfall therefore has a reason not to bid the debt up. That is not a tactic you can exploit, but it is useful context: the bid you are competing with is set by someone else’s calculation about a deficiency judgment, not by what the building is worth.

The sequence that works

Establish which sale it is, from the parcel: inside city limits, or within the acreage tests, means a trustee’s sale and a clean result; outside them means a sheriff’s sale and a redemption period you will be living inside. Then establish whether your money can be in the trustee’s hands the same hour, because that, not the price, decides whether you can participate at all. Then establish what survives: taxes at the treasurer, liens in a title search, construction history on anything half-built.

If any of those three comes back wrong, the answer is usually not a cleverer loan. It is the bank-owned listing that shows up three months later, where a short-term loan does the job it is actually built for: buying quickly, on a property that can be inspected and insured, with a sale or a refinance already identified as the way out.