In one line: The foreclosure auction at the end of a non-judicial foreclosure.
A trustee sale is the public auction that ends a non-judicial foreclosure: the trustee named in the deed of trust sells the property to the highest bidder, and the proceeds pay the lender.
Buying at one is the deep end. Payment is cash or near it, there are no inspections, no title insurance in the ordinary way, no disclosures, and the occupant may still be in the house. The discounts are real and so are the ways to lose money, starting with buying a second lien by mistake.
Most buyers should treat trustee-sale notices as information, not inventory: they mark homes and owners under pressure, some of which become ordinary listings a negotiation later.
A worked example
A home with a $310,000 loan balance goes to auction. The lender credit-bids $310,000. A buyer bids $325,000 in cash and wins, takes the home subject to any senior liens and property taxes, and gets a trustee's deed a few days later.
Questions people ask
Can I get a mortgage to buy at a trustee sale?
No. Payment is cash or cashier's cheque, in full, on the day or the next business day. Buyers who need financing belong in pre-foreclosure or in the bank-owned lane after the sale.
What is the biggest risk at a trustee sale?
Bidding on a junior lien's sale by mistake: a second mortgage's foreclosure does not clear the first, and the notice will not tell you which one it is. Pull the title before bidding, and treat HOA sales as a separate question again.