Posted by David Krulac on May 12, 2006 at 19:25:59:
you got to know when to hold and when to fold. sometimes the line is close. I’ve had them fall both ways, or should I say all three ways.
one that I should have won, law was on my side I appealed the court decision twice to no avail.
one that I should have lost, ended up staying on my side
one that was not black or white ended up losing, so I’ve had them all different ways.
I had one that was litigated for 15 years.
Who would prevail in this case? (long) - Posted by Natalie-VA
Posted by Natalie-VA on May 11, 2006 at 10:16:18:
Hello All,
I see Elizabeth’s recent deal in NJ has sparked some debate, so I thought I’d throw out one that I recently encountered.
We are a deed of trust state (Virginia). It’s non-judicial with no rights to redemption.
I bought a property a few months ago at trustee sale (foreclosure). Prior to paying my balance and receiving the trustee’s deed, another settlement agent reported that the seller had sold the property prior to the trustee’s sale.
They did their settlement on a Friday, Monday was a Holiday, and they sent their deed down for recording on Tuesday. The trustee sale was held Tuesday morning, prior to their deed being recorded. They sent the payoff to the trustee (attorney who conducted the foreclosure), and he received it the following day.
At this point the new buyer owns the property and has 2 deeds of trust recorded against it. The question is, what happens if I pay my balance and record the trustee’s deed?
I sought legal advice and my attorney and the trustee concurred that I would then own the property, and the prior deed and DOTs would be wiped out. The attorney for my title insurer also agreed with this, but would not insure my title. They said that even though I would be legally in the right, they would have to spend money defending that.
To make a long story longer, I didn’t have a good enough spread to incur legal fees on this one, so I let it go and got my deposit back. The trustee and I were both frustrated that bad behavior was being rewarded (the other settlement agent screwing up), but felt we should just move on. If I had a larger spread, I would have fought it.
Does anyone have any thoughts on how this might have played out?
–Natalie
Re: Who would prevail in this case? (long) - Posted by BTI
Posted by BTI on May 18, 2006 at 24:09:42:
Natalie
I don’t know the fine points of Virginia law, but if that had happened to me in California I wouldn’t care if the seller had sold the property 10 times and each recorded deeds before the trustee sale. Each of those buyers would be buying subject to the situation and unless they cured the loan of the foreclosing lender in a timely manner before the sale, the property would be mine. A new owner and a check is in the “mail” is not a valid defense per my experience, it better have been received before the sale or it’s too late, holiday or no holiday.
BTI
Re: Who would prevail in this case? (long) - Posted by JD
Posted by JD on May 15, 2006 at 03:03:20:
I think a Judge would go out of his/her way to contrive some reason for voiding the sale. A possible rationale would be that because the debtor’s last day to cure fell on a holiday, then the debtor’s last full day to cure should have been extended by a day (a standard practice in some States).
Well, I am JT, and I don’t know… - Posted by JT-IN
Posted by JT-IN on May 12, 2006 at 13:04:26:
Natalie:
Unfortunately, my expertise is in judicial sales, and I am just not as familiar with the non-judical trustee sales, when dealing with reading between the lines. If you are talking judical cases, that is a different story.
It seems from what you have written about the situation, that you could have prevailed… but as you said, why risk it…? In fact, this is another reason of why not to get involved in thin foreclosure deals. You have to plan on the worst contingencies, and when they don’t happen, so much the better.
What notice is filed regarding the Trustee Sale, which would alert any uniformed potential buyer, that an action to collect is underway…? In judicial states, this would be a Lis Pendens… so what would that relate to in your non-judicial collection actions…?
Comparing your set of circumstances to a judicial state, any deed or actions following that Lis Pendens filing that does not resolve the problem at hand, are mute, and void, when compared to the finishing of the foreclosure action. I personally like that approach better, as it seems that there is NO middle ground.
Just my thoughts on this…
JT-IN
not JT, You be the Judge… - Posted by David Krulac
Posted by David Krulac on May 12, 2006 at 07:34:53:
I’ve been involved in too many of these myself. If it goes to court, you could win or you could lose. My interpretation is in this case you would probably lose. The judge is going to be sympathitic to the innocent party that bought the property on Friday, paid their money and think that they own their home.
In one case that I’m familar with a week before the foreclosure the property was settled and the balance owed was sent to the lien holder. for some reason it did not get processed in a timely manner and the property was again sold as a foreclosued property. The purchaser stubbornly decided to litigate, it went to court and was quickly decised against the foreclosure buyer.
There are key difference with Elizabeth’s case, where the lender had the deed and didn’t record it for years. To me tht implies at least some neglegence on their part. But in your case the deed was promptly recorded. And the sale occurred before the trustee sale. If on the other hand if in your case the Trustee Sale had preceeded the sale to the private party, I would have ruled in your favor.
Litigation is never fun, ask me how I know. its hard to predict the results and often time the case is decided in a seemingly illogical way. Precedent cases are seldom exactly identical. Judges have their own prejudices. One judge that I’m familar with has been hearing cases involving objections to foreclosure cases for about 20 years. They specifically assign those cases to him, because the other judges don’t want them and he has all this experience. But in those 20 years all of the cases have been decided one way except for a lone exceptional case. If you’re going to court with this judge there is a 99.99% chance that you can predict the verdict in advance. Knowing this, even if the facts and the law are on your side and certainly if there are gray issues, you want to settle the case before wasting your time and money in court. This judge will look for the tiniest flaw in the case and use that as grounds for overturning the sale. In one case, I witnessed the judge instructing the plaintiff’s attorney on what he needed to do. It was almost comical.
JT - Natalie needs your wisdom - Posted by Elizabeth NJ
Posted by Elizabeth NJ on May 12, 2006 at 02:32:44:
Hi Natalie, I see you had a situation similar to mine. How do we find these messes?
I understand your comment that you would have fought it if you had a larger spread, and I think that’s the deciding factor for us all – what’s it worth for us to hang in there and tough it out?
Could you not have assigned your contract to someone with deeper pockets so you could make something on the deal?
Now that you’ve been through the process, why not do the research on your own to determine the answer to your question. That way, if it pops up again, you’ll know how to deal with it.
The lessons we learn in this business can be costly but they are definitely educational.
Good luck to you on this and all your activities.
Best regards.
Elizabeth
Re: Well, I am JT, and I don’t know… - Posted by Natalie-VA
Posted by Natalie-VA on May 12, 2006 at 20:36:10:
JT,
In this case, the other buyer wasn’t uninformed. They knew they were trying to beat a foreclosure; their settlement agent just screwed up. They shouldn’t have left it to their settlement agent. When I am trying to beat a foreclosure I will often hand deliver the money. If not, I will still micro-manage things until the sale is cancelled.
As far as notice in my area, nothing is filed at the courthouse. I’ve heard of people on this board talking about NODs, but we don’t have that here. The only notice to the public is a legal ad in the newspaper. The only instrument recorded at the courthouse would be an “Assignment of Substitute Trustee”, but this isn’t required to be recorded prior to the trustee sale. In fact, it’s often recorded just prior to the new trustee’s deed.
–Natalie
Re: not JT, You be the Judge… - Posted by Natalie-VA
Posted by Natalie-VA on May 12, 2006 at 10:08:42:
Thanks for your comments David. I agree that a sympathetic judge may have ruled against me, especially since the other buyer was allowing the foreclosed owner to rent the property back. Even in small claims cases (another subject), it sometimes seems that the judges just rule however they feel, without regard for the law.
I did have another scenario recently where the foreclosed owner did a refinance before the sale and the payoff didn’t make it to the trustee until after the sale. I was the lucky winner on this one too. In this case, I stood my ground and was in communication with the foreclosed owner. Their refinance happened to be a cash out deal, so they paid me 15k to go away. Away I went! Last time I checked, her new lender and settlement agent had offered her $7500 to make up for their mistake. She was going to hold firm and get her entire 15k back. Hopefully she did.
It’s tough to deal with these situations, because you want to do the right thing, but on the other hand, if you consistently walk away from deals, you might end up out of business.
–Natalie
Re: JT - Natalie needs your wisdom - Posted by Natalie-VA
Posted by Natalie-VA on May 12, 2006 at 09:59:27:
Thanks Elizabeth. There was no room to even assign this one. I offered it up to another investor for free, but they didn’t want to deal with it either. I only had a 29k spread from 146k to 175k. It was a creampuff condo (4 years old) that would have only needed carpet and vinyl at the worst, so my calculated profit without extra legal fees was only about 10k. Definitely not worth fighting for.
I think the hard part for me on this one was giving in when I felt I was right. The trustee felt that he conducted a proper sale, but also didn’t want to deal with potential litigation. The other thing that irks me is that the foreclosed seller would have netted around 13k more with my sale. I wonder if she even knew that? She would never answer the door, so I had no communication with her.
–Natalie