Lawsuit: Foreclosure Auction Ads, Actions Illegal
Just when you thought problematic real estate sales were slowing down and their aftermath (including foreclosures, bankruptcy filings, etc.) was picking up, a new lawsuit regarding foreclosure auctions has cropped up.
According to the Inman News, a lawsuit was filed with the California Superior Court this month on behalf of three people who attended a foreclosure real estate auction in the southern part of the state. One of the three is reportedly a real estate broker for RE/MAX.
Sources indicate that the suit claims deceptive advertising strategies on the part of those promoting real estate auctions and actions during real estate closings that violate federal regulatory laws. Because the lawyers in charge are reportedly seeking class action status for the suit, tens of thousands of people could be affected.
It seems that one lawyer involved has noted that, if the suit is granted class action status by the court, three groups of people could be affected: those who attended foreclosure auctions, those who entered a winning bid but did not ultimately buy the property and those who entered a winning bid and did follow through with the purchase.
The lawsuit evidently focuses on what happens after someone enters a winning bid at a foreclosure auction (where a property in foreclosure is bid on by potential buyers).
Many real estate auctions are called “reserve auctions,” because properties for sale have “reserve prices” that must be reached in order for a property to actually be sold. This price, it seems, is rarely mentioned during the auction itself, which can lead a bidder to believe he or she has purchased a house for a set amount, when in fact the details may not be finalized.
This reportedly happened to one of the plaintiffs in the suit, who won an auction by offering $153,000 on a property and was told at signing that she would have to fork over an additional $50,000 if she wanted to own the home.
The lawsuit also alleges that many auction companies require buyers to use their settlement service providers when signing the paperwork, and during the final transaction require buyers to pay for sales costs – including commissions! And some of these fees, according to the suit, violate state regulations.
The defendants listed include Countrywide Home Loans Inc., GMAC Mortgage LLC, auction companies, and title and escrow companies.
It seems that even the current economic upheaval caused by deceptive mortgage lending and real estate practices is not enough to deter some from fraudulent and illegal behavior.