A couple thought they were snagging a $97,606 foreclosure fixer upper at a courthouse sale, only to find out months later they had actually bought its worthless second mortgage. The original was in arrears, and now the house would be sold at another courthouse auction.
“…Wachovia sold us a worthless second mortgage that was part of a piggyback loan made to the previous owners,” the unlucky couple told SFGate. “Both loans were originated, signed and recorded on the same date. Rather than foreclose on both loans at the same time, Wachovia chose to foreclose, market and sell the worthless junior lien, purporting it to be the real property, which is what we purchased.”
A spokesman for Wells Fargo, which owns Wachovia, said: “When these properties are sold at auction, they’re without covenant or warranty. It’s the responsibility of the person bidding at auction to fully understand exactly what they are bidding on and what the implications are. Bidding on property at foreclosure auction is a very different process from a standard home purchase.”
The couple and Wells are in the process of negotiating a confidential settlement.
By the letter of the law, Wells didn’t do anything wrong, which is why buying a property at auction is not a recommended pastime for novice investors. If you do, consider hiring an attorney and/or professional investor to help you. Watch some auctions before you participate in one. And make sure you thoroughly research the title to make sure it’s without liens, and that you’re really getting the real one.
Winning bid on mortgage buys family heartache [SFGate] (Thanks to Paul!)