Lawsuit Challenges Foreclosure Auction Practices
For those facing the dreaded prospect of foreclosure, many things, such as the value of your home, the bouncing interest rate on your mortgage, and the overall economy, may be out of your control. Other things, such as your personal finances, may feel out of control as they never before have.
But the law allows you to count on certain standards when you're dealing in the volatile real estate market, and one lawsuit in California is challenging the practices of certain auction houses for foreclosures who seem to be taking advantage of those in the market.
The suit was filed by three individuals, one a RE/MAX broker, who attended a recent real estate auction in South California. Their inside knowledge of the real estate industry allowed them to uncover some shady backroom practices at the auction house.
According to the lawsuit, the auction house conceals fees and contract practices until after the foreclosure sale is made and the bidder goes to pay for the property and sign the agreement. The auction houses "direct and require the use of their settlement service providers and shift the cost of sales, including commissions, from the lenders/sellers to the consumers."
Further, the lawsuit alleges that through fine print clauses like "sale is subject to lender confirmation," auction houses lead winning bidders through hoops that prevent them from negotiating loans on their own terms, but rather bind winning bidders to certain loans and lenders in order to receive their property.
The lawsuit names several auction companies, including Real Estate Disposition Corp., LandAuction.com, DoveBid Inc., AuctionHouse Real Estate Disposition Services, Kennedy Wilson Auction Group Inc., and Auction Services International Florida 100 Realty Inc., as well as title and escrow companies who participate with the auction houses and big-name lenders such as Countrywide and GMAC. The lawsuit seeks class-action status, which may be good news for all consumers who have raised a paddle at auction with their eye on a short-sale home.
With the boom in liquidation sales of foreclosed properties, consumers should be aware that just because deals are beginning to pop up all over the country, that doesn't mean speculators aren't still trying to wring every dollar out of the consumers trying to take advantage of these deals.
Smart consumers will read the fine print of their auction guides and ask specific questions to the auction officials before making any bids. Sometimes buying a foreclosed home involves taking on a mortgage that is larger than the home's value, a feature that will negate any positive aspects of the low auction price. Foreclosure auctions can be a great place to find cast-off homes at incredibly-low prices, but sometimes these deals are too good to be true; proceed with caution.
