Can a Foreclosure Sale Be Rescinded?

19 Replies

Hi,

I bought a property at the foreclosure sale in Texas. The deed has been recorded and the sale had happened more than 15 days. However, i received a letter from previous owner's attorney to demand for rescind the foreclosure sale. Can a foreclosure be rescind? Is this possible?

Thanks 

Rights of Redemption

An investor should be prepared to hold the property and avoid either making substantial improvements to it or re-selling it until after any applicable rights of redemption have expired.

Chapter 209 of the Property Code, known as the “Residential Property Owners Protection Act,” requires provides for certain procedures and protections in the event of foreclosure by a homeowners association. The redemption period is 180 days (Property Code Sec. 209.011).

After foreclosure for unpaid taxes, the former owner of homestead or agricultural property has a two-year right of redemption (Texas Tax Code Sec. 34.21a). The investor is entitled to a redemption premium of 25% in the first year and 50% in the second year of the redemption period, plus recovery of certain costs that include property insurance and repairs or improvements required by code, ordinance, or a lease in effect on the date of sale. For other types of property, the redemption period is 180 days and the redemption premium is limited to 25%.

http://www.lonestarlandlaw.com/BuyingAtexas.html

It is Non-Judicial foreclosure sale (Trustee). So i don't think that law is applicable.

Originally posted by @Khanh Tran :

It is Non-Judicial foreclosure sale (Trustee). So i don't think that law is applicable.

apparently those fall under this (that's a lot of reading...)

http://www.statutes.legis.state.tx.us/Docs/PR/htm/PR.51.htm

You are now the legal owner of property.  They need to talk with Trustee or Bank that filed foreclosure.  Are they still living in residence?

Originally posted by @Rocky V. :

You are now the legal owner of property.  They need to talk with Trustee or Bank that filed foreclosure.  Are they still living in residence?

I just received an email from the attorney today. He also send a certified mail to me & Trustee. I had talked to the Trustee and he said he will email back to the client's attorney later. The client's attorney letter said if i don't sign the rescind sale agreement then he can sue me, bank and trustee and i have to pay for the attorney fee. Btw, this is commercial property.

I primarily purchase Trustee Deeds here in the dallas/fort worth area but concentrate on SFR. I've known other investors that have had their sales rescinded after a couple weeks but not after Deed has been filed. I'd hold off until you speak with an attorney. Hopefully, one can chime in here on BP.

@Khanh Tran The short answer is YES.

The law provides specific reasons for rescission of foreclosures. For example, perhaps it was discovered after the sale that the debtor filed BK minutes before the sale; or the debtor actually reinstated the loan; or the auctioneer didn't get a message to cancel the sale.

What did the letter from the attorney say as to the grounds for rescission? You need an attorney for sure.

While there is no redemption period for a Trustee's in Texas, the foreclosure can b challenged in court. You would surely be named in any lawsuit challenging the foreclosure but the likely downside outcome for you would be you receiving back your funds from the purchase 

Did the attorney list a reason for their demand?

512-293-3885

You will Not be liable for any of the previous owner’s attorney fees......just a scare tactic bluff. As said, you did nothing wrong and worst case is you get your money back....most likely they lose the suit to rescind the sale.

The attorney is absolutely bluffing...he knows he would have to go to court to get the foreclosure rescinded but by bullying you he's hoping to avoid the cost. He also knows he may not be successful in court but if you voluntarily convey the property back to the prior owner, he won't have to test his theory in court. 

Anyone who says not to worry about this is giving questionable advice. The issue is whether the sale could be rescinded if the facts as stated in the attorney's letter turn out to be true. At least get an answer to that question.

If you purchased an owner's title policy when you closed on the property you should consider making a title claim. If you wait too long you could blow coverage if it is something the title company was obligated to hire a lawyer and defend against. 

Was this a bank foreclosure or a tax foreclosure? In Texas, there is no right of redemption for properties sold for defaulted mortgages. There is a right of redemption for properties sold for unpaid taxes. For commercial properties, it's 180 days.

In any case, I would definitely talk to a Real Estate Attorney about this. I would not ignore it.

Originally posted by @Tom Gimer :

Anyone who says not to worry about this is giving questionable advice. The issue is whether the sale could be rescinded if the facts as stated in the attorney's letter turn out to be true. At least get an answer to that question.

The trustee gave only 20 days notice instead of 21 days. The trustee said we need to receive the money back. I felt so disappointed. The sale has happened more than 20 days and we have to get the money back. Should i hire a lawyer?

Unfortunately,  the foreclosure would almost certainly be overturned by the court as the Trustee screwed up. Obviously 1 day made zero difference but the law is clear on the required steps

I would undo the transaction and receive my funds back and move on.

512-293-3885

Yep, that makes it a do over. In 45 days or so you can likely bid on it again.

Originally posted by @Greg H.:

Unfortunately,  the foreclosure would almost certainly be overturned by the court as the Trustee screwed up. Obviously 1 day made zero difference but the law is clear on the required steps

I would undo the transaction and receive my funds back and move on.

 Thank you. It is hard to accept the fact :). I guess It is time to move on.

Originally posted by @Wayne Brooks :

Yep, that makes it a do over. In 45 days or so you can likely bid on it again.

 :) Yeah. It hurts but we need to look for other opportunity.

@Khanh Tran There are sales the first Tuesday of every month.  Sales, resales and struck off properties.  I would give back the funds and go to the next sale.  It is possible that the owner filed bankruptcy and like mentioned before they crossed in the mail.  It happens.  

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