Bought house at sheriff auction, someone else bought it day befor

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Bought house at sheriff auction, someone else bought it day befor

Luke Aubut
Flipper/Rehabber · Madison, WI · Member since 2017 · 49 posts · 14 votes

Help please! What are my options?

I was high bidder at a sheriff auction a few weeks ago. I paid my deposit immediately to the clerk of court. While preparing for closing, the title company finds out that the seller who was being foreclosed upon, sold the house the day before the auction. But get this, the deed was not recorded until the day after the sheriff sale. My deposit for the sheriff sale was recorded before the other buyers deed was recorded. (This sounds like something you learn about in RE class). My title company will not insure title. 

Who has rights to the property? Do I have any rights to the property and should I pursue it?

Info that MAY be helpful: There were 3 liens on title, 1st position mortgage was foreclosing. I was told by title company that my bid at auction would clear all liens. Based on the other buyers sale price, i don't think their sale amount would pay off all liens and fees.  The mortgagee did not cancel the auction, therefore assuming they were not aware of the seller selling. Is the other buyers purchase even valid?

Any other info that may be helpful to know in this situation? I have not officially talked with a R.E. attorney, I know some of you would suggest that.

This is a lower priced property (50K) and it's my first deal! Yahooooo!

Thank you for any suggestions, advice or opinions.

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Scott Schultz
Rental Property Investor · West Bend, WI · Member since 2015 · 931 posts · 598 votes
7y
The borrower has legal right to sell the property right up to the confirmation of sale, so literally the borrower can show up at confirmation and settle the debt, you will get your 10% back from the clerk if the sale is legitimate and satisfies the foreclosing lender. This is something that happens, I have seen it before, just part of the game. 
  
Originally posted by @Luke Aubut:

Help please! What are my options?

I was high bidder at a sheriff auction a few weeks ago. I paid my deposit immediately to the clerk of court. While preparing for closing, the title company finds out that the seller who was being foreclosed upon, sold the house the day before the auction. But get this, the deed was not recorded until the day after the sheriff sale. My deposit for the sheriff sale was recorded before the other buyers deed was recorded. (This sounds like something you learn about in RE class). My title company will not insure title. 

Who has rights to the property? Do I have any rights to the property and should I pursue it?

Info that MAY be helpful: There were 3 liens on title, 1st position mortgage was foreclosing. I was told by title company that my bid at auction would clear all liens. Based on the other buyers sale price, i don't think their sale amount would pay off all liens and fees.  The mortgagee did not cancel the auction, therefore assuming they were not aware of the seller selling. Is the other buyers purchase even valid?

Any other info that may be helpful to know in this situation? I have not officially talked with a R.E. attorney, I know some of you would suggest that.

This is a lower priced property (50K) and it's my first deal! Yahooooo!

Thank you for any suggestions, advice or opinions.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    You’ll have to wait and see.  It’s not uncommon for the foreclosing lender to fail to cancel an auction after they have been paid......or the buyer screwed up and didn’t pay off the foreclosing lender.....or it was just some misguided quit claim attempt at stalling the auction.  A title transfer, in and of itself, prior to the auction date wouldn’t affect the auction process/sale.

    1Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    7y

    Not enough facts presented here. And hence the lawsuit.

    Let me throw out a hypothetical... let’s say the foreclosing lender was “paid off” in 2016 but they were shorted a few hundred dollars and therefore never released their lien. Receiving no further payments they force placed insurance and advanced taxes, etc.

    In that scenario all the claims currently being made would be relevant. Read the complaint.

    One more thing... what do you mean your title company won’t insure title? You obtained a title insurance commitment, closed, bought title insurance (I presume), and recorded your deed. This type of situation — including counsel — is exactly what title insurance is intended to respond to. 

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  • Roman M.
    Investor · Miami Beach, FL · Member since 2016 · 486 posts · 216 votes
    7y

    It seems like a sheriff sale where you are actually get title insurance which is great as it is unlike other sheriff sale where buyer has to do their own title work and there is no title insurance.

    your deposit should be safe if sheriff can't deliver clean title. 

    I will ask for another title co opinion as some title co are not experienced enough in this situation regardless of how many years that been doing this. 

    Regardless you should not loose your deposit.

    2Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    7y

    I don't know much about Wisconsin law but in general: if the county had no right to conduct the auction - and if the property was legally sold before the auction, then they did not have the right to conduct the auction - then there is no right to your deposit. As for clearing the other positions, if there wasn't enough money at closing to clear all the liens and no waiver of lien by the lower position parties, I don't see how the closing could go through - unless the new buyer agreed to absorb the liens. 

    Bottom line: I would demand my deposit be returned, and if it was not returned I would visit an attorney. 

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  • Nick Rutkowski
    Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Luke Aubut

    I’d call a real estate lawyer and make the decision to pursue or not. Give it a few days to see what happens before jumping into a lawsuit.

    2Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y

    Can you talk to the bank and find out what's happening?  I'd also talk to the people that ran the auction.

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  • Luke Aubut
    OP
    Flipper/Rehabber · Madison, WI · Member since 2017 · 49 posts · 14 votes
    7y

    @Theresa Harris, that is a good simple first step.  So I'd ask them if they have received a payoff on the property yet?

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  • Luke Aubut
    OP
    Flipper/Rehabber · Madison, WI · Member since 2017 · 49 posts · 14 votes
    7y
    Originally posted by @Nick Rutkowski:

    @Luke Aubut

    I’d call a real estate lawyer and make the decision to pursue or not. Give it a few days to see what happens before jumping into a lawsuit.

    Thanks Nick, I was going to see how things progress through the Confirmation of Sale hearing which is scheduled for next week. 

    The judge is supposed to approve or disapprove the sheriff sale. I'm wondering if the judge fails to discover that another deed was recorded the day after the sheriff sale, then I am issued a sheriff deed to the property, now there are possibly two deeds?

    By the way, the seller/borrower had a right of redemption period which ended the week before the auction. They sold to the other buyer between the time the redemption period had ended and before the sheriff auction. I'm wondering if they had a right to sell at that time, without permission from the lender.

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y
    Originally posted by @Luke Aubut:

    @Theresa Harris, that is a good simple first step.  So I'd ask them if they have received a payoff on the property yet?

     I'd call them and explain the situation to them. If they were past their right of redemption period, find out what happens if they sold the home themselves.  I would have thought with a foreclosure, the bank becomes involved in any sale at that point...I could be wrong.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    @Luke Aubut Either your state has some very strange laws or you are misunderstanding something......”redemption rights” don’t expire Before an auction, if they exists.  I think you are probably confusing Redemption rights with Reinstatement rights, which refers to the right to just pay off the amount of Payments in arrears, not the whole balance due.

    1Reply
  • Luke Aubut
    OP
    Flipper/Rehabber · Madison, WI · Member since 2017 · 49 posts · 14 votes
    7y
    Originally posted by @JD Martin:

    I don't know much about Wisconsin law but in general: if the county had no right to conduct the auction - and if the property was legally sold before the auction, then they did not have the right to conduct the auction - then there is no right to your deposit. As for clearing the other positions, if there wasn't enough money at closing to clear all the liens and no waiver of lien by the lower position parties, I don't see how the closing could go through - unless the new buyer agreed to absorb the liens. 

    Bottom line: I would demand my deposit be returned, and if it was not returned I would visit an attorney. 

    That's the big question JD; "if the property was legally sold before the auction..."  Who determines this?   Will the judge at the confirmation of sale hearing get into this, or will he/she even be aware that the property was sold by the borrower the day before the auction?

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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    7y
    Originally posted by @Luke Aubut:
    Originally posted by @JD Martin:

    I don't know much about Wisconsin law but in general: if the county had no right to conduct the auction - and if the property was legally sold before the auction, then they did not have the right to conduct the auction - then there is no right to your deposit. As for clearing the other positions, if there wasn't enough money at closing to clear all the liens and no waiver of lien by the lower position parties, I don't see how the closing could go through - unless the new buyer agreed to absorb the liens. 

    Bottom line: I would demand my deposit be returned, and if it was not returned I would visit an attorney. 

    That's the big question JD; "if the property was legally sold before the auction..."  Who determines this?   Will the judge at the confirmation of sale hearing get into this, or will he/she even be aware that the property was sold by the borrower the day before the auction?

     Well:

    - If it was a sale based on a mortgage default (which is what it sounds like to me), the bank or the trustee for the bank got a summary judgement to have the property auctioned. If they then consented to being paid outside of that auction, it was their responsibility to halt the sale. If they did not, then the auction proceeded under false pretense. Someone who was really enterprising could probably get a few bucks out of the bank beyond their deposit as a penalty. 

    - If it was a sale based on a tax lien, in which the government was forcing the sale, and they allowed a sale to go through, then they are responsible. Same scenario as above only it will probably be more difficult to get anything more than your money back as government is unlikely to sanction government with punitive penalties. 

    Another wrinkle: it could be possible, with legal action, to nullify the sale before the auction and those funds to be clawed back. This happens, for example, when someone who is about to declare bankruptcy starts liquidating in an attempt to shield assets. But again will take an attorney and a suit with no guarantee of success.

    Personally, I think your best bet is go get your deposit back and wait for the next deal. Exception to that would be if the local government is attempting to hold you to the sale terms or forfeit your deposit. In that case, if you can't take title to the property, you really need to get an attorney involved. 

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  • Luke Aubut
    OP
    Flipper/Rehabber · Madison, WI · Member since 2017 · 49 posts · 14 votes
    7y
    Originally posted by @Wayne Brooks:

    @Luke Aubut Either your state has some very strange laws or you are misunderstanding something......”redemption rights” don’t expire Before an auction, if they exists.  I think you are probably confusing Redemption rights with Reinstatement rights, which refers to the right to just pay off the amount of Payments in arrears, not the whole balance due.

    Per the online court record for the foreclosure case; on Dec 19, 2018 Attorney for plaintiff / lender "requests judgment of foreclosure. ...... Court grants judgment of foreclosure with 6 month redemption period and no deficiency." 

    The sheriff auction was held June 26 2019 for this reason I believe, to allow the 6 month redemption period for the borrower. So it looks like the auction was held 6 months and 1 week after the foreclosure motion. 

    In Wisconsin the redemption period for the borrower happens before the sheriff auction, no redemption after a sheriff sale.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    @Luke Aubut Thanks for the clarification....never saw a redemption period that started with the judgment, as opposed to the actual sale.

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  • Luke Aubut
    OP
    Flipper/Rehabber · Madison, WI · Member since 2017 · 49 posts · 14 votes
    7y
    Originally posted by @JD Martin:

     Well:

    - If it was a sale based on a mortgage default (which is what it sounds like to me), the bank or the trustee for the bank got a summary judgement to have the property auctioned. If they then consented to being paid outside of that auction, it was their responsibility to halt the sale. If they did not, then the auction proceeded under false pretense. Someone who was really enterprising could probably get a few bucks out of the bank beyond their deposit as a penalty. 

    - If it was a sale based on a tax lien, in which the government was forcing the sale, and they allowed a sale to go through, then they are responsible. Same scenario as above only it will probably be more difficult to get anything more than your money back as government is unlikely to sanction government with punitive penalties. 

    Another wrinkle: it could be possible, with legal action, to nullify the sale before the auction and those funds to be clawed back. This happens, for example, when someone who is about to declare bankruptcy starts liquidating in an attempt to shield assets. But again will take an attorney and a suit with no guarantee of success.

    Personally, I think your best bet is go get your deposit back and wait for the next deal. Exception to that would be if the local government is attempting to hold you to the sale terms or forfeit your deposit. In that case, if you can't take title to the property, you really need to get an attorney involved. 

     @JD Martin great response, your explanations are sincerely appreciated! I'm thinking I may have to wait for the result of the confirmation hearing before truly accepting one way or the other.  If the other buyers sale is valid, I have no problem with that. If the judge declares the sheriff sale valid, I'll be happy to buy my first property, but I'll probably need an attorneys help to make sure I have sole rights and ownership.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    @Luke Aubut Out of curiosity, I looked up the Wisconsin foreclosure/redemption issue.

    You are right, the “redemption period” starts at the time of the judgment. BUT, from what I read from NOLO, the borrower Actually has up until the confirmation hearing on the sale to redeem.  The “redemption period” of 6 months seems to be more of a required delay before the auction can occur, not an absolute drop dead date preventing redemption .

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  • Luke Aubut
    OP
    Flipper/Rehabber · Madison, WI · Member since 2017 · 49 posts · 14 votes
    7y
    Originally posted by @Wayne Brooks:

    @Luke Aubut Out of curiosity, I looked up the Wisconsin foreclosure/redemption issue.

    You are right, the “redemption period” starts at the time of the judgment. BUT, from what I read from NOLO, the borrower Actually has up until the confirmation hearing on the sale to redeem.  The “redemption period” of 6 months seems to be more of a required delay before the auction can occur, not an absolute drop dead date preventing redemption .

     mmmeeeehh..... I've read that article also, and many similar. I agree with your last sentence above. However, each article I've read states something ambiguous such as: From Nolo - "Once the redemption period expires, the sale takes place and the court confirms it."  Leads me to question, does the redemption period Really expire, or just a choice of words by the author?

    1Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    @Luke Aubut Well, the only way to know for sure is to read the actual state statute....always fun reading.

    1Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    @Luke Aubut Well, that was easy....statute 846.13 “...redemption up until the sale”.  In the small explanatory print that follows “...sale means confirmation of sale”.

    1Reply
  • Nick Rutkowski
    Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Luke Aubut

    Dang, that sounds like someone really messed up. Best of luck man, hopefully you can get this resolved without litigation.

    0Reply
  • Maugno M.
    Flipper / Landlord · Tyler, TX · Member since 2016 · 255 posts · 126 votes
    7y

    In texas, the redemption period starts after the Sheriff Sale. 6 months on non homestead and 2 years on homestead.

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  • Andy Mirza
    Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Luke Aubut:
    Originally posted by @Wayne Brooks:

    @Luke Aubut Out of curiosity, I looked up the Wisconsin foreclosure/redemption issue.

    You are right, the “redemption period” starts at the time of the judgment. BUT, from what I read from NOLO, the borrower Actually has up until the confirmation hearing on the sale to redeem.  The “redemption period” of 6 months seems to be more of a required delay before the auction can occur, not an absolute drop dead date preventing redemption .

     mmmeeeehh..... I've read that article also, and many similar. I agree with your last sentence above. However, each article I've read states something ambiguous such as: From Nolo - "Once the redemption period expires, the sale takes place and the court confirms it."  Leads me to question, does the redemption period Really expire, or just a choice of words by the author?

    I'm new to WI FC's as well but not to judicial FC states. In other judicial states, the confirmation of sale hearing takes place about 30 days after the actual Sheriff's or Judicial Sale. My understanding is that until the judge issues the order confirming the sale, the property still belongs to the borrower/defendant. Once the judge issues the order, whoever handles the sale can draw up the Deed for recording. With this logic, it would appear that your sale won't go through.

    However, you mentioned that you recorded a Sheriff's Deed before the other transaction, which confuses me. In WI, do they indeed issue a Sheriff's Deed before the Confirmation of Sale hearing? 

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  • Jenifer Levini
    Attorney · Santa Cruz, CA · Member since 2015 · 345 posts · 358 votes
    7y

    Once again, it's difficult to believe that you'd risk losing $50k but not willing to spend a few hundred bucks on a local real estate lawyer to  find out the actual laws in your jurisdiction. This sounds pretty straightforward to me. Go to a local real estate lawyer. Spend one hour going through all the details. She will tell you exactly how to proceed. All these arm-chair lawyers' guesses are worth exactly what youre paying for them.
    Real estate investing is a profession. If youre unwilling to get professional help when you need it, you'll in for a rough road. A good lawyer will be your partner to making a lot of money and protect you when the trouble hits the fan.

    2Reply
  • Luke Aubut
    OP
    Flipper/Rehabber · Madison, WI · Member since 2017 · 49 posts · 14 votes
    7y
    Originally posted by @Jenifer Levini:

    Once again, it's difficult to believe that you'd risk losing $50k but not willing to spend a few hundred bucks on a local real estate lawyer to  find out the actual laws in your jurisdiction. This sounds pretty straightforward to me. Go to a local real estate lawyer. Spend one hour going through all the details. She will tell you exactly how to proceed. All these arm-chair lawyers' guesses are worth exactly what youre paying for them.
    Real estate investing is a profession. If youre unwilling to get professional help when you need it, you'll in for a rough road. A good lawyer will be your partner to making a lot of money and protect you when the trouble hits the fan.

     @Jenifer Levini fantastic advice, I agree! Thank you and Amen!

    Just to clarify, I do not have 50K invested. I could lose out on a 50K deal which I project to profit 10K-20K as a flip. I have a $4000 deposit on the property which I am not in fear of losing. Any money I put towards an attorney I do fear on losing, because it could be money spent without a net gain for me. I'd first just rather gather an educated guess and a reasonable belief in the rights to a property before I pay for legal assistance.  If this community offers some perspective and angles I have not thought of, than its worth the price I paid to be a member here at BP!

    2Reply
  • Luke Aubut
    OP
    Flipper/Rehabber · Madison, WI · Member since 2017 · 49 posts · 14 votes
    7y
    Originally posted by @Andy Mirza:

    I'm new to WI FC's as well but not to judicial FC states. In other judicial states, the confirmation of sale hearing takes place about 30 days after the actual Sheriff's or Judicial Sale. My understanding is that until the judge issues the order confirming the sale, the property still belongs to the borrower/defendant. Once the judge issues the order, whoever handles the sale can draw up the Deed for recording. With this logic, it would appear that your sale won't go through.

    However, you mentioned that you recorded a Sheriff's Deed before the other transaction, which confuses me. In WI, do they indeed issue a Sheriff's Deed before the Confirmation of Sale hearing? 

    Thanks @Andy Mirza, sorry, I was unclear. I do not have a sheriff deed or any deed, I was wondering what would happen if the judge was not aware or missed that another sale took place and issued me a sheriff deed. Also the person I spoke with on the phone at the clerk of court office stated that she saw my name as the person who put down a deposit on the property on the day before the other buyers deed was recorded. That's all. I don't know if that would be a factor in anything.

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