newbie investor purchase occupied reo through auction.com-help!!

[Imran A.]

Hi, I am a newbie investor and recently purchased (or thought so) a home in san bernardino, ca through an online auction.com occupied reo auction. I was the high bid on a property at $125,000 about 20% below market that I knew was occupied, and was given title through a quitclaim deed with no title insurance. I did not check the title before I closed because I thought since it was an REO the title would be clean. Nevertheless, I closed on this property a couple weeks ago, and received a letter from the county assessor that they had no record of the grantor (in this case, Nationstar bank) being assessed to the property and that they had no record of a trustee deed being granted to the grantor. I called the county assessor and they told me that nationstar did in fact try to file a trustee deed in september 2011 but it was rescinded in jan 2012. I immediately let auction.com and the title company know what I heard from the county, and auction.com is saying they are waiting for a response from nationstar, which has not come over the past 48 hours. I am freaking out as I have already started the eviction process with the current occupant, the previous homeowner, who called me and said that nationstar told her she would get her house back. Obviously I made a big mistake by not checking title beforehand but does anyone have advice for me on how to proceed? Can nationstar legally sell me a house that they didn't have title to begin with? Any advice is much appreciated! Thanks.

[Robert Adams]

Imran A. I would not ever advise to assume "since it was an REO the title would be clean. "