Wednesday, May 30, 2007

$6.5 Million Property Bought At Foreclosure For $2,000

This story may not be about the theft of someone's home equity, but one foreclosure buyer got a "steal" and may be of some interest to foreclosure auction investors. A foreclosing mortgage lender was owed about $17 million, secured by 57 acres of undeveloped land in Sacramento County, California. A public auction was scheduled to commence on February 24, 2004 at 10:00 a.m. An individual, Bruce Palmbaum, showed up at the auction with $10 million in available funds. The property was reportedly worth about $6.5 million, and the foreclosing lender intended to place an opening bid of $6 million. According to the court case:

"The sheriff commenced the sale around 10:00 a.m. (the exact time is the subject of intense dispute) and Palmbaum submitted an opening bid of $2,000. Palmbaum’s bid turned out to be the only bid because [the foreclosing lender's] designated bidders got stuck in traffic (my emphasis) on the morning of February 24 on their way from the Bay Area to Sacramento, arriving at the auction room sometime after 10:00 a.m. After the sheriff’s gavel fell confirming a sale to Palmbaum for $2,000, the late-arriving bidders vociferously objected, demanding that the sale be rescinded. The officer replied that bidding was closed and the property had been sold to Palmbaum."

Subsequent litigation by the foreclosing lender to undo the foreclosure sale was unavailing. The bottom line was that Mr. Palmbaum walked away with 57 acres of land, reportedly worth over $6 million for two grand (I hope the foreclosing lender's attorney had his/her malpractice insurance paid up).

Source:

Amalgamated Bank vs. Superior Court, (Cal. App. Ct., 3rd District, April 16, 2007; case available online courtesy of Findlaw.com)

For a short blurb in The Union on this case, see Business Law Bulletin: The devil is in the details, by California attorney Peter C. Bronson (look for the caption: Third case: The purchase thwarted by heavy traffic).

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