Homeowner Victimized In Equity Stripping Deal Successfully Challenges Bona Fide Purchaser Status Of Subsequent Buyer In Attempt To Void Deed
A 2005 court decision of the Colorado Supreme Court gives a good example of how a financially strapped homeowner who was screwed over in an equity stripping, foreclosure rescue deal can approach (probably with help of experienced, competent counsel) undoing the transaction in court of law.
The case involved a foreclosure rescue operator who acquired title to a home through fraudulent means from a financially strapped husband and wife, and who then flipped the home to a subsequent third party purchaser shortly thereafter.
In bringing suit to void the deed, the homeowner successfully attacked the subsequent purchaser's asserted status as a bona fide purchaser, despite the fact that the subsequent purchaser neither participated in the foreclosure rescue operator's alleged fraud, nor had any knowledge thereof. The court ruled(1) that, because the the subsequent purchaser bought the home with the homeowners in occupancy and possession thereof, the subsequent purchaser was charged with a duty to inquire of the homeowners as to the nature of their possession. Such an inquiry would have uncovered the fraud by the foreclosure rescue operator. The purchaser's failure to make such an inquiry legally placed him on notice of the fraud, thereby disqualifying him from the protection of the recording statutes as a bona fide purchaser. Consequently, the subsequent purchaser's title to the homeowner's property is subject to being voided on account of the fraud perpetrated by the foreclosure rescue operator.
For an expanded version of this post, and the links to the court decision, see Lack Of Knowledge Or Partcipation In Fraud Not Enough To Sustain Bona Fide Purchaser Status In Equity Stripping, Foreclosure Rescue Deal.
For case law addressing the effect of possession and a real estate purchaser's duty to investigate when seeking the protection of the recording statutes as a bona fide purchaser, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.
(1) In ruling favorably for the homeowner, the Colorado Supreme Court reversed a ruling of the state Court of Appeals, which in turn, affirmed a trial court, ruling (incorrectly, in retrospect) that the subsequent purchaser was entitled to the protection of bona fide purchaser status, and consequently, the homeowner would be precluded from voiding/cancelling the deed (which goes to show that, if you're a homeowner in this position, not only do you have to be lucky enough to find an attorney to represent you who really knows what he/she is doing in this area of law, but the attorney may have to be willing to ignore, what in retrospect were, the incorrect rulings of the lower courts and appeal those decisions up the ladder until the justice system ultimately - and hopefully - gets it right. I can't imagine how many homeowners there must be who found themselves in a similar foreclosure rescue scam, but were either unable to retain affordable, competent counsel or, if represented, unable to finance an appeal of an incorrect trial court decision. I suspect that the attorney in this case probably provided his/her services to the financially strapped homeowners either (a) on a contingent fee basis, or (b) "on the arm."
The case involved a foreclosure rescue operator who acquired title to a home through fraudulent means from a financially strapped husband and wife, and who then flipped the home to a subsequent third party purchaser shortly thereafter.
In bringing suit to void the deed, the homeowner successfully attacked the subsequent purchaser's asserted status as a bona fide purchaser, despite the fact that the subsequent purchaser neither participated in the foreclosure rescue operator's alleged fraud, nor had any knowledge thereof. The court ruled(1) that, because the the subsequent purchaser bought the home with the homeowners in occupancy and possession thereof, the subsequent purchaser was charged with a duty to inquire of the homeowners as to the nature of their possession. Such an inquiry would have uncovered the fraud by the foreclosure rescue operator. The purchaser's failure to make such an inquiry legally placed him on notice of the fraud, thereby disqualifying him from the protection of the recording statutes as a bona fide purchaser. Consequently, the subsequent purchaser's title to the homeowner's property is subject to being voided on account of the fraud perpetrated by the foreclosure rescue operator.
For an expanded version of this post, and the links to the court decision, see Lack Of Knowledge Or Partcipation In Fraud Not Enough To Sustain Bona Fide Purchaser Status In Equity Stripping, Foreclosure Rescue Deal.
For case law addressing the effect of possession and a real estate purchaser's duty to investigate when seeking the protection of the recording statutes as a bona fide purchaser, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.
(1) In ruling favorably for the homeowner, the Colorado Supreme Court reversed a ruling of the state Court of Appeals, which in turn, affirmed a trial court, ruling (incorrectly, in retrospect) that the subsequent purchaser was entitled to the protection of bona fide purchaser status, and consequently, the homeowner would be precluded from voiding/cancelling the deed (which goes to show that, if you're a homeowner in this position, not only do you have to be lucky enough to find an attorney to represent you who really knows what he/she is doing in this area of law, but the attorney may have to be willing to ignore, what in retrospect were, the incorrect rulings of the lower courts and appeal those decisions up the ladder until the justice system ultimately - and hopefully - gets it right. I can't imagine how many homeowners there must be who found themselves in a similar foreclosure rescue scam, but were either unable to retain affordable, competent counsel or, if represented, unable to finance an appeal of an incorrect trial court decision. I suspect that the attorney in this case probably provided his/her services to the financially strapped homeowners either (a) on a contingent fee basis, or (b) "on the arm."
posted by Home Equity Theft Reporter at 4:05 AM
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