Novice Auction Sale Bidder Fails In Conducting Due Diligence; Winds Up Holding The Bag, Spending $120K+ For Worthless Foreclosure

In Boulder Creek, California, the Santa Cruz Sentinel reports:

• Roberta and Randall Strand thought they were getting a great deal on a foreclosure and helping their daughter and future son-in-law become homeowners. Instead they are holding a worthless second mortgage. The home they bought for just under $98,000 and fixed up for $25,000 is scheduled for a foreclosure auction [...] to satisfy a debt of more than $529,000. They offered lender Wells Fargo $75,000, but it was to no avail.

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• The Strands saw a newspaper notice last fall about the home, which is a mile from theirs, slated for a foreclosure auction. The unpaid debt was listed as $97,604. [...] Roberta looked up the property records. She saw there were two mortgages, a first and a second, recorded on the same date with the same lender. She figured the lender was auctioning the first and that the second mortgage would be wiped out. "The price was right," her husband said.

• They took out a mortgage on their own home to make their offer. At the auction on the steps of the county Governmental Center in November, they were the only bidders. The house had been stripped, and they spent $25,000 on improvements -- windows, paint, carpet, lighting and appliances. In January, before Hayley and Bryan could take out a mortgage to pay them back, a notice arrived from Wachovia Bank, saying the previous owners owed $529,259 on their loan.

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• The family sued Wells Fargo, which acquired Wachovia, and Cal-Western Reconveyance, which posted legal notices of the sale, claiming deceit, fraud and wrongful foreclosure. They want their money back. The Strands' attorney, Steve Vondran of Newport Beach, argued that "Wells Fargo and Cal-Western have set up a system that allows them to mutually profit off the sale of worthless second mortgages."

• Superior Court Judge Tim Volkmann granted a temporary restraining order halting the May 7 sale, then denied a motion for a preliminary injunction, saying the plaintiffs had not established a reasonable probability of success. This allows the sale to occur [] as scheduled. "They relied on their own mistaken beliefs and lack of diligence," Martin McGuinn, Cal-Western's attorney, noted in his written arguments. "Bidding at a foreclosure sale is a highly speculative endeavor."

• He pointed out the plaintiffs admitted they knew Wells Fargo had two deeds of trust on the property and "decided on their own what interpretation to place on that information" without consulting Cal-Western.

For the story, see Boulder Creek family bought worthless second mortgage from Wells Fargo at foreclosure auction (if link expires, try here).

For story update, see Wells Fargo regains disputed Boulder Creek home at second foreclosure auction.