In Pinellas County, Florida, the St. Petersburg Times
- The problem is, Carlson's lender, Bank of America, sold it more than a year ago to another couple, who thought they had bought the foreclosed property free and clear. Legal experts say that in trying to reverse a foreclosure after the home has been sold to a third party, Carlson's case may be the first of its kind but it's unlikely to be the last.(1)
Whether it's robo-signed documents, falsified affidavits or failure to properly notify defendants, as claimed in the Carlson case, shortcuts by lenders' law firms could prove to be land mines in the legal system. When triggered by homeowners who feel their cases were improperly handled, such issues could raise ownership questions for years to come.
- Carlson contacted Mark Stopa, a St. Petersburg foreclosure defense attorney, and his motion to vacate the foreclosure judgment, cancel the sale and regain possession of his house was filed last month. Stopa said that everyone, even a homeowner behind on his payments, has the right to defend his property from foreclosure in court. [...] Stopa bets that more foreclosures will boomerang back to the courts.
- "This is perhaps the best example yet of the problems that transpire when foreclosures are done too hastily," he said. "You have to do things right from the very outset. If not, the cleanup will be far worse."
For more, see Dad tries to reverse foreclosure on his former Dunedin home.
See also Re-Claiming Your Home After Foreclosure – Improper Service.
For the above-referenced motion, see Verified Motion To Vacate Foreclosure Judgment, Cancel Foreclosure Sale, And Return Defendant To Possession.
(1) The initial analysis of whether a foreclosure sale of real estate can be undone after a third party acquires title to the home requires a determination as to whether the foreclosure judgment and the sale thereunder is void (also referred to as absolutely void, wholly void, void ab initio), or merely voidable (meaning that a foreclosure sale or judgment, while containing minor defects, is nevertheless valid until challenged by the injured party).
If the judgment or sale is found to be absolutely void, it is treated as a nullity (as if it never happened), and any title acquired by a subsequent purchaser, irrespective of how innocent or bona fide, will have acquired no title. A challenge to an absolutely void judgment or foreclosure sale can be brought at any time, and is not subject to any statute of limitations or other procedural time frames.
Alternatively, a finding that a foreclosure sale or judgment is merely voidable will then trigger a second analysis requiring a determination as to whether the subsequent party acquiring title to the real estate qualifies for protection as a bona fide purchaser (also referred to as a good faith purchaser or innocent purchaser). A bona fide purchaser is generally considered as one who purchases property without actual or constructive knowledge of competing interests and pays the vendor valuable consideration. A purchaser is generally considered to be on notice if he has knowledge of facts sufficient to put an ordinarily prudent man on inquiry and a reasonably diligent inquiry would lead to the discovery of title or sale defects.
Where a foreclosure sale or judgment is found to be merely voidable (as opposed to absolutely void), a subsequent 3rd party purchaser having bona fide purchaser status will be able to defeat the attempt to undo the foreclosure sale. The interest acquired by a subsequent 3rd party purchaser not having this status, however, can be defeated, subject to compliance with the applicable time frames within which a challenge to the judgment or foreclosure sale can be brought.
It is important to note here that, contrary to what the rhetoric put out by the title insurance industry may imply (see American Land Title Association: Comments regarding title insurance on foreclosed properties), bona fide purchaser status:
- is not automatically granted to a subsequent buyer of a foreclosed property,
- is only relevant when the foreclosure sale and/or foreclosure judgment is found to be merely voidable (there is no such thing as bona fide purchaser protection when the foreclosure judgment and/or sale pursuant thereto is found to be absolutely void), and
- is not necessarily available to a subsequent purchaser merely because said purchaser has a complete lack of actual knowledge of any of the relevant facts surrounding the defects in the sale or judgment; being 'deemed' to 'have notice' of the relevant facts is sufficient to render bona fide purchaser protection inapplicable.
For more information on some of these points, one need not go further back than a September 28, 2010 court decision from the Washington State Court of Appeals (Division II) in which a number of the foregoing points are generally addressed.
In a nutshell, the court in Albice v. Premier Mortgage Services Of Washington, Inc. (go here for .pdf, and if these links expire, TRY HERE), No. 39265-8-II, 157 Wn. App. 912; 239 P.3d 1148; 2010 Wash. App. LEXIS 2199 (Wn. Ct. of App., Div. II, September 28, 2010) found that a technical defect in following the applicable statute rendered a foreclosure sale void, despite any claim of bona fide purchaser status made by the 3rd party foreclosure sale buyer. The court further went on to hold that, given the specific facts of the case, the 3rd party foreclosure sale buyer did not qualify as a bona fide purchaser anyway, thereby allowing the foreclosed homeowner to undo the foreclosure sale regardless.
For the briefs filed in Albice, see: