The foreclosure mess recently took another step toward surrealism. You may have heard that the Earl family, which had previously been evicted from a house in Simi Valley (northwest of Los Angeles), California, decided that they had the right to reclaim their former home.
According to the Wall Street Journal, the Earls paid $500,000 for the house in 2001, and pulled out more cash via refinancings. They eventually stopped making payments, and owed $880,000 by the time that they were evicted.
After the foreclosure, an outside investor bought the property, spent $40,000 fixing it up, and resold it. The new buyers were supposed to move in shortly thereafter, but the Earls got there first and changed the locks. Somehow, the Earls attorney has rationalized that the Earls should get their previous house back because he doesn’t know who owns the loan.
Now, I am not an attorney, but know enough to believe that the Earls have zero right to that property. Even if there is confusion about who owns the loan, there is no doubt about who should not have a place at the table – the Earls!
Beyond the legal considerations, the ethical and common sense decision should be to keep the Earls out of that house forever. It defies logic that the Earls and their lawyer have taken this step, and is a sad commentary on much of the country’s value system. Lots of people will rationalize doing whatever is best for them without concern for anyone else, but this takes it to a whole new level.
As a mortgage note buyer, I would be beyond angry if someone tried shenanigans like this with one of my real estate notes. Buying a real estate note is different from buying and reselling a property, but the legal code and basic approach are similar.
The current set of politicians seems to throw away any respect for the law or anything resembling an ethical approach in favor of garnering big headlines for themselves that appeal to the non-thinking masses. Hopefully, adult supervision and common sense will return in real estate law and this situation in particular. If not, my opinion is that the real estate note and general real estate markets will certainly worsen.
Alan Noblitt is the owner of Seascape Capital Inc., which buys real estate notes. He may be reached at (858) 672-4678 or toll-free at 1-800-634-4697. If you would like to learn more about real estate notes and read informational articles, visit www.seascapecapital.com.
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RECLAIMING A HOUSE … REALLY ??