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Jack, Home Buyer in Potomac, MD

Bought Short sale which was foreclosed latter

Asked by Jack, Potomac, MD Mon Jun 6, 2011

I recently bought a bank approved short sale, and just did closing last week. But we were shocked to know that over the weekend someone came and changed our locks of new house. It was latter discoverd from the neighbour that, bank had send someone to change locks, because house has been foreclosed.
What should we do, since first time buyer, we are completly shocked, please help, any advise would be appreciated.


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Call the Settlement office asap. This is a perfect example of why title insurance is so important.
1 vote Thank Flag Link Mon Jun 6, 2011
Hello Jack,

Looks like you received a lot of valuable advise below, but I would be very interested to hear how things worked out, so please keep us posted.

0 votes Thank Flag Link Tue Jun 7, 2011
This is very likely a case of crossed wires and interdepartmental miscommunication. Start with the title company that handled your settlement. I would also contact the listing agent for the property since he or she should have a good contact at the bank. In the interim you have every right to change the locks back and if anyone challenges you on this the HUD1 statement that you signed at settlement is your proof that you are the rightful owner of the house until your deed comes in.
0 votes Thank Flag Link Mon Jun 6, 2011
I appreciate the panic of the situation! I cannot speak to the financial side since I am a Realtor. But I assume the Realtor has done his or her job correctly. So this situation will be cleared up quickly. Here is why-- In our capacity we verify in the process the following: that there was a legitimate listing for sale, that all contractual documents were signed properly and protect the interests of my buyer, that the contract was sent to the lender and received approval, that the title company received a copy of the contract, that both lender and title co were aware of all incidental situations, that settlement date was set, , "clear to close" was received from buyer's lender and that title company granted CLEAR TITLE of ownership to my buyer, that my buyer had the opportunity to get a home warranty and, finally after final inspections are made, and HUD closing sheet is reviewed (and includes buyers title insurance policy!) that I witnessed the settlement and consummation of the purchase. If all these steps were done I believe this problem is nothing more than a lack of communication within the bank.
0 votes Thank Flag Link Mon Jun 6, 2011
Hi Jack:

Just contact the trustee and the attorneys that handled the foreclosure and submit to them the short sale approval letter, the HUD-1 of your settlement, this is becoming a common mistake from the short sale department and the attorneys or legal department.

Carlos Caraballo
0 votes Thank Flag Link Mon Jun 6, 2011
In the short sale process are many parties who have conflicting goals that allow them to pursue what is most financially beneficial to them, especially if a 'Mortgage Servicing' company is involved.
It may be simply a clerical error on the part of the bank or a revenue enhancement maneuver by the servicing company.
Your option is to consult your attorney or the title company whichever one you used. And as previously stated, when you are moved in, keep everyone else OUT!

It would think this information would be beneficial to all readers if the culprits were identified.
0 votes Thank Flag Link Mon Jun 6, 2011
Contact the Trustee who handled the foreclosure auction. They have direct contact with the Bank who ordered the foreclosure auction. Another case of the "foreclosure department" not knowing what the "Short Sale department" is doing.
0 votes Thank Flag Link Mon Jun 6, 2011
Call the attorney who managed your settlement and change again lock.

Good luck
0 votes Thank Flag Link Mon Jun 6, 2011
Jack - I would agree with both of the previous two answers as possible solutions. I will also tell you that I have a listings currently that has not been foreclosed but is in default and the bank sent someone to change the locks six months ago even the home wasn't foreclosed and still has not been. Upon doing some follow up I found that the bank had simply had an error in their system and the order for the lock change was done prematurely. Hopefully that is what you will find as well.

Best of luck,

0 votes Thank Flag Link Mon Jun 6, 2011
The scope of a bank's ignorance is breath-taking. I'm guessing that they were continuing to process the foreclosure as your short sale was being approved. Once you settled, a logical person would assume that the bank would stop foreclosure steps. Unfortunately for you, common sense and logic are in short supply with banks.

I would first go to the attorney that managed your settlement. They would have obtained releases for all liens -- including the banks. See if they have a contact with the bank to clear this up. In the mean time, I would change the locks again. If the bank sends anyone else back to your home, call the police.

Good luck.
Web Reference:
0 votes Thank Flag Link Mon Jun 6, 2011
Contact the closing company immediately. They need to figure out what happened with the deed, but it sounds like the deed was transferred twice. One of the transfers was probably not correct. Once you figure out what is going on, you may need a real estate attorney to help sort things out.

The bank would much rather have your money from the short sale versus the foreclosure, but hopefully things can get worked out.

Good luck!
0 votes Thank Flag Link Mon Jun 6, 2011
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