Todd Phelps and Paul Whitehead didn’t think they were last month when they were the winning bidders in a foreclosure auction on the steps of the main Riverside, Calif., county courthouse. They thought they had won the lottery.
For years, they had been living in a rent-controlled apartment in Santa Monica and waiting out the housing bubble in hopes of buying a weekend getaway in the Palm Springs area. And on Sept. 10, they thought they had finally done it, getting a house for $137,000.
Several days later, however, they realized that what they had really bought was a second mortgage from Wachovia on a house that still had an enormous, unpaid primary loan. In other words, they did not own the home free and clear, and the auction company wouldn’t give back their $137,000 check.
The tale is certainly enough to give anyone pause, especially as several banks slow or halt their foreclosure proceedings amid questions about how they cut corners to speed up the process. Still, roughly half the recent home sales in hard-hit states like California, Arizona and Nevada have been foreclosures or short sales, according to RealtyTrac. Anyone wanting to buy homes in those and other states hit hard by the housing crisis will probably encounter these sorts of properties.
Read on.
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