Intimidating buyers at the steps

While attending an auction yesterday, an attorney representing the homeowner created a bit of a stir … while the auctioneer was in the middle of soliciting bids on a property, the lawyer waived legal papers in front of the gathered investors and admonished that anyone who buys this property will be immediately entangled in a nasty lis pendis … The auctioneer stopped her auction and patiently waited for him to say his piece, and then proceeded to sell the property (went back to bene). The same lawyer was milling around pre-auction and made sure all who were there knew that this property was going be in litigation due to “fraud” … something to do with false dates on loan documents and improper notorization. One of the investors at the steps challenged the lawyer and very calmly and directly asked “are you trying to intimidate potential buyers?” He said, “no, I am merely informing prospective buyers that this property will be in litigation.” … A rose by any other name still spells intimidation to me … What’s your take on this type of shenanigins? A few investors chuckled afterwards and said “I want to hire that guy to come to any auction for a property that I want to buy” (so that he can scare off any competition).

Civil code 2924h(g) is pretty clear that is unlawful for anyone to restrain bidding, with the simple exception of informing others that a sale is “as-is”. Fine is $10k or a year in prison. See the text of the code here:

Doesn’t seem to me that attorneys should be exempt, but who knows.

While illegal, I would much rather not be caught in the middle litigation which we’re certainly seeing plenty of. Maybe it’s time to have officers on site as well?

Thanks Sean for the Code info. And to Aaron’s comment … yes, despite the impropriety by the attorney at the steps, I too would prefer to avoid getting caught in the middle of litigation. So it was good to know ahead of the bidding. The 1st lender dropped the bid to 50% of their debt (leaving at least $75K on the table), so they must have known something was up. Found out later that the outfit behind the lawsuit has been very aggressive in filing one dubious slap suit after another on select foreclosure properties, and thereby tying up investors for many months. They also file out of state and that can run up defense costs.

While litigation can cause delays and tie funds up they don’t have much of a case against you as a bona fide purchaser at the auction. Especially if you weren’t a party to the cause of action. If they have a valid case against the lender and win, I think you’d then have a reasonable case against the lender for improperly selling you the property, so you should get paid either way. In the couple of these I’ve been involved in I’ve been able to keep my attorneys fees fairly low, as even though I’ve been named in the suit, the case is ultimately against the lender for something that happened prior to my purchase, so other than having to answer to the affect that I wasn’t involved and have no knowledge there isn’t much to do. The lenders attorney’s on the other hand were super aggressive which made it fairly easy to just go along for the ride. I certainly don’t blame anyone for wanting to avoid litigation, but other than a delay these situations have generally worked out fine for me.

Another incident of lawyers waiving threats at the steps … I just retuned from an auction where a paralegal showed up to hand deliver the following flyer to all who were there to bid … Property: XXXXXXX To Whom It May Concern: Please be advised that I represent the home owner regarding the above property. A legal action has been or will be filed and there has or will be a Notice of Pending Action recorded against the property. If you purchase this property, you have actual notice that you will be involved in a legal action. Feel free to call my office with any questions. Sincerely XXXXXX & Associates XXXXX Esq.

A savvy investor at the steps noted that this was a smart move on the part of the attorney, as by way of this notice, investors now have “constructive receipt” of a notice that a lis pendis will ensnare them if they buy the property and the investors could thereby lose there innocent party status (i.e. “you were warned”). What’s your view of this tactic at the steps?

To finish the story … the property was indeed sold at the steps, but interested buyers heeded the lis lendis threat and failed to bid … it went back to the bank.