A Corona couple that tried unsuccessfully to purchase a home at an auction of lender-owned properties has filed a lawsuit against several auction companies, including Irvine’s Real Estate Disposition Corp., accusing them of a “bait and switch scheme.”
At an auction in Pomona in March, Juan and Laura Torres made the highest bid — $146,000 — for a Corona property, according to the suit. Ms. Torres believed she had opened escrow on the property after signing paperwork at the auction and agreed to pay a 5 percent “buyers premium,” bringing the total price to $153,300. However, 30 days later, she was told that “she would not be able to purchase the property unless she came up with $50,000 more money,” the suit says.
The suit was first reported by Inman News, where a copy of the lawsuit can be downloaded.
The suit, filed last week in Los Angeles County Superior Court by the Huntington Beach firm Spainhour Law Group, seeks class-action status on behalf of “all persons or entities who attended a live auction … held by one or more of the defendants.”
The suit appears to hinge on whether the auction companies are responsible for the plaintiffs’ perception that properties would be sold to the highest bidder, as opposed to “subject to confirmation” by the lender that owns a property. Lenders typically set a “reserve price” for each property they offer at these auctions, and if the bidding doesn’t rise to the reserve price, they are not obliged to sell under the auction rules.
Most people who attend the auctions think that if they make the highest bid, they can buy the property, said Shawn Olson, a lawyer with Spainhour. “That’s how they’re advertised,” he said. Instead, the highest bid “becomes the basis for an offer to the purchase property. That’s not right,” he said.
“If they advertised (that) the auction really is a solicitation of offers, their auction process wouldn’t work,” Olson said.
The auction that the Torreses attended was organized by CataList Homes Inc., which is one of the defendants in the suit, Olson said.
In a statement to Inman News, Michael Davin, president of CataList, defended the firm’s auction process, saying “the reserve auction method is an effective and fully legal sales process utilized for hundreds of years in the sale of many types of assets.”
A third plaintiff in the suit is Peter Terraciano, a Lancaster real estate broker who attended an auction held by REDC in April, Olson said.
Rob Friedman, chairman of REDC, said that if the highest bid for a property is below the reserve price, his auctioneers make it clear that the sale is “subject to confirmation.”
“We don’t try to hide it — we announce it and we have it on paperwork when they sign. We try to cover all bases so we are not hiding anything from anybody,” Friedman said. “And we have hundreds of very, very happy clients and people who are buying properties at what we consider to be wholesale prices.”
Other defendants in the suit include Countrywide Home Loans Inc., GMAC Mortgage LLC, and Dovebid Inc.
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Gee, another real estate scam.
So it’s like Ebay. Maybe they should just have a “buy it now” option like Ebay too.
Stupid people who don’t read the fine print, then complain, and sue because they didn’t get what they want…hey, let’s start a bailout fnd for them too!
A bogus lawsuit filed against a half dozen unrelated auction and mortgage companies by people who apparently can’t read the rules of these auctions. Anyone who can’t understand the way the reserve price works is too stupid to own a home and will just end up foreclosed upon because they “didn’t understand” that their payment would go up in two years. They can blame that on their real estate agent and the mortgage broker, and everybody else who “defrauded” them.
That’s not an auction. I’ve been to plenty of them.
I’ve never been to a legitimate auction where the ‘reserve’ was silent. Or one with shill bidders who drove the price higher. I’ve been to literally hundreds of auctions before.
I’m glad somebody sued those crooks. It might not be illegal, but it sure as heck wasn’t legitimate. The REDC group is an outright joke.
Let these greedy Buyers got burn to learn their lessons.
Scenes From The Las Vegas Housing Meltdown
REGARDING REDC and FAKE BIDDING…..
Despite what your crazy uncle or Warren Buffett says about housing prices, the residential real estate market in many areas of the US is still in a lot of trouble. Doug French, an executive vice president of a Nevada bank, spent Derby day at a housing auction in Las Vegas and what he saw wasn’t pretty.
Finally it was post time for the action and the first home went up for bid – just short of 2,600 square feet in southwest Las Vegas. A brand new home, a one-year builder warranty, built by a reputable builder with a nearly 99 percent customer satisfaction rating, the auctioneer emphasized. To listen to the auctioneer, the bidding quickly escalated from the $159,000 starting point. The three young men working the crowd were frantically giving signals to the auctioneer, quickly moving from one attendee to another, and the price of home kept rising. It seemed like a real auction. But it was only real like professional wrestling is real. There were no actual bids on the first house, or the second, or the third. No bidding cards were raised.
The auction company kept up the charade for over 2 hours and for all 46 homes. The auctioneer’s rapid-fire delivery never waned. The young ladies who were there to help winning bidders with their sales contracts stood in the corner and clapped in unison until the very end. And the young tuxedoed gentlemen who worked the floor carried on with their elaborate gestures and signaling, as if it was a choreographed Broadway dance routine.
Only a couple dozen people remained by auction end, and only a handful of homes were actually sold. There were few real bids even at the low starting prices that were only a third the price that similar homes fetched during the boom a couple years ago.
Socal, no it is not like Ebay. On Ebay, if you don’t hit the reserve, you do not “win” the aution. Just imagine what it would be like if you “won” an ebay auction, then the seller emails you saying, “you need to pay $100 more”.
These real estate (edited).. are unbelievable.
They the auction folks need to get it right !
REDC is a realtor scam.
just goes to show you how far off of a “real offer” these folks were making if they were off $50,000…..
Some people think they have it all figured out, and go out and think they can just steal a house, yet unbeliveably cant even read the rules….
of course when it does not work ….they think they have a reason to sue, and can even find lawyers to take their case……lawyers….the way they operate is a scam………………………….
It’s an auction. Their offer is the real offer. If it was too low, someone else would’ve bid higher. Not only that, but the Terms and conditions state that the auctioneer can bid up the price for the seller.
The real question is whether the plaintiffs case is the norm or the exception. If it’s the norm, the perception will be that the sellers set unrealistic reserve prices to hit the winning bidders for more money after the auction.
I just read the terms of these auctions, and one thing that bothered me is that the terms clearly state that if the reserve price is not met, the seller will approve or deny the offer within 7 days. Why did the seller take 30 days? This is another thing that I’d be curious to know if it’s the norm or the exception.
Louis, the offer should have been rejected within the “7 days” as agreed to by the Seller. To wait until closing was about to be completed is unacceptable, don’t you think?
I don’t believe there would have been a lawsuit if the Seller sent them a letter on day 6 and rejected the offer.
Yes, it is arrogant for the seller, Countrywide, not to have replied within the 7 day period specified. However, the Buyer’s remedy was to cancel the deal and get his deposit back at any time. Why did the Buyer wait? It was his choice.
The thing that doesn’t make sense is to sue the companies via the class action (lawyers take all) method when they should be able to sue to force Countrywide to sell them the house. That is, unless they were planted knowing this practice was SOP at the auctions.
When I used to read RE columns, it was often said the buyer could force the sale on a reluctant seller via a “specific performance” lawsuit. This was a common topic as a seller would get a late better offer or decide not to sell now.
If the buyer has completed all the requirements in the contract and Countrywide did not fulfill its obligation to reject in 7 days or less, I would think the buyers could force the sale. Would Countrywide also want to pay for a lawyer and the legal fees of both sides to protect 50,000 dollars on such shaky grounds? Countrywide is probably just bluffing hoping they could bully the buyers into paying some more. Good for the buyers for fighting back, just not in the right way.
Is NO ONE going to hold a BUYER responsible for themselves anymore? Have we just reached a point in society where hand holding at every step is the norm? This is rediculious. Just like the bailouts that are happening all over it comes down to responsibility. READ WHAT YOU ARE SIGNING BEFORE YOU SIGN IT. Come on now!
Oh and by the way, the subject to information that they ‘bidders’ sign at the auctions states: that if you receive NO contact within the allotted subject to period then your contract is considered CANCELLED.
If they would have read their paperwork, perhaps they would have seen this.
This is just another group of individuals wanting to get money from companies that they think have an endless supply, and lawyers telling them that they are right to do it. Because again, no one will hold you responsible. Please..
I would like to file a lawsuit against REDC for defrauding me.
I would like for us all to file a class action law suit against REDC . For bait & switch and taking hard working people for there money. This company is a rip off. Don’t fall into there trap like many people i have talked to did. You play by there rules & they still find away to rip you off.