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Article Courtesy of The Tampa Bay Times
By Susan Martin Taylor
Published July 8, 2017
The winning bidders, an Orlando couple, thought they had
gotten a good deal on the 1,500-square unit in the Ram-Sea Condominiums with
heated pool and Jacuzzi. Owners can use their condos as permanent homes or
lucrative vacation rentals.
But the Orlando couple won't do either. After the electronic auction was
over and the money paid, they made an alarming discovery: A bank has a
superior first mortgage on the condo and could soon foreclose.
That would leave them with no condo and out almost half a
million dollars.
Foreclosure auctions can be risky, and this couple aren't the first to learn
that the hard way. But the amount of money involved and the circumstances
around the sale make it stand out among the hundreds of foreclosure auctions
held each year in the Tampa Bay area.
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"It definitely doesn't
smell right, to say the least," said attorney Jon McGraw,
who represents the couple, John and Christine Houde.
Among the unusual aspects of the sale:
• The condo's previous owner is a company, Outbidya, Inc.,
started by Clearwater lawyer and real estate investor Roy C.
Skelton. Although Outbidya lost the condo in the auction,
another of Skelton's companies, Deutsche Residential
Mortgage, collected $380,000 from the sale — $222,000 more
than Obidya had paid for the condo.
• Deutsche Residential obtained a final judgement of
foreclosure based not just on the amount owed on the condo,
but also on promissory notes for other properties owned by
Skelton's Outbidya.
• The attorney representing Deutsche Residential in the
condo foreclosure, Bruce Harlan, once was suspended from
practicing law because of misconduct in a different mortgage
foreclosure case.
McGraw said he plans to file an emergency motion to try to
vacate the sale and get his clients' money back. |
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On June 8, a condo overlooking the Gulf of Mexico in
North Redington Beach sold at a Pinellas County foreclosure auction
for $458,100.
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"We're just trying to digest this whole thing," Houde
said of the transaction that left him and his wife reeling.
Skelton did not respond to a call or email, and Harlan did not respond to a
call.
An Ohio man bought the beachfront condo in 1997. Two years ago, after he
failed to pay nearly $11,000 in condo fees, the Ram-Sea II Condominium
Association obtained a judgment against him and a foreclosure auction was
set. Outbidya won with a bid of $157,800, and deeded half of its interest in
the condo to a partner, Parkes Investments, LLC.
Homeowner association auctions have been popular with investors because they
often can take title to a property for much less than market value although
the home could still face foreclosure on a bank's first mortgage. At the
time Outbidya obtained title, there was no active bank foreclosure and the
condo could have been available for rent or personal use for a considerable
length of time before the lender took it back.
On March 13, 2016, though, Wells Fargo began foreclosing against both the
original owner and Outbidya.
Less than a month later, Skelton incorporated Deutsche Residential Mortgage.
(It has same name but no connection to the huge German bank.) It then issued
a $160,000 mortgage to Outbidya and Parkes Investments.
In effect, one of Skelton's companies — Outbidya — was borrowing from
another of Skelton's companies — Deutsche Residential.
The foreclosure case on the bank's first mortgage proceeded slowly. This
year, though, the pace accelerated toward foreclosure on the second mortgage
held by Deutsche Residential.
In February, Deutsche sued Outbidya and Parkes Investments and demanded
payment on loans for properties in Largo and Tarpon Springs as well as for
the North Redington Beach condo.
In April, Deutsche obtained a final judgement of foreclosure for $377,036.
Circuit Judge Jack St. Arnold set the foreclosure sale for June 8.
Even though the judgment was for considerably less, bidding on the condo hit
$458,100 because of its gulf-front location and because some bidders — like
the Houdes — probably assumed the foreclosure was on the bank's mortgage.
Had that been the case, the winning bidder would have owned the condo free
and clear and Skelton's Deutsche Residential, holder of the second mortgage,
would have gotten nothing
But by beating the bank to foreclosure, Deutsche Residential already has
received $378,000 from the proceeds of the auction, If no one else files a
claim or the sale isn't vacated, the company could also get the $78,000
"surplus'' — the difference between the judgment amount and the sale price.
McGraw, the couple's attorney, says Skelton's companies "hijacked" Wells
Fargo's case in order to foreclose ahead of the bank.
Lawyer Matt Weidner, who has been involved in many Tampa Bay foreclosures,
called the condo case "unprecedented." While Skelton's company might
originally have overpaid for the condo, Weidner said, he was able to come
out far ahead in the end.
"No way would he imagine such a windfall," Weidner said "but the level of
machinations to execute this plan is breathtaking."
Weidner said a $150 title search would have revealed the pending bank
foreclosure and presumably kept the Houdes from bidding $458,000.
"Auctions are not for amateurs," he said. "I get a phone call once a week
from somebody who went to a seminar, or saw a buddy do it and the stories
are pretty sad. I've had people take their retirement income and throw it at
one of the auctions. But the psychology of these investors is that this is a
county auction and surely it must be legitimate and simple and so I'll bid."
Harlan, Deutsche's Residential's attorney, got in trouble in 2011 over his
role in another condo foreclosure case. The Florida Supreme Court suspended
him from practicing law for three months for trying to block foreclosure of
a Tampa man's condo without the man's knowledge. Harlan had been hired by a
real estate agent who wanted to buy the condo in a short sale.
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