Correspondence - Real Estate auction sham w/IRS/Government

From: Bill Sanders (OFP)
To: Dad
Sent: Friday, June 22, 2007 10:56 PM
Subject: Fw: Real Estate auction sham w/IRS/Government

Dad,

*CONFUSION* - Glancing through the email and attachments, am I right that:

1. this guy probably signed without reading all the terms/conditions...
2. "walking a property" will NOT tell you if the place is "buildable"...
3. If the government KNEW it wasn't buildable, they would have had to disclose that fact, right? (But how do you PROVE that they KNEW it?)...
4. There's a clause that states potential buyers need to contact (someone) for access to the property before the auction, and, if he didn't take advantage of that, he's SOL - HOWEVER,
5. If this were a private deal, and the buyer wanted to back out for the same reasons, wouldn't the Law and/or GOVERNMENT kinda force the issue and get the sellers to return the money?

Is he just using the wrong clauses? Wrong understanding of real estate law?

Any advice we could pass on to him?
Bill

From: Bill (OFP)
To: sean sander
Sent: Saturday, June 23, 2007 4:01 PM
Subject: Re: Real Estate auction sham w/IRS/Government

Sean,

I checked with my father who recently retired as a real estate appraiser after working as a salesman and broker, also, since around 1978. He said:

I'm not a lawyer, and I haven't dealt in real estate for some time (as stated in my disclosures on my site). However, reading through the paperwork you attached to the following email:

In the "Terms of Sale for Town of Genesee, WI", there's a clause "Inspection of Property" that states:

There's also a clause "Real Property Descriptions" that states:

The sentence "If a legal misrepresentation is determined before the final closing on the property, the Government reserves the right to cancel the sale and refund any earnest/deposit money paid." does NOT say that YOU can cancel, but that THEY can, and the misrepresentation of which they are speaking is most likely YOURS. If you did not misrepresent anything, then they have no reason to cancel/refund. And if you DID misrepresent, they COULD take legal action.

The first paragraph/term states that as soon as they accept your bid, it establishes the legally binding contract, which is bound by the terms/conditions on the page.

#6 on your contract of sale says THEY can cancel the sale and refund the deposit if all lien releases are not filed. YOU "agree to hold harmless the Seller and its agents from any and all claims or actions associated."

#12 states "The Seller has disclosed all known defects with the real estate and makes no warrantees or guarantees either expressed or implied. The buyer states he has personally inspected the Real Estate and acknowledges that by entering into this contract the Buyer is agreeing to accept the property in "As-is" condition." ... "Buyer acknowledges that he/she relied entirely on his/her own information, judgement, and inspection of the Real Estate and available resources"

from the FAQ at http://www.treas.gov/auctions/irs/faq.shtml (I realize the link in the brochure didn't work, but it's not that difficult to find):

What all this means, to me, is that the government seized the property and set up the auction. Then chose EG&G as their agent, meaning their "auctioneer". The agent is not required to do Due Diligence to make sure the site being sold is clear of all liens, find any discrepancies in the descriptions they were given, or even find out if the site being sold is "buildable". (They probably had no clue that you could not build a house there.) They make a sales (repeat SALES) brochure of what they KNOW, set up and conduct the auction. There should have been at least one "open house" on the property, which may or may not have been the day of the auction, itself, where you could have had people check the property out for you. They state in a number of places, that it's on YOU to verify everything you need to know about the property before the sale.

There's no way for me to know if you had people other than the other buyers looking at the property, or if you, yourself, are an expert on soil, utilities, "buildability" of properties, etc.

So, the auction happened, and you were the accepted bidder. As soon as the "gavel sounded", it established the legally binding contract, subject to the terms and conditions on the written contract. One of the reasons for the terms "as-is" and "with all faults" is to protect the seller from people trying to back out of a contract because they (or their spouses) find problems, or don't like it. IE, if you sold a used car, you would sell it "as-is" and "with all faults", so days or weeks later, the buyer can't come back to you and demand a refund if something broke. This is fairly standard in sales contracts for used items, and even new.

So, from my understanding of the contract, terms, etc., you are stuck with the property. If you had had inspectors check it out beforehand (due diligence - see http://www.answers.com/topic/due-diligence?cat=biz-fin for the definition), you would have known the property wasn't buildable. (At least this is what the contract is stating.)

You MAY have an "out", but only by intervention of a third party. The property may be redeemed within 180 days (6 months). What this means is that if the owners, the heirs, executors, or administrators of the owners; any person having any interest (as in "money", not as in "I like it") in the property; any person having a lien interest (someone the owner owed money, who put a lien on it) in the property; or any person on behalf of those listed above, within 180 days of the acceptance of the bid wants the property for themselves, they can pay what you paid (plus 20% annually) and get it back. Also, from my understanding, if you improve the property in any way during that first 180 days, the only money required for them to get the property (and your improvements) back is the amount you paid at the auction (plus 20% annually). There are very few tax-sales, foreclosures, etc., that will NOT allow redemption. After all, they don't want to put people out of their homes if they don't have to.

Now that I think about it, this may be why some homes sit boarded up for 1/2-year or so (whatever period is required by the state) - "forever" by the neighborhood. Someone may have purchased it at auction, but not want to put any improvements on it until it is legally and 100% theirs. Money problems could then come up with the purchaser, and they can't afford to improve the property, so it appears "abandoned" to all but them (as long as they continue making any payments required - mortgage, taxes, insurance, etc.)

Anyway, from all that I've read and from my understanding of contacts and law, the property is yours (after 180 days from the acceptance of the bid). The thing is, now that you've found the land is not buildable, I believe the law states that YOU must inform potential buyers that the land is "unbuildable". (You should check with your lawyer/realtor what you must disclose.)

I hope you find a way to use or sell it! And I'm sorry I couldn't help.

Bill

(I know you said I could use your name on my site, but am unsure of which real-estate auction page you are referring. Also, if you don't mind, may I include the packet you sent me? If you wish, I can blank out identifying (ie: addresses and phone numbers) information. I would also include the message, above. Hopefully, this would be a warning to others about auctions, and help them see what they have to find out about properties before they buy...) -bs

From: Bill (OFP)
To: sean sander
Sent: Saturday, June 23, 2007 8:37 PM
Subject: Re: Real Estate auction sham w/IRS/Government

Sean,

As you stated, "“If legal misrepresentation is determined prior to the final closing on the property, the Government reserves the right to cancel the sale and refund any earnest/deposit money paid”. ", again, does NOT say that YOU can cancel, but that THEY can, and the misrepresentation of which they are speaking is most likely YOURS. If you did not misrepresent anything, then they have no reason to cancel/refund. And if you DID misrepresent, they COULD take legal action.

I doubt it would/could be "reasonably expected" that they (EG&G OR the government) would do "soil testing ([which] requires a backhoe and digging down 3-5 feet)" to see if the land was buildable. Now, if they would not/could not allow you onto the land to check this for yourself, that could be a problem. However, if the information was available somewhere (say the courthouse from prior owner's tests), then, again, I would guess you are SOL.

If "the property has paved street access" (a paved road leads to the property - my understanding), "the area is primarily countryside" (which it appears to be), there are "homes and small subdivisions" around it, and there are electric lines in the area from which electricity could be attained (NOTE: There's NOTHING about access to water, sewer, gas, or other utilities), then again, they said what they could say from a visual inspection, I would venture to say there's nothing deceptive about it.

If you were purchasing from a regular real-estate agent, the owner (say the property had been in the family for years, or lived out of state or country), would you have expected them to dig a hole 3-4' deep to find out whether the land was buildable? While a material fact, if it was unknown by either party, they disclosed all they knew about it. Again, though, if it's found in the county or state records, 1) YOU could have found it and 2) THEY could have found it, if they are required to search for those facts.

Or, turn it around. If you were selling the property, and the buyer was attempting to back out on the same points, what would YOU do? Again, would YOU, as owner, believe that you would be required to find out the buildability of the site if that were not a selling point?

It sounds like you know more about real estate law, or law in general, than I. But from all I've read and what I know, it doesn't seem to me that you have a case. I would say "Don't throw more money down the tubes, unless you can reasonably believe you can win."

Be sure to check with your own legal counsel (whether you, yourself, are one, or not) to be sure you understand this correctly. You own feelings about it may be tainted by ego. ("They GOT me!") when they didn't really.

Just a few points/questions from a (hopefully) friendly ... advisor(?) ;-)

Bill

From: Bill Sanders (OFP)
To: sean sander
Sent: Sunday, July 08, 2007 1:35 AM
Subject: Re: Real Estate auction sham w/IRS/Government

Sean,

I have included our correspondence on my site... Please see [this page], and the attached PDF and let me know if I missed anything to blank out. (I hope you don't take anything I said personally. My purpose there is to help other people see what needs to be done.)

Please, keep me informed of your ... fight ... to cancel the sale.

Bill