The $458,100 foreclosure sale of a gulf-front condo in North Redington Beach should be set aside and the money returned to the bidders because of "unauthorized conduct, misconduct and fraudulent acts" leading up to the auction, a new court filing says.
In an emergency motion filed this week in Pinellas County Circuit Court, an attorney for John and Christine Houdes' Orlando Realty Group LLC asks a judge to vacate the June 8 sale because of a "well-executed and sophisticated scheme" to deceive bidders in order to obtain a "windfall" profit.
In the meantime, an experienced Tampa investor who bid at the same auction said he — like the Houdes — also thought the foreclosure was on a first mortgage. Had that been the case, the winning bidder would have gotten the condo free and clear.
"Holy, cow!" was Rob Isbell's reaction when he learned from a Tampa Bay Times story that the auction was only on a second mortgage and that the condo still faced a bank foreclosure.
"It took somebody being very creative" to create the impression that a first mortgage was being foreclosed, said Isbell, who has bought dozens of homes at bay area foreclosure sales.
Isbell said he also found it curious that the condo was recently on the market for $675,000 with no mention of a pending foreclosure. The listing was withdrawn June 7 — one day before the auction.
As the Times reported, Outbidya, Inc., a company started by Clearwater lawyer Roy C. Skelton, bought the unit in the Ram-Sea Condominiums in 2015 after the condo association foreclosed on owner David Kapes.
In March, 2016, Wells Fargo started foreclosure proceedings against Kapes and Outbyida. Less than a month later, Skelton created Deutsche Residential Mortgage, and Deutsche issued a mortgage to Outbidya and Parkes Investments LLC, which had a 50 percent interest in the condo.
This spring, Deutsche — no relation to the giant German bank — obtained a final judgment against Outbidya and Parkes. Deutsche said they owed a total of $377,000, not only on the condo but also on other properties owned by Skelton's Obidya.
Outbidya and Parkes, both of which had Skelton as their attorney, did not contest the amount, allowing Deutsche to move quickly toward the auction.
"The sudden and convenient creation of the notes and Deutsche (Residential) Mortgage is itself suspicious," the emergency motion says. "But, considering the extensive insider relationships among the conspirators and their principals… fraudulent intentions of the conspirators is undeniable."
By beating the bank to foreclosure, Skelton's Deutsche Residential received most of the proceeds of the sale. Had the bank foreclosed first, Skelton's companies would have gotten nothing.
As it stands, the Houdes and their Orlando Realty Group LLC are out $458,000 and could also lose the condo in the bank foreclosure.
Experts strongly advise anyone interested in a foreclosed property to get a title search before bidding. But Isbell, the investor, said he did his own informal title search and the second mortgage was not readily apparent.
A search of Pinellas official records showed that the only mortgage ever issued to Kapes, the condo's previous owner, was in 1997. The second mortgage — issued by Deutsche Residential last year — did not have Kapes' name on it .
First and second mortgages on a property typically have the same borrower's name.
Isbell said that when he saw only one mortgage with Kapes' name, he presumed the auction was on Wells Fargo's foreclosure of the 1997 first mortgage.
In an email response to a request for comment Thursday, Skelton did not address most of the allegations in the emergency motion. He did say, though, that Deutsche's foreclosure action, final judgment and notice of sale were publicly recorded "for all to see."
Skelton also said that the Houdes, through their Orlando Realty Group and another company, have bought dozens of other properties at foreclosure auctions.
"Kind of changes the complexion of your article doesn't it?" he said.
If the Houdes can't get the sale vacated, Isbell said their best recourse might be to negotiate with the lender about paying off the $162,000 first mortgage plus any interest and fees owed. That would give them outright ownership of the condo, valued for tax purposes at $467,542.
Including the $458,100 the Houdes bid at auction,'' they (would have) overpaid for the property but it's not like they'd lose everything," Isbell said.
Contact Susan TaylorMartin at email@example.com or (727) 893-8642. Follow @susansakate