Real Deal: Foreclosure foul-ups

Caroline and Tony Ng thought they had a great deal. They found this house in foreclosure, made an offer, got an inspection, got financing and made the deal. They packed up all their belongings and got ready to move into their dream home.

Caroline Ng, Home Buyer
It was very exciting because you could see how everything was coming together.

But then everything fell apart. Their real estate agent told them a recent surprise ruling in Massachusetts land court brought their dream deal to a screeching halt.

George Lambert, Realtor
It was just snatched from them by this judge's decision.

Now the Ng's dream house is stuck in legal red tape. And they're stuck in an apartment full of packed-up belongings.

Caroline Ng, Home Buyer
It did hurt when we had nowhere to go.

Here's the real deal: That court ruling could affect every foreclosure sale in Massachusetts within the last three years. The judge found mortgage paperwork was often improperly filed. The result in all those cases the foreclosure process must now go back to the very beginning. It could take months! And that's putting real estate agents, banks, lawyers, and homebuyers in chaos.

Linda Kody, Realtor
Because nobody really understood completely what it meant and what was going to happen, everyone just said everything stops.

Like the Ngs homebuyers are the first casualty. The houses they thought they purchased are yanked away from them. And since the whole foreclosure has to start over it's open to new bidders! And in a new sale, buyers like the Ngs may lose. And each time that happens original buyers also lose all the money they paid for inspections and appraisals. And all the while, all the houses just sit empty.

Hank Phillippi Ryan, 7NEWS
How many properties and people could be harmed by this?

Tom Bennett, Real Estate Attorney
Thousands, I mean, literally, but I have no idea exactly how many.

Hank Phillippi Ryan, 7NEWS
Does anyone know?

Tom Bennett, Real Estate Attorney
I don't think so.

Though the buy-a-foreclosed home market was once so hot there were bus tours of eager buyers, at this agency at least a dozen foreclosed homes sit in limbo while banks scramble to make sure the mortgage and title paperwork will pass the courts muster.

Hank Phillippi Ryan, 7NEWS
What a mess

Tom Bennett, Real Estate Attorney
It is. It is a mess.

But it's not only home buyers who are hurting, Jeb bought a foreclosed home on the Cape a year ago. He's now getting married and has to move, but because of the court's ruling---he can't sell his house and no one knows how long he'll have to wait.

Jeb Cooperider, Home Owner
I lost out big, big time, and I really can't do anything about it.

Hank Phillippi Ryan, 7NEWS
So now what? Experts say if you're looking to buy a foreclosed property make sure all the paperwork is in order according to the court's new ruling. Bottom line, check with your real estate agent and your lawyer before you sign anything.

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