Brian and Holly Barnhart dreamed of turning an eyesore into a home for their growing family.
Their dream was destroyed by a zombie title - not theirs, but someone else's. As their experience shows, buying a foreclosure can be risky.
It all started in November 2010, when the Barnharts forked over $153,000 in cash savings for a Spanish-revival house in Cape Coral, Florida - a Wells Fargo foreclosure that was in a sorry state. Rats poked around the patio. The water in the swimming pool was green. The yard was wild with weeds.
The couple plowed an additional $100,000 - the balance of their savings - into a gut renovation. Here they planned to raise their two small children and the baby that was on the way.
But in January 2011, not long after unpacking their boxes, the Barnharts found out from the Lee County property appraiser that when they purchased the house, the bank didn't actually own it. So now, neither did they. The title insurance they were required to have when they closed on the house afforded no protection.
"It's an absolute and utter nightmare," says Brian Barnhart, a real estate agent. "It has pushed my wife to the breaking point."
It turned out that in 2007, Wells Fargo, which is the trustee of the previous owner's mortgage, and American Home Mortgage Servicing, which is the mortgage servicer, foreclosed on Richard Riccobono. Trustees act on behalf of the mortgage bond investors who own the loan, and foreclosure suits are usually brought in their name. Mortgage servicers actually manage the loans.
On December 30, 2008, Wells Fargo took ownership of the house. The following July, it had that move set aside and transferred the title back to Riccobono.
Riccobono says that he didn't know the house was back in his name and that he is prevented from transferring the title to the Barnharts because of various liens on the property. "It's the craziest thing I've ever seen," says Riccobono, now living in Fort Myers.
In 2011, the Barnharts sued American Home Mortgage Servicing, now called Homeward Residential, and Wells Fargo in a bid to get the banks to scrub the title. Under a settlement reached in March, the banks agreed to pay the couple's lawyer's fees and clear the title, Barnhart says.
But the title change still hasn't happened.
Wells Fargo said that as trustee, it had nothing to do with management of the loan and referred questions to Homeward Residential.
Homeward Residential said it was still working to resolve a lien and a small claim judgment against the former owner in order to clean the title. "We continue to be in regular communication with our customer regarding this situation," it said.
Barnhart says the bank had assured him it would straighten out the mess by October. That's when the family of five moved into a new house with hopes of selling their former dream home, a place Barnhart's wife won't set foot in.
But they still can't put it on the market because, as Barnhart says, "it's still not ours."
(Editing by John Blanton)