Squatter's Rights and Wrongs: Some Making Money Off Foreclosed Homes

This is a foreclosure story that will make you hit the roof. It all started when California's real estate bubble popped. Then foreclosures spiked, and then came the squatters. Squatters are taking advantage of all those empty, unguarded homes owned by the banks and not being maintained. Turns out at least one trespasser may have done a lot more than just make himself at home.

TRANSCRIPT:

Judy Muller/Reporter: About a year ago, Lynn Read was in the market for a small home in a good neighborhood. Her real estate agent showed her this one .So she made an offer, but the deal was somewhat complicated by the fact that this was a short sale. That's when a financially troubled seller works with the bank to sell the property for less than the seller owes.

Sandi Pfister/Realtor: Unfortunately, because the lenders are taking so long in their process to get approval for a short sale or for a foreclosure, we are seeing properties stay vacant without anybody taking charge of the property for sometimes more than a year.

Muller: This place was only vacant a few months before someone moved in.

Read: We hadn't closed the property, a squad showed up, and there were a number of men who had buckets of paint. And one of the neighbors noticed this and the agents noticed this and they tried to come over and stop this from happening. But before they could do anything, this squatter had moved in and put the utilities in his name.

Muller: Lynn Read says this is the squatter videotaped by an investigator she hired. His name is Terry Savoy, and he has had run-ins with the law before. Even so, the police said there is nothing they could do.

Read: He doesn't have to show any proof that he actually owns a property or is legally renting the property or anything like this, and that's all it takes. He establishes residency. A piece of mail comes to the property and the sheriffs will not arrest him because they think it's a civil matter at that point.

Muller: The police are often reluctant to get into the middle of these disputes because the squatter may produce official-looking documents, and the police are in no position to judge whether they are legitimate. So the legal owner must go to court to get an eviction notice. And that process can take months. Making matters worse, the legal owner in this case was in no position to go to court.

Pfister: The problem is this is a short sale. The owner has no money to be represented by an attorney to get this guy out. So that makes it much more difficult.

Muller: So this guy was smart enough to target that kind of a property?

Pfister: Yes, we believe so, yes.

Muller: But Savoy seemed to be interested in more than just securing a place to live. He took out this ad on Craigslist, advertising the home for rent.

Muller: We found this ad in Craigslist.

Read: Oh, you're kidding!

Muller: For this place! So he's being trying to advertise this.

Read: Oh Wow! Look, there we are even with the same furniture.

Muller: It's exactly. Here is the house. And he's saying "beautiful single family home! Full of personality, in a quiet residential neighborhood," and it goes on. And then of course, here we are. This is the room we are looking at.

And he's tidied it up. It looks fabulous. Savoy's ad attracted multiple renters, and several of them put down cash deposits ranging from $1,200 to $3,000 and signed official-looking leases. Renters say he kept putting off the promised move-in date by claiming repairs were needed. But his luck ran out one fateful day in December, when several of those would-be renters happened to show up at exactly the same moment.

Jose Castillo first met Ben Daley when they both came to question Savoy about why the so-called "plumbing repairs" were taking so long.

Castillo: I pulled in the driveway looking around for the water main damage. Ben sees me. He pulls up behind me and asked me what I'm here for. And I explained that my stepson's gonna rent this property today.

Daley: Their step-or their son had paid a first and last on this house already. And from that point, I knew, you know.

Muller: It was a scam?

Daley: Yeah. And he pulled up and saw both of us and didn't leave. And my buddy parked his truck behind him blocking him in.

Castillo: So Ben proceeded to call the police. And then I proceeded to call the police. And then the police showed up. To discover at the end of all this that he's not the owner of this property. He's- that he broke in. He's posing as the owner and stealing people's deposits.

Muller: The police arrested Savoy because there appears to be evidence these people had been criminally defrauded. But the victims have yet to recover their money. Castillo's step-son, Daniel, put down $3,000 in cash, with hopes of living in the house with his wife and three children.

Jolene Castillo: We were under the assumption that we were moving in on the 15th. We signed the lease. He gave us keys which we later found that didn't even work.

Muller: The Castillos and Ben Daley have both filed suit against Savoy in small claims court. They are still stunned at the cool way they say Savoy played them. When we reached Savoy he had no comment for this story.

Daley: Yeah, he had an office over on Hawthorne Boulevard here in Lawndale. I went there. It was, you know, an actual office. He had pictures of his family and what not. And he's sitting there in a suit.

Daniel Castillo: Who would do this to people?

Jolene: To families. He even met our kids. He knew we had three kids.

Daniel: And it's like, who, who would do that? Who would do that?

Muller: And these folks were not the only victims in this case. Judge James also answered one of Savoy's rental ads on Craigslist; this one for the garage apartment behind the house.

James: And he moved me in. He took my money. He actually said, "Give me $3,000 up front. You can stay here. That should cover your rent for three months."

Muller: Like the others, James was impressed with the professional way Savoy seemed to conduct his business, from the lease agreement to the credit check.

James: He actually ran my credit.

Muller: No!

James: Yeah. He actually ran my credit to make it seem like, because you know, you can check and see if someone actually checked your credit.

Muller: The scamster doesn't want to be scammed, you know what I mean?

James: That's what it was. The scammer doesn't want to be scammed.

Muller: As for Lynn Read, she finally closed on the house on December 31st. But she hopes her story will serve as a cautionary tale.

Read: You never know what's going to happen. And the laws are set up that it doesn't make it easy for people to buy a short sale, and it makes it very easy for people to move in and to scam other people.

Muller: And her own ordeal is not really over. She still must get rid of Savoy's belongings: a closet packed with clothes, his furniture, and more.

Muller: What are you going to do with all of this? Eventually what happens to all this stuff?

Pfister: State law requires that you not take; you not get rid of this until you notify the owner, the tenant, whether they were legally here or not, of when they can come and pick it up.

Muller: He's still got rights, in other words?

Pfister: That's right.

Muller: Under California state law, so-called "squatter's rights" are protected under certain circumstances. If a squatter moves into an abandoned building, pays property taxes, and if the owner does not object, he could end up owning that property. But now new breeds of squatters, con artists, are taking advantage of that gray legal area. So widespread is the practice that there are now websites devoted to instructing people how to get away with squatting in abandoned properties. One tip: If you can make a rundown exterior look great, your neighbors might actually appreciate you.

Pfister: The laws of California regarding this kind of situation have not kept up with the situation. The laws are targeted to protect tenants against abusive landlords. And that's the law under which a squatter is able to stay in the property. So we don't have a law yet that helps a landlord. We have laws that help illegal tenants.

Muller: Of course, owners can always go to court and win an eviction. It can take a long time and it can cost thousands of dollars, but, as we saw when he rode along with sheriff's deputies one day, evictions are swift and certain.

After someone is evicted and the locks are changed, the owner still has to clean up the mess they leave behind. So what can owners, buyers, and renters do to protect themselves from squatters in the first place?

Pfister: Well the very first thing is if you are an owner, or a real estate agent representing an owner who moves out of a property, you have got to be absolutely ultimately confident on a daily basis that the property is secure. So either you have somebody check on the property or you check on the property.

Daley: The only thing I could have done is had someone that had access to one of those realtor websites. And you could find out that it was bank-owned, you know.

Muller: Or you could just listen to your mother.

James: She was just, like, "This guy, it seems something is wrong with this guy. He's just very shaky and he's very nervous when he talks to us."

Muller: So your mother didn't trust him?

James: From day one. When we came to see the property she actually told me, "I don't think you should rent this property".

Muller: At last report, the victims say Terry Savoy was still trying to convince them that he would refund their money.