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The Hundred-Dollar House

Written by mayborn

By Ellen Raff


In January of 2001, roughly six months after Ari Sullivan graduated from New York University, her mother died of pancreatic cancer.  Ari lived in New York City, working for a small marketing firm.  Nine months later, during her walk to work, she noticed one of the twin towers burning.  By the time she walked another block, a plane had crashed into the second tower. 

She went to work, dealing with the tragedy as best she could   While the fallout from the collapse of the Twin Towers continues to play out beyond the original smoke and debris, it seems strange to look back and contemplate a peculiar phenomenon:  New York real estate soared to new heights after the tragedy.

Ari inherited a condominium near Washington Square that her mother had bought as an alternative to dorm expenses while both Ari and her sister attended different colleges in the city.  The investment proved prudent. 

Roughly two years after 9-11, Ari and her then-boyfriend left New York for a more rural and chillier existence on the easternmost coast of Maine.  Ari sold her inherited property at the height of the real estate bubble in New York City.  A realtor probably wouldn’t have mentioned, unless asked, that there was no elevator. And she would probably describe the condo as small but irresistibly charming, with a well-placed skylight on the top floor of the four-story building offering a warm and cheery ambiance.  In 1998, her mother paid $68,000 for the condo.  Ari sold the property in the range of $300,000.

In Maine, Ari and her boyfriend lived frugally, alternately renting from relatives or over the winter from homeowners taking a break from the cold.  After a few years of underemployment and waning passion in the relationship, Ari set out on a mission of self-discovery that would, she hoped, involve a warmer climate. 


Fast forward to a wedding in Tallahassee, Florida in 2008.  The bride wore a muted ivory dress that didn’t quite hide her bare feet; the groom wore flip flops.  Her father, (to whom I am married) gave her away in the traditional manner.  He was delighted to see her happy. And he took comfort in knowing that, despite the nation’s financial chaos that year, most of his daughter’s nest egg was intact and securely invested.

In the months that followed Ari’s wedding, the recession deepened, big banks were bailed out, and unemployment worsened.  Under a mortgage relief plan passed by President Obama, many distressed borrowers should have been able to refinance and take advantage of lower interest rates.  Some borrowers in default or at risk of default were also eligible to lower their payments through various loan modification plans.

The goal of the Obama plan was to keep people in their homes.  In theory, a bank would be better off accepting reduced payments on a loan because foreclosure would end mortgage payments on the property. Furthermore, the bank would in all probability have to sell the property for a lower price, and any new mortgage would carry a lower interest rate. 

By mid 2009, although some people were able to take advantage of the plan, stories surfaced around the country that thousands were unable to get mortgage relief in a timely manner.  Loan officers didn’t return calls; people waited on hold for hours; documents were faxed and re-faxed.  Months passed without action for many borrowers.  The banks, it seemed, were dragging their feet.

At the same time, a related industry had become more efficient than ever.  With so many foreclosures to process, some law firms had amassed an army of paralegals and new legions of lawyers to push foreclosure documents through the courts as fast as possible.  Former employees described competitions to reduce the number of days – from about 135 to 75 days or less – to complete the foreclosure process.  Law firms specializing in this business earned the nickname “foreclosure mills.”

Caught between these two industries, many borrowers who believed they were in the process of working out a loan with their lender were surprised when they learned their foreclosure had already been processed, and their house sold at auction without their knowledge.


Ari and her husband, Ryan, have mastered the art of living creatively on few dollars. And that’s fortunate because employment options have been sparse. A year after their wedding, they were parents to an eight-month-old baby.  People had begun to call the national recession “great.”  Interest rates stayed stubbornly low. The stock market languished, and real estate remained distressed. With no secure investment options for her nest egg, and a rambunctious baby boy about to grow out of his crib, Ari decided it was time to buy a house.

Neither she nor Ryan could qualify for a mortgage. They decided to purchase a house with cash.  The budget would be tight.  Even if they found a house in their price range, they were worried about the prospect of making repairs and other unforeseen expenses that accompany home ownership. 

A friend who was new to real estate showed them several properties in the range of $140,000, but the couple was not impressed.  The homes seemed small for their needs.   Most of them were aging and needed extensive repairs.  Eventually, their realtor friend showed them a three-bedroom, two-bath house listed for short sale (meaning the seller was willing to take less than what was owed on the mortgage.)  The asking price was $129,000.

“It was the biggest house we had seen for the price,” Ari recalls. “It had clearly taken a beating.  The rugs were disgusting– the kitchen very out of date—yet it had promise.  The pool was black. The yard was unkempt. There was trash throughout the house. Despite all that, I could see it was a great house, it was well proportioned…the best deal we had seen, at the lowest price.” 

Ari, who had lived in small apartments most of her life, fell in love with the property.  The house and lot were large in her estimation:  1,372 square feet on two-tenths of an acre. “I felt the yard in the back was huge and the yard in the front was huge,” she says.  “I would look at everyone else’s property, and compare and I thought, ‘Our yard is bigger or as big.’ I already thought of it as my yard.  Now, I know some of my estimates were totally off base.  But then, it seemed like I could build another house (in the back yard), and plant a garden, and still play soccer.”

Anyone who has ever purchased a house knows the first-time experience is a lot like a love affair. A buyer’s heart flutters during the first tentative negotiations, when an offer is written in ink, and the contract is signed. A first-time home buyer’s ego and identity become wrapped up with the property.

Ari offered $120,000 for the house.  She was prepared to deal with a counter offer. But the seller promptly accepted the contract, and paperwork was returned with the seller’s initials on every line item. 

Then the process stalled. In a short sale, the owner is a co-seller with the mortgage bank.  Ari’s offer had been submitted and accepted around Thanksgiving, but no word came from the mortgage bank, Aurora Loan Services, LLC.  Weeks passed. Finally, in January 2010, Ari learned from her realtor that the mortgage company planned to sell her dream home through a public auction.

For a first time buyer, the idea of buying a house at a public auction would be as daunting as a safari in unchartered territory. Ari researched auction rules in Florida.  She learned that the clerk of court would oversee the sale and that a bidder must provide a five percent deposit and pay the remaining balance by the end of the day.  She heard that sometimes a bank’s representative is the only bidder at an auction.  When that happens, it’s not unusual for the bank to obtain title to the house with a bid of just one hundred dollars.

Before the auction, Ari spent nearly $2,000 for customary inspections of the house.  She learned the roof needed work.  Armed with that information, she decided she wouldn’t bid higher than $105,000.  But she left room to maneuver. On the day of the auction, she sold enough investments to have $111,000 on hand to make the highest bid.

On February 12, 2010, Ari arrived at the courthouse with her realtor.  “You walk in through a metal detector,” she recalled. “There on the ground level is a glassed-in room with receptionist stations, like a bank, where people pay traffic fines and stuff.  Right next to the line of people waiting, there were two people with clip boards.”  At first Ari thought one of the men represented the bank.  “When the two of them saw me and my friend together, they asked who was bidding.  They told me I had to pay $70 just to bid.”  Her companion watched as Ari paid the fee.  “Then they realized it was just me bidding—that’s when the mask kind of came off.” 

That is also when Ari learned there was no representative from the bank present; that the second man holding a clipboard was an assistant to the clerk.  “‘Well, I guess we’ll proceed,’” he said. “They asked me for an opening bid.  I opened it at one hundred dollars.”  Ari won the bid, and the clerk issued a certificate of sale. Jubilant, Ari called her father and told him what happened. She could get the title in ten business days, if nobody objected to the sale. “Get ready,” her father warned. 


The Law Offices of David J. Stern, P.A. processed 70,382 foreclosures in 2009.  They were the primary legal representatives for Freddie Mac and Fannie Mae in Florida.  In handling foreclosures, law firms earn a flat fee rather than an hourly charge, which is why the firms have a strong incentive to expend as little time as possible on any case.  The flat fee also means firms like Stern’s work hard to control staffing and administrative costs, which eat into profits.

Law firms were not the only ones overwhelmed with the number of foreclosures in 2009 and 2010.  Courts did not have the manpower to process all the cases. To reduce the backlog, some cases were processed in as little as twenty seconds.  This practice earned the nickname “rocket docket.”

With employees under pressure to process the foreclosure cases quickly, it’s easy to imagine that some documents might contain errors overlooked by the court.  It’s also easy to imagine that some of the documents might contain inaccuracies because expedience had become a higher priority than accuracy. 

In fall of 2009, Ariane Ice, an attorney representing a homeowner in a foreclosure case, recognized that a notary’s stamp on some of the relevant court documents could not have been valid if the document dates were valid.  The only explanation was that the documents were back dated.  She alerted Andy Kroll, a reporter for Mother Jones, who began investigating some of the foreclosure mills.  Kroll reviewed court documents and sat through multiple foreclosure hearings, and came away convinced that foreclosure mills were operating with reckless disregard for the legal rights of homeowners. Courts tended to overlook some errors that had become routine, such as missed court dates or improper documentation. That no representative of the mortgage bank showed up to bid against Ari suddenly seemed  “normal” given the questionable foreclosure practices going on in the industry at the time.


As she counted off the required ten business days after her successful bid, Ari wondered why her initial contract to purchase the house had been rejected, and why no one had appeared on the day of the auction to bid against her.  From her perspective, it looked as though management of the property was chaotic, and she thought it might be reasonable to expect that whoever forgot to show up at the auction might also be too busy to file an objection to her bid and purchase. 

So it was shattering when she opened her mailbox one day and read a letter from the Law Offices of David J. Stern informing her that the firm had filed an objection and motion to vacate (or nullify) the sale. Ari consulted a lawyer, Sten Sliger, who explained that although she had legally purchased the house at auction, the existing precedent appeared to favor the mortgage bank. “He told me that in order to object to my ownership, the bank’s attorney would have to admit they were idiots,” Ari said.  Strangely, though, it would probably work in their favor.

Although she isn’t a lawyer, Ari studied the precedents established in similar foreclosure cases that her lawyer gave her. None of the cases were exactly like hers. But in general the courts had ruled in favor of banks when they demonstrated they had made a mistake. Sliger advised Ari that she probably would not be able to keep the house.  She thanked him for his work, paid his fee and began preparing for her court hearing on May 10 at 3 p.m. to decide the fate of the house. Ari and Ryan began feeling overwhelmed by what they might be up against in fighting the bank and its lawyers.  Ryan especially worried they might blow thousands of dollars on attorney’s fees. 

Ari thought Ryan might be right. But her father encouraged Ari to set aside her emotions and think of the house as a pure investment.  Although she had learned to roll with the ups and downs of the stock market (where thousands of dollars might disappear one quarter, and re-appear the next) it was much harder to think of writing checks to lawyers as an investment.

With trepidation, she approached the law office of King and Wood. “The case had a very interesting fact pattern,” Ed Wood told me. “I had not seen a case exactly like this.  I was a little doubtful.  Most of the precedent wasn’t favorable for her position.”  Ari hired Wood to try to settle with the mortgage bank before the hearing.

The house had been vacated by the previous tenants. But Ari was not allowed to enter it (despite her winning bid) until her dispute with the bank was settled.  She worried about repairs that might be needed if the house sat vacant too long.  She drew up a list of work she thought would be required to make the house livable. She also reluctantly agreed, on her attorney’s advice, to offer the bank $40,000 to settle the dispute over the house she felt she legally owned.

Weeks passed with no response from the Law Offices of David Stern.  At this point, the law firm had become the face of the opposition.  Despite her father’s advice to keep cool, Ari had a difficult time keeping her emotions in check. After months of haggling and hoping for the best, Ari began to worry that she might not get her dream house back at any price. 

An ultra-successful attorney, David J. Stern owned a 16,000 square foot mansion on the Atlantic Intracoastal Waterway, and a luxury condominium in the Ritz complex in Hillsboro.  He purchased a vacation home near Vail, Colorado.  He was on record as owning four Porsches, a Rolls Royce, a Cadillac, and a Bugatti.  He called his 130-foot yacht Misunderstood.

In January of that year, a spin-off of Stern’s foreclosure business, DJSP Enterprises, had gone public on the NASDAQ.  DJSP provided back-office support to Stern’s law office operations.  The spin-off had approximately 1,000 employees, with offices in Plantation, Florida, Louisville, Kentucky and San Juan, Puerto Rico—and yet another located off-shore in Manila, the Philippines. 

In March of that same year, while Ari was working on her response to the motion objecting to her auction purchase, Stern travelled to Southern California to address a conference hosted by a large investment banking firm, Roth Capital Partners.  In his speech, Stern told investors why they should invest in DJSP Enterprises.  On MotherJones.com, Andy Kroll writes:

“Stern explained why the time was right to invest.  Historical data, he said, showed that people will continue losing their homes in large numbers through 2012, ensuring plenty of business.”

Kroll reports that Stern told the group, “I hate to hear people are losing homes, and credit isn’t available…But if you are in our niche, it’s what we want to do, and it’s what we want to see.”  At the conference, Stern also distributed T-shirts depicting a caricature of himself in a Superman costume, with the letters “DJSP” emblazoned across his chest.


As the May 10 hearing date drew near, Ari and Ryan became resigned to the prospect of losing their claim on the house.  They decided against paying any more legal fees. Ari even planned to represent herself in the court room.

A few days before the hearing, Ari visited a petting zoo with her 15-month-old son.  In the middle of a rustic scene populated with sheep and donkeys, her cell phone rang.  A woman identified herself as Ms. De Leon, an attorney with David. J. Stern’s law firm.  De Leon asked Ari if she had ever made another offer on the house.  When Ari referenced the $40,000 offer that had been sent by her lawyer, De Leon said she had no knowledge of it.  She asked Ari if she wanted to make another offer.  Ari said, yes, she was willing to offer $80,000.  De Leon told her to send the offer over e-mail.  Once again hopeful that the matter might be resolved within hours, Ari sent the offer via e-mail when she got home. 

“And that was the third offer we got no response to,” Ari told me.

The hearing took place at 3:00 p.m. as scheduled.  De Leon arrived to represent the interests of Stern’s client, Aurora Loan Services. For Ari, the hearing did not begin auspiciously.  “When I showed up by myself and the judge called me up, she asked me if I was going to be represented by lawyers and I said no,” Ari said. The judge, who had seen an attorney’s name associated with the case, actually telephoned the attorney (Ed Wood) to ask him why he wasn’t present.  The conversation took place on a speaker in front of everyone in the room. “He tried to come up with an answer that wouldn’t embarrass me,” Ari said.  “Something like, ‘The client decided it wasn’t in her best interest.’”

The presiding Circuit Judge, Jackie L. Fulford, described the hearing in her seven-page court order issued in June.

Excerpt:  … the Law Office called one witness, presented the Court with one document, and made argument.  The Law Office did not present any testimony from a representative of the Plaintiff (Aurora Loan Services).  Ms. Antwanese Edwards, an employee of the Law Office, testified that it was her responsibility to gather bidding instructions from the client...  However, it was later determined that the sale (date) did not appear on the report provided to the representative…According to Ms. Edwards, the Law Offices of David J. Stern, P.A. did not, and does not, have a system of checks and balances to make certain that a mistake of this nature did not occur.

The judge went on to describe her own experience with the Law Offices of David J. Stern, including numerous telephone hearings for which no attorney contacted the court, numerous excuses referring to problems with the tickler system or problems in the mail room; that the law firm failed to obtain local counsel for hearings and caused the Court to spend “a great amount of time on the phone trying to reach a person who had knowledge of the case(s).”

Although the precedent stated that a low price would not be enough to negate the sale, the law firm made an issue of the hundred dollar bid, and argued that the price was “grossly inadequate.” 

But because the law firm had not gone to the trouble of providing an appraisal to the court, the judge was not impressed with the argument. In addition, she pointed out that she was aware the Plaintiff (Aurora Loan Services) routinely bid $100 for the purchase of foreclosed property.  She also mentioned the law firm’s failure to negotiate in any way with Ari after the sale.

Excerpt:  (Ari) testified at the hearing that she had attempted to negotiate a purchase of the subject property with the Law Firm prior to entry of summary judgment, after entry of summary judgment, prior to the foreclosure sale, and even after the foreclosure sale when Plaintiff filed its Motion to Vacate Sale.  According to the testimony of (Ari), she experienced similar difficulties in dealing with the Law Firm… The Law Firm did not present any testimony or other evidence to show that any of the offers were communicated to its client (Aurora Loan Services).


 “In light of all the circumstances,” the judge concluded, “to declare this an ‘accident’ would be a miscarriage of justice.”  She denied the law firm’s motion, and ordered the clerk of court to issue the certificate of title in accordance with the auction. 

But Ari’s nightmare was not yet over. She had to wait three weeks after the hearing to get the title.  Nevertheless, she lost no time ordering repairs to the roof of the house so it would be ready for move-in by July.  The timing was propitious because the lease on the garage apartment she shared with Ryan was expiring in June. Finally, she was spending money on the house instead of lawyers.

Friends congratulated her, and peppered her with questions about how in the world she managed to get a hundred-dollar house.  She tried to explain that if her top price had been a hundred dollars, she would never have offered $120,000 in the first place. But her friends tended to gloss over that part of the story and concentrate on her getting a house for “only a hundred dollars.”

As far as Ari is concerned, the strangest reaction of all came from the realtor-friend who had shown her the house back in November.  He typed a letter and hand-delivered it to Ari at her apartment.  Although he acknowledged that Ari was under no legal obligation to him, he believed she should pay him $22,000 commission on the house (a number which is roughly sixteen percent of the county appraiser’s valuation).  Ari responded with a short answer: his amount was unreasonable.

Ari soon learned her trials with the Law Offices of David J. Stern were not over yet.  The plaintiff (Aurora Loan Services) had the option to appeal the case within 30 days of the decision, and they did. Ari went back to her attorney, Ed Wood, and asked him to help her with the appeal.  Because the judge had ruled in her favor, Wood told Ari he thought the momentum was on her side.  “The firm had created a certain amount of ill-will with the courts,” he told me. Wood, who also represents lenders (mortgage banks) in foreclosures, described the judge’s action as “basically throwing the book at the lender.” He said the judge wanted to serve notice to the mortgage bank that they couldn’t always depend on the excuse that their lawyers “made a mistake.”  In fact, they would be held responsible.

Wood warned Ari that the appeals court might take as long as six months to make a decision.  In July, she and Ryan moved into the house with their son, but they didn’t spend any more money on repairs or improvements beyond fixing the roof.

At the time of Ari’s hearing in May 2010, the stock price of DJSP had taken a hit after Stern warned investors of lower earnings due to a slowdown in foreclosure cases.  The Treasury Department had renewed its homeowner-relief efforts, with stepped-up demands that banks make a serious effort to negotiate with their borrowers.  In July, angry investors brought a securities-fraud class-action suit against Stern and DJSP.

In August of 2010, Mother Jones’s Andy Kroll published his exposé of alleged fraudulent practices by the Law Offices of David J. Stern.  He had discovered numerous fraudulently dated documents, documents signed without proper review of the legal details, and incidents of foreclosure pushed through without a correct determination of which lender held title to the house (a crucial part of any foreclosure). Kroll also reported that there were hundreds of cases in which borrowers were foreclosed upon and evicted from their homes even though they had not missed a payment or tried to bring their payments up to date once the foreclosure proceedings began.

Shortly after Kroll’s piece ran, Florida’s Attorney General, Bill McCollum, opened investigations on Stern’s law firm and several other foreclosure mills. By September, 2010, Gretchen Morgenson and Geraldine Fabrikant of the New York Times had also looked into foreclosure mills and published a piece describing multiple cases of fraud committed by foreclosure mills in Florida.  In the piece, the writers highlighted a number of the personal and professional excesses of David J. Stern.

On November 4, 2010, Tom Royce reported on Realestatebloggers.com:  “The Law Offices of David J. Stern was terminated (as counsel) by Freddie Mac and Fannie Mae on Tuesday.  The mortgage giants had concerns over how the firm was conducting some of their practices.”  The loss of Freddie and Fannie was a mortal blow to DJSP enterprises.  David J. Stern stepped aside as CEO of his spin-off, and DJSP was forced to lay off hundreds of employees.


During the fall of 2010 and the winter of 2011, Ari’s legal representative kept her apprised of requests from the Appeals Court.  Stern’s office missed a deadline to file an amended appeal required by the court.  Finally, in April of 2011, Ari learned from her lawyer that the court had dismissed the appeal, on a technicality. The long ordeal was over.  The house was finally hers.

In the end, Ari spent nearly $16,000 on attorney’s fees.  That’s a savings of $104,000 over her first offer of $120,000 for the house.  It’s fair to say that neither the mortgage bank (Aurora) nor the prior owner of the house were well-served in the transaction. 

I asked Ari if she had known during her ordeal that she had been up against a law firm that was known in Florida as a foreclosure mill.“No, I had no idea,” she said.  “I didn’t know anything about the law firm at all.  One of the first things I did was to Google Aurora Loan Services, and that’s when I read all these testimonies on-line.  Not only had they ignored my offers, but there was all this testimony how they had screwed what seemed like half the people in the country.  At the time I felt they were screwing me too, and I was really pissed off.”

One strategy of the firms in the foreclosure industry was intimidation. They knew borrowers were afraid of fighting their lenders because they didn’t have the deep pockets of the lenders.  That fear almost worked in Ari’s case.  Luckily, by the time her case was heard before Judge Fulford, the courts had become wise to some of the unethical practices of foreclosure mills.

In March of 2011, David Stern announced that his law firm would no longer process foreclosures.  As a result of the ongoing criminal investigation of his practice by the Attorney General’s office and a reprimand from the Florida Bar Association, Stern’s once-mammoth firm is now out of the foreclosure business.  Stern has put many of his personal assets - homes, cars and yacht - up for sale.  Stern’s firm has filed separate suits against a long list of its own former clients, including Aurora Loan Services, for breach of contract. 

Mortgage lenders who failed to implement workout relief in a timely manner are now facing fines from the federal government, and their stock prices are suffering.  Homeowners facing foreclosure, on the other hand, now have a better chance of defending their right to stay in their homes - if only because the decline of the “rocket docket” gives them more time to work out an agreement.

If someone has a case like Ari’s, there is no way for a lawyer to advise his or her client that they might have a good shot at keeping their house.  Attorneys today will still be looking at the same precedent Ari and her lawyers reviewed in 2010.  Because there was no ruling by the appeals court, there is no searchable record of Ari’s triumph in the precedent.

Ed Wood explained that when a case is dropped due to technicalities, it is a decision made by a clerk, not a judge.  It has nothing to do with the merits of the case.  But that doesn’t mean it wasn’t a strategic move by Stern’s law firm.  They know as well as anyone that if they keep a case out of the appeals court, they will avoid having a potential loss show up in future precedent searches. 

“This case was one of probably more than we know,” Wood said.

Today, Ari and Ryan are both employed at part-time jobs.  Like the cavalier joke left over from George W. Bush’s campaign against Al Gore – “There are plenty of jobs – I know a guy who has three of them,” – Ari and Ryan have a total of three jobs between them, augmented by occasional musical gigs.  For many in their generation, under-employment is not the new normal; it is the only normal they know.  They don’t have medical insurance, but among the legions caught in the fallout of our nation’s sub-prime mortgage debacle, they know they are lucky.  They have a repaired roof over their heads.





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