OMG! This actually happened to us . . . we bought a USDA foreclosure at an auction, put maybe $14,000 into repairing it and fixing it up. And then (after we sunk the money into it) were contacted by someone from the USDA who told us that there was language in the paperwork that included some kind of a "recission clause" or something that allowed them to, in effect, come back and take the house up to TWELVE months after we'd owned it (unless we paid them more money)!
We debated over whether or not to try and fight it and opted to pay them the additional $8,000 they were asking for . . . we still got a good deal on the house, but this just makes my blood boil even now four years later! I don't know. We owned the house. Probably should've fought it, but just decided it wasn't worth the headache.
As a practice, I think it rarely happens, but we don't do USDA foreclosures any more. Just check your contract carefully and see if there's something that allows for the owner to come back after the property is sold. (I would think it'd be EXTREMELY difficult to pull off from the bank's / GSE's perspective . . . but you just wouldn't want the hassle of having to fight it, and there's a chance (albeit slim) that they might be able to somehow cloud your title if you don't cooperate.
Feb 16, 2012