Note: This story ran in Saturday's News Sentinel. I only reprint it here due to it's involvement in Loudon County and the impact it could have locally.

Rarity lots among those set for auction

Foreclosures put upscale properties in hands of bank

Several lots in upscale East Tennessee communities will hit the auction block this morning, after foreclosure proceedings left them in a bank's hands.

Furrow Auction Co. is selling 21 lots that were foreclosed by First Tennessee bank in a sale that features six lots each at Rarity Bay and Rarity Pointe - in Vonore and Lenoir City, respectively - plus three lots each at Rarity Mountain in Jellico, Tenn., and Rarity Ridge in Oak Ridge.

Mike Ross, president of Maryville-based Rarity Communities, said none of the lots is owned by his firm. Asked about the state of his company, Ross said, "Well, we're just trying to hunker down and hang on as best we can."

Today's auction also features three lots in a Campbell County project previously called The Villages at Norris Lake.

Besides the tough real estate market, Rarity has faced some legal woes in recent months. In March, one of the original partners in Rarity Pointe filed a lawsuit against LTR Properties, which is owned by Ross. Meanwhile, Ross also is facing a complaint in U.S. District Court in Colorado, where several plaintiffs who bought property in Rarity Pointe or Rarity Mountain claim they were victims of fraud.

At least four of those plaintiffs owned properties that were foreclosed by First Tennessee and are included in Saturday's sale. While First Tennessee was at one time a defendant in the case, the bank is no longer a defendant. Commenting about the lawsuit, Ross has said, "We find it has no merit."

Among the six Rarity Pointe lots set for auction today, all were sold to buyers from Colorado. They all featured 100 percent financing from First Tennessee, including a variable interest rate note.

Rarity Bay also has faced scrutiny from Loudon County officials. The county's district attorney general, Russell Johnson, conducted an investigation that found Rarity Bay deeds prepared by a firm called Assurance Title in some cases reflected prices that were higher than what buyers said they paid for the property. Johnson's investigation was turned over to the Tennessee Bureau of Investigation, which said in April that its investigation was ongoing.

The auction likely isn't good news for home values in the Rarity projects. According to records in Loudon County, for example, Lot 225 in Rarity Pointe was sold to a couple from Colorado in 2006 for $425,900. But when First Tennessee took back the property in 2008, a deed valued the same lot at only $322,000.

The 11 a.m. auction will take place at the Cedar Bluff Holiday Inn, located at 304 Cedar Bluff Road.