Legal Question in Real Estate Law in California

What type of sale? Short sale, foreclosure, private sale by him? Check to see that he is in fact the owner, report the situation to the police [be very accurate in what you say and do not positively say he committed a crime as you might be subject to a defamation suit if you turn out to be wrong in significant facts, contact the lender to see if you can take over the mortgage, check with the realators involved to see what they know and any HOA that might exist, immediately file a Superior court suit against him for fraud, breach of control [just use free form complaint can get off court internet site and fill out as well as you can as you can then file without additional charge before you serve him an amended complaint that is more accurate], file a lis pendes so that anyone involved in the sale knows that there is a problem with the townhouse and will not buy it, go to an attorney who handles such matters and see what else can be done [speak to several for free and see if any feel yo can recover any part of your money -- see if you can find out if the guy who did this is employed or has any assets you might be able to collect with a judgment].

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85% likely you have been defrauded. You need to decide whether it is a criminal or civil matter. If the former, make a polce report. If the latter, hire a lawyer and discuss whether to make a demand for settlement, full performance, or to sue immediately. Look up "rent skimming" in the California Civil Code (sections 890-893) and see if the definitions fit.

Sounds like you bought yourself into a lawsuit. Get started asap if you intend to try to recover any of your money. Hire an attorney local to the property immediately and file a lis pendens along with the lawsuit.