CNBC has learned that the hilltop mansion inside Sherwood Country Club which Lenny Dykstra bought from Wayne Gretzky for $17.5 million has been sold in a foreclosure auction.
The winning bid (perhaps the only bid) came from Index Investors, the "hard money" lender which loaned Dykstra around $600,000 before his finances collapsed.
Index, run by Jeff Smith, was the first party to try to foreclose on the property in July 2009. The original auction was put on hold at the last moment when Dykstra filed for bankruptcy protection.
Dykstra, in an interview with CNBC at the time, claimed he was the victim of mortgage fraud by Washington Mutual, since taken over by JP Morgan Chase. He valued the house at $25 million and planned to recoup some of his fortune by selling time shares in the mansion.
Index Investors' attorney, Bruce Speiser, tells CNBC that Jeff Smith bought the home for a mere fraction of $25 million. In fact, he got it for close to the amount of money Dykstra owed Index, plus interest, between $600,000 and $700,000. However, Chase still has a lien on the property for its $12 million first mortgage.
Speiser says Smith is working with Chase to come to terms whereby Smith would fix up the mansion and sell it, and both parties would share the profits. The bankruptcy court Trustee is also involved.
Index hopes to repair damage to the home blamed on Dykstra. Last year the former World Series great removed fixtures and flooring to show water damage to the property, demanding payment by Fireman's Fund. The insurer has since agreed to pay for a portion of the cost to repair the mansion and another home Dykstra owned inside Sherwood.
One person not involved in Wednesday's foreclosure auction was Lenny Dykstra. What's more, the bankruptcy court has barred him from coming near the mansion.