Buying REOs - Newbie Question

[Gina Watkins]

Hello, 

I have run across a rehabber in my area (Central Coast of California) who was able to purchase an REO from the bank without it ever hitting the MLS. He said he "used to go to the auctions" but wouldn't tell me any more. I was looking at the property for months and it said owned by US Bank. I called them and the company that lists their properties and they didn't have the address on file at all. Then, all of a sudden I found out that it was bought by someone else (a rehabber) and was being renovated and would be listed soon. The property was sold to the investor/rehabber since I have been tracking it several months ago. There was never a listing for it as an REO.

So, my question is... Is that legal? I thought that the banks had policies of not selling the house directly after the auction, they say they always list with an agent. The guy is apparently an agent himself. Currently the LLC on title is an LLC owned by this agent.

Any insight?