Sheriff sale of in-law's house smells funny

Dear Harry: My situation has been kicking around since my mother-in-law died in 2010. My husband was her only child, and he is deceased. Her nearest kin are my three children. My mother-in-law left a home and some small savings accounts. There was no will. I went to City Hall and went through the process of having myself appointed as administrator of her estate. It was very easy to get the banks to transfer their accounts to the estate. The house was a bigger problem. I did get the title transferred to the estate. However, when I went there a few days later, I found a contractor working on the property. I contacted the owner of the contracting company and he told me he had purchased the property at sheriff's sale about a month before. I went to the Sheriff's office where I was told that a local bank had foreclosed on the property to cover a home-equity loan of $11,000. The sale brought in $38,000. Other costs left $21,000. The money was then given to a woman who satisfied someone that she was the owner. This was clearly a fraud. How could they have given this money to an impostor?