United States: A Beginner’s Guide To Buying Foreclosed Property In Florida

Sometimes you’ll see notices in Florida newspapers advertising foreclosure sales by the Clerk of the Court. Foreclosed property is often sold at below market prices, and may offer a bargain for investors who can afford it. But you’ll need to do some research and consider a number of issues before buying foreclosed property.

Foreclosure sales occur when a creditor has a lien on property to secure an owner’s debt. If not paid, the creditor can foreclose the lien by filing suit and obtaining a foreclosure judgment requiring that the property be sold to pay the debt. At the sale, the Clerk of the Court will auction the property to the highest bidder. The foreclosing creditor can bid at the sale and is given a credit against his bid for the amount of his judgment. Other bidders must pay cash or certified funds. Since you can’t get your money back after you pay the Clerk, you’ll have to be comfortable with the value and condition of the property in advance.

If you’re thinking about bidding, the first thing to do is inspect the property and determine what it’s worth. Foreclosed properties frequently require repairs and may have building or health code violations, so you’ll need to consider renovation or remediation costs in deciding what to bid.

If the property is occupied by tenants, make sure their rights were extinguished in the foreclosure. The foreclosure judgment will name everyone whose rights in the property were foreclosed, assuming it was done correctly. The property will still be subject to rights of anyone not named. For a few hundred dollars, a title insurance company can examine the title to the property and issue you a title insurance commitment itemizing all matters affecting the title, including taxes and other liens, recorded restrictions and similar matters. Make sure you review the title commitment in advance and actually have your title insured if you’re the successful bidder. Take the charges into account in determining your bid.

Consider taxes and insurance. You may have to pay back taxes, since a foreclosure in Florida won’t extinguish County real estate taxes. Adjust your bid accordingly. If you acquire the property you will likely need casualty insurance. Determine your premium in advance and arrange for the insurance to be effective immediately if you’re the successful bidder.

Over 90% of foreclosing creditors in Florida acquire the properties themselves due to lack of competitive bids. Most would rather not own them because they’re not in the business of repairing and selling property. Call the creditor in advance to see if they will tell you how high they intend to bid. Determine what their judgment amount is, since they can bid up to that amount without having to pay cash. If the creditor is a mortgage lender, maybe they’ll agree to finance your purchase.

Once you’re comfortable with the physical condition, status of title and value of the property, you’ll need to have funds available. Florida law requires you to deposit 5% of the bid or $1,000.00 (whichever is less) with the Clerk of the Court at the sale, with the balance due in cash or certified funds, usually later that day. You’ll also have to pay Florida documentary stamp tax at the rate of 70 cents per $100 of your bid. Upon payment, the Clerk will issue you a Certificate of Sale, followed later by a Certificate of Title unless objections to the sale are filed (for reasons such as improper procedure and the like). At that point the property is yours, although if the prior owner or tenants haven’t moved out you may need to get a court order to evict them.

If you are a beginner in this area, seek the advice of a real estate attorney or other expert before bidding on foreclosed property, since "buyer beware" is the rule in Florida. You won’t get any warranties regarding the condition of the property, so you’ll have no recourse if a problem comes to light later. Some companies specialize in finding and investigating foreclosed properties for investors. Check the company’s reputation and references, and make sure you take their fees into account in determining what you’re willing to bid.