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Buying foreclosed properties at public auction can result in a great deal for the investor. However, some advance research is essential to avoid buying a "pig in a poke". First and foremost, remember that the lender's representative will attend the auction to protect the lender's interest, and at a minimum, the lender will have already received a current appraisal and a Broker's Price Opinion (BPO) for the subject property. The lender will know how much the property is really worth without regard to the mortgage balance that has been foreclosed. The lender's representative will have been instructed to bid up to a certain point based on the lender's estimate of current value, less repair costs and closing costs should they end up owning and then reselling the property. Does this make sense so far? In a nutshell, by the time the the property is sold at public auction, the bank knows what the property's bottom line worth is to them personally. Believe it or not, on many occasions, the foreclosing lender thinks the property is worth WAY more than reality and ends up buying it back for themselves. In such an event, the lending institution must have the property prepared for sale (repairs, etc), take responsibility for utilities, taxes, HOA fees, and insurance, have it marketed, keeping it in their portfolio for some indeterminate period of time, during which they suffer additional loss of income, plus pay additional closing costs to eventually dispose of the property. Buying at foreclosure auction may sometimes result in a great deal for the buyer, but by and large, Short Sales result in the most lucrative, consistent bargains. Not only do Short Sales allow for adequate due diligence, you make your offer in advance. You don't have to make your final bid under pressure with sometimes mere seconds to decide. At any rate, THE BASIC RULES FOR BUYING AT PUBLIC AUCTION: l. Access the Property Talk with the lender or the attorney who is foreclosing. If possible, talk with the current (soon-to-be-foreclosed-upon) owner. If you are not able to get access, you should be very reluctant to more forward. Regardless of how good a deal you may believe you are getting at the foreclosure sale, you don't know the condition of the house. Many homeowners who are about to lose their house will strip it of everything valuable -- fixtures, appliances, etc. Does it need $500 worth of repairs or $25,000? 2. Check the Title There can be hidden issues that would preclude you from getting good marketable title to a property purchased at auction. Some investors hire a title company to run an abstract of title and search. Others go to the courthouse (or go online) and research the title themselves. The really smart investors will typically hire a local attorney to assist them. The lawyer can obtain a title search to make sure that there are no hidden issues that would preclude them from getting good title to the property. While many liens and judgments are wiped out with the foreclosure, some items such as IRS liens can survive the public auction. 3. Last But Not Least Additionally, and especially if you are considering buying a condominium, check out the status of the Home Owner's Association. If there are other units that are delinquent or facing foreclosure, fees may drastically increase in the near term to cover the resulting deficiencies. Where common elements are maintained by the HOA, loss of use may occur if the bills cannot be paid. Simply put, make sure that you (and/or your attorney) carefully review the financial status of the HOA, including Condo Docs, Q&A's, Covenants and Restrictions, etc. Buying any property at a foreclosure auction sale is a risky venture. After all your due diligence, the delinquent homeowner can file for bankruptcy relief at the 11th hour, which would put a stop to the sale. Also, as previously mentioned, you must pre-determine the condition of the property, both in a physical sense and with regard to title. http://www.clerkofcourts.cc/foreclosures/ YOU MUST DO YOUR OWN RESEARCH FOR THE PROPERTY INVOLVED. The Clerk's Office uses only legal descriptions, however, with this information, you can find the street address information from the Property Appraiser's Office. The Property Appraiser's records will also show improvements, if any. The status of county property taxes can only be checked at the Tax Collector's Office. The Clerk's Office assumes no responsibility for any encumbrances (judgments, mortgages, taxes, and other liens) on any property offered for sale. It is in your best interest to have a title search done by an attorney or title company. However, you may search the Official Records located in the basement of the Clerk's Office at the Courthouse in Crestview or the Records Center of the Clerk's Office in Shalimar. If the property is occupied, it is possible you will have to take legal action to get possession of the property until this is granted by the Court. You may not have access to the property without permission of the owner. The Clerk's Office assumes no responsibility for the availability of any property offered for sale. The Foreclosure Sales may be held any weekday at 11:00 a.m. (by legal publication) at the front door (Main Street) of the Courthouse in Crestview, and the front door of the Clerk's Office of the Courthouse Annex in Shalimar. Anyone bidding at the sale should be aware that the successful bidder is required to deposit 5% of your final bid. This deposit may be in the form of personal check, cash, cashier's check, or money order. This deposit has to be paid immediately following the sale, the successful bidder may not leave the sale to get the deposit due. The balance of the bid must be paid by 4:00 p.m. on the day of the sale, unless stated otherwise in the final judgment. If the balance of the bid is not paid within the prescribed time period, the deposit will be forfeited. The bid will also include court registry fees which is 3% of the first $500.00 of the bid plus 1.5% of the balance of the bid. The balance of the bid must be paid in cash or cashier's check only. A Certificate of Title will be recorded after the tenth day from the date of the sale. The defendant has ten days to object to the sale. If objections are filed, the Judge will rule at a hearing as to whether or not a Certificate of Title is to be issued. If you should purchase any foreclosure property, you will be required to complete a Department of Revenue (DR-219) form to accompany the Certificate of Title at the time of recording. Based on the amount of the bid, you will be required to pay documentary stamps ($.70 on each $100.00 or fraction of $100.00 bid) before the ten day period has expired pursuant to F. S. Chapter 201. The Clerk's Office is not authorized to give legal advice. If you require legal advice, you should obtain it from an attorney or some other source. If you have additional questions concerning the procedures for foreclosure sales held by the Clerk of Court, please contact our office at (850) 689-5807 or (850) 651-7200. |
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