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Buying a house at a Florida foreclosure auction is a risky business. We have been speaking to many people every week who have bought homes that went up for auction only to find out that there were additional liens on the property and now the property is in foreclosure.
When you buy a property at a foreclosure auction, you will get the title and be the owner of the record, but that does not mean that you have a free and marketable title. When you buy a property at a foreclosure auction, you are buying it subject to any liens that were superior to the lien that was foreclosed on in the foreclosure case.
The most common scenario that we see is clients who buy a house at a foreclosure auction from a homeowner’s association foreclosure. These properties typically can be purchased at a foreclosure auction for a steep discount.
You may be able to find a property worth $500,000 that sells at a homeowner’s association foreclosure for $20,000. That sounds like a great deal, but I can assure you that it is not. The reason the property Is not selling for more is because there are other liens on that property that could easily exceed $500,000.
Even though you paid $20,000 and are the owner of a record, those other liens can still be foreclosed on and you most likely will lose the house and you can kiss that $20,000 (plus whatever other money you spent on the property) goodbye. At some point, the lienholders will foreclose on that property and the house that you purchased for $20,000 will again be sold at auction to someone else.
If someone is losing their home for not paying homeowner’s association dues, that means they likely have not paid their mortgage for many years. The balance on the mortgage is usually higher than the value of the property after years of nonpayment. When you buy a house at a homeowner’s association foreclosure, you will need to pay off any mortgages and liens that still exist on the property or will be in foreclosure even though it’s not your mortgage.
So while the mortgage company cannot demand money directly from you, they can still foreclose on the home to get paid because that mortgage was attached to the property before you took ownership. In other words, the mortgage company’s interest in the property is superior to your ownership interest.
To make matters even worse, if you bought the property at an auction for less than what the previous owner owed to the association, you are now liable for that difference as the new owner. So let’s say the previous owner owed the association $50,000 and you bought the property for $20,000. Guess what, you are now on the hook for the additional $30,000
It is heart-wrenching when people call us who find themselves in this situation. We see hard-working people spend their life savings buying a property at a foreclosure auction and fixing it up only to find themselves in foreclosure a year later for an old mortgage that was still on the property.
Our Fort Lauderdale foreclosure defense lawyers have been getting calls like this for more than 10 years, but for some reason, we have been inundated with these calls over the last few months. There is usually not much that can be done other than negotiating a settlement with the bank that is now foreclosing, however, that will usually cost hundreds of thousands of dollars, and not many people have that kind of cash lying around.
Please do not fall into the trap. If something is too good to be true, it probably is. Unless you have experience in real estate investing and have a title search that shows there are no other liens on a property, it is a huge risk to buy a property at a foreclosure auction.
As always, our Florida foreclosure defense lawyers are here to give you a free consultation. Call us 1-888-FIGHT-13.
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Loan Lawyers is made up of experienced consumer rights attorneys who use every available resource to develop comprehensive debt solution strategies. Our goal is to take on those burdens, resolve those problems, and allow our clients to sleep soundly knowing they are on the path to a better future.
