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Florida continues to make national news as it currently ranks third (behind Nevada and Arizona) in the highest foreclosure rates in the country.  Florida even surpasses notoriously distressed California in the number of homes being foreclosed upon by lenders.

This means that there are a lot of homes being taken back by financial institutions through the foreclosure legal process, leaving these institutions, which are normally in the money lending business, suddenly holding real estate that they never intended to have.  For many investors and bargain hunters across the state, the country and even across the globe, this translates into opportunities to make a deal.

And lots of deals are being made here in Florida.

In today’s Miami Herald, an article by Toluse Olorunnipa entitled, “Miami pending home sales rise, bucking national trend,” reports that comparing February 2010 and February 2011, pending home sales in the Miami-Dade area rose 22% (statistics provided by the Miami Association of Realtors).

A twenty-two percent rise in real estate sales is a big deal.   Especially when you consider Olorunnipa’s point that across the country, home sales fell for the second straight month in February 2011.

What all this means is that those properties tactfully labeled “distressed” are being sold hand over fist by these lenders to bargain hunters.

However, there may never be a more applicable time to warn “buyer beware.”  Right now, there are many strange and bizarre ways that lenders, mortgage servicers, and foreclosure law firms acted (i.e., illegally) that it is impossible to adequately define the term “wrongful foreclosure.”

Worst of all, title insurance on these bargain sales may not shield the buyer from potential claims.  What are they really buying?  Do the buyer’s know?

Law firms in Florida are being held in contempt of court for their bad acts in the foreclosure process.  This behavior is not limited to Florida.  Banks are also being held accountable in Massachusetts for their conduct in foreclosing and reselling property.  Investigations are being conducted by state attorney generals across the country for possible criminal liability. (Last week, for example, the Sun Sentinel reported that the Florida attorney general has expanded it investigation into foreclosure fraud to eight different law firms that were heavily involved in representing lenders in foreclosure proceedings.)

And the result in many of these cases is that the foreclosure is being deemed improper, wrongful or just plain void – causing legal title to remain with the homeowner who was the subject of the foreclosure proceeding. However innocent the purchaser may be, the seller of a foreclosed or distressed property cannot sell more than what he owns under state law.  If the bank never had the right to foreclosure, it certainly never had the right to sell the home.

What to do?  If you come across a great real estate deal that is a distressed property, move carefully.  Investigate the deal fully, including the foreclosure proceedings and the related title issues, and hire legal counsel before you sign on the dotted line.  You may be buying a lawsuit in the future (against the seller, maybe the title company, etc.) instead of a nice, pretty piece of Florida real estate.

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