Everyone in the Miami area knows that the Florida real estate market is in a huge mess. However, some South Floridians may be surprised to learn just how long that real estate crisis may continue into the future. Why? Title to Florida real estate – particularly the real estate that has gone through the foreclosure process here in South Florida – may be clouded. (We’ve discussed the details of the title problems in a past post, here.)
Continuing Florida Real Estate Title Problems
People that bought a home after a foreclosure may not have good title to the property. No matter how much faith a Florida buyer may have in the purchase of a foreclosed property, the truth is that most of these properties come with title questions. The buyer may own nothing more than a lawsuit against the bank that sold the house to him/her as well as the title insurance company that gave its okay to the sale by issuing a title insurance policy.
Buyers May Have To Sue Their Title Insurer – This Is The Lawsuit Risk For Florida Title Insurance Companies
In a recent article in the Florida Bar News, the head of the Florida Land Title Association said that title insurance companies are being very careful these days. They are because they have to be — that’s their legal duty — it’s their job: to insure title of Florida real estate. They insure that title is free and clear of any clouds which could negatively impact ownership when someone buys a home or lot or land.
If a title insurance policy is issued reflecting that the owner has clear title and it turns out that there is a flaw in the legal title to the home, then the person who paid for the title insurance policy can sue the title insurance company for legal damages if the title insurance company does not resolve the claim. Right now, Florida title insurers are still issuing title — and taking a big risk in doing so — but if they decide that it isn’t worth the exposure, then it is questionable how many foreclosure properties will find buyers: who wants to buy that risk of having an owner pop up later, claiming the right to the real estate?
One Big Question: Was The Defaulted Home Owner Served
When there is a legal foreclosure in Florida, under the law the person that owns the property subject to foreclosure must be made aware that the legal process has begun. It’s called “notice” and it’s protected by the due process provisions under both the federal and state constitutions.
All too often, Foreclosure Fraud cases in Florida have issues of no or improper notice being given to the defaulting homeowner. Sure, they may have moved out and it is not easy to find them. Still, if they have not received legal notice that their property is being taken via a lawsuit, then they may have a due process argument that the foreclosure proceeding was void. Which means, if they win that argument, that they still own the land and the innocent person who thought they bought a nice home or condo really didn’t buy that home or condo at all, because the bank did not have clear title to pass to them.
Think this doesn’t happen just because a large bank is involved? Wrong. Bad, stupid, illegal things that disregard basic Florida laws are happening all the time in the ForeclosureFraud frenzy. Consider the Boudreaus’ story, as one example (we wrote about it here).
ForeclosureFraud and Robosigning Has Not Been Solved – It’s Still Happening
Reports are that robosigning is continuing even now, after all the scandals erupted and the investigations began and the lawsuits have been filed. Which means that the problem has not been solved and more properties will have title issues.
Florida Court System Hurt By Lack of Filing Fees in 2011
According to the Florida Bar News article, right now there are approximately 400,000 pending foreclosure cases in Florida and the Florida court system has had to borrow money to meet its budget after the Foreclosure Fraud and Robosigning crisis last year forced banks to stop filing foreclosures since so much of their paperwork was flawed (make that illegal). Seems that Florida courts have depended upon foreclosure filing fees in the past for a significant part of their budget revenue; the halt in filings meant the courts had a cash gap.
Which means that the predicted increase in foreclosure filings will be met with an overburdened and undermanned Florida court system. The banks will be working hard to move properties that have been foreclosed upon, selling them to unsuspecting third party buyers. Real estate buyers should be familiar with the concept of Caveat emptor (buyer beware) – savvy buyers will know their rights (or have their lawyer with them) before they buy any Florida real estate.