Florida foreclosures are tempting to many looking to buy a Florida home or condominium, if for no other reason that there are so many bank-owned properties available for sale today. Anyone searching through online real estate sites can find lots of foreclosure properties, many in some of the nicest and most desirable South Florida communities. For instance, at the time of writing, Zillow had 10 pages of foreclosure properties available for purchase in Miami, Florida, alone.
It is always wise to research and find the best deal when buying real estate. However, from our perspective as Florida residential foreclosure attorneys, these bargains need to be carefully considered before committing to the purchase.
Florida condo towers may have many condo units that are the subject of foreclosure. Do you want to live there?
Here are several tips for anyone considering buying a residential foreclosure property in Florida:
1. Buyer Needs to Be Pre-Approved for a Home Loan
Foreclosures involve financial institutions as sellers, and the seller-bank will want to deal only with purchasers who are ready, willing, and able to purchase the property. Buyers should expect to have their funding in place before making an offer on a residential foreclosure.
This means being “pre-approved” for the home loan, which is different from being “pre-qualified.”
Going through your investigation for the best mortgage lender, and getting established as a borrower before you venture into purchasing a particular property, is smart for anyone interested in buying a residential foreclosure.
2. Foreclosed Home is Sold “As Is”
Foreclosed properties are sold by lenders who have filed a civil lawsuit to take title to the home because the borrower defaulted on the home loan. The lender has (1) lost money on the loan as well as (2) expended money on the foreclosure litigation.
This means that the lender will not be willing to expend additional funds to repair or maintain the property. The bank is not in the real estate business. It is looking to recover as much of its financial losses as it can, so it can return to the business of banking (making loans).
For the buyer of a foreclosed property, this means the home or condo is being sold “as is.” There have been no repairs, and little if any maintenance. This is part of the reason that it has a reduced price.
Buyers need to be aware of the risks undertaken by anyone buying an “as is” property here in Florida. Inspections are wise, including not only the standard home inspection but specialized inspections for things like mold and termites.
If the buyer purchases a foreclosure property and discovers serious problems with the home after closing, then he may well have to face the consequences. There may not be any claim to make against the lender as the seller, because the buyer agreed to purchase the home or condo “as is.”
Read: Florida Real Estate Foreclosures The Nightmare of Buying From a Bank.
3. Foreclosure Properties May Not Be a Bargain
Considering that the foreclosed home or condo is being sold “as is,” the expense in making repairs to the property may end up with the buyer not having such a great bargain after all. That is one reason to be careful when assuming the foreclosure property is being purchased at a giveaway price.
Another is to investigate the home or condo’s true market value. Buyers should never assume that the lender is so desperate to get rid of its foreclosure inventory that it is selling at below the property’s market value. That may or may not be true.
The goal of the lender is to get back as much of the financial loss it has sustained on a bad home loan as it can get. Banks can (and do) list foreclosure property at a sales price that is higher than the current fair market value of the home, just as traditional sellers do.
It’s in the lender’s best interest to do so; the goal is to maximize how much money they can make in the sale. Accordingly, the buyer of a Florida residential foreclosure is wise to investigate market values for the area where the home or condo is located.
This can begin with looking at online ballpark values, like the Zestimate on Zillow (a controversial value and not one to rely upon as sole market value investigation). Buyers can also ask their real estate agent for their “comparative market analysis” (CMA) before deciding on their offer.
Understanding the comparable sales figures for the foreclosure’s location, combined with an understanding of the likely repair expenses that will be needed, can help the savvy buyer determine their best offer on the home or condo, and if that figure truly is a “bargain.”
4. Location of the Residential Property
Here in Florida, foreclosure lawyers (as well as others who deal with foreclosed properties, like inspectors, surveyors, and realtors) can point to certain condo towers or suburban neighborhoods as communities that are filled with residential foreclosures. It’s wise to consider the location of the foreclosure before deciding to make an offer if the home or condo sets in one of these areas.
Neighborhoods and communities with heavy percentages of residential foreclosures may have issues with lagging property values; failure to maintain or keep up with common areas or community swimming pools; as well as a number of vacant dwellings that have been unoccupied for a long period of time (sometimes years).
Buyers need to know if they are about to make an offer on a property that is a great bargain, but sits in the middle of a distressed neighborhood or condominium. Living in the place may present challenges until things turn around. The buyer may have to deal with frustrations (like minimal or non-existent condo common area upkeep). It may be hard to re-sell the home or condo unit if the buyer is not happy and wants to move.
See: What Associations and Condo Owners Can Do About a Nonpaying Florida Condo Unit Owner.
5. Title Issues with Florida Foreclosures
In Florida, foreclosures have resulted in a huge amount of title failures and clouds on residential titles. During closing, the standard title search does not provide the buyer will every detail about the title to the land and its improvements. The title search will confirm through the local land records that there has been a foreclosure on the mortgage on the home.
The title search may not reveal other issues that are common to homes where the borrower has defaulted on the home loan. There may be valid claims to the property by various taxing authorities, as well as liens by creditors (like the pool contractor who was never paid).
It is prudent when buying a foreclosure to investigate title fully, in order to make sure there are no outstanding claims against the property before closing. Any title issues that are discovered by the buyer before closing can be presented to the lender for the bank to cover as part of closing the deal.
See: How Do You Know If The Chain Of Title To Your Florida Real Estate Is Clear?
6. Closing the Deal May Take a Long Time
Buyers need lots of patience when going through the real estate closing process with a foreclosure. One reason a foreclosure closing takes longer than a standard closing is because the seller is a financial institution. There is not just one person who makes the decision to accept the buyer’s offer. Because the seller is a regulated lender, a bank officer may have the authority to agree to the sale, but his decision may be overseen or contingent on another officer, or a committee. This takes time.
It may also mean that negotiations can be more complicated, too. Maybe the buyer’s initial offer gets turn down by the lender because of internal criteria or industry guidelines. The lender may counter with a counteroffer, and things may go back and forth until a deal is reached.
Once the deal is struck, things will still be frustrating for many buyers. Closings will take longer. In Florida, the traditional closing will happen within 30-45 days of the sales contract. Banks are notoriously slow to close.
This is because the lender’s primary objective is to handle all kinds of bank business, and not to sell real estate. The bank officers who have the responsibility for closing will often have other tasks to perform (that generate income for the bank). Foreclosure closings are not a priority for many lenders.
Additionally, some lenders have a backlog of foreclosure properties on their books. There may be other closings already in the queue, and the buyer must take his or her place in line no matter how efficient that particular bank may be in closing its foreclosure deals.
Read: Florida Title Company or Real Estate Lawyer: Who Should Handle Your Closing?
Florida Foreclosure Attorney Helping Buyers of Foreclosed Florida Homes
There are many other considerations for anyone who is considering buying a residential foreclosure here in Florida. From our experience representing individuals in real estate transactions, as well as successfully defending borrowers in foreclosure defenses asserted against lenders, we understand the complexities of these types of purchases.
Each residential foreclosure property is unique and must be analyzed according to its specific circumstances, including everything filed in both (1) the civil lawsuit records for the foreclosure and (2) the real estate records regarding title to the property itself.
Having an experienced Florida Foreclosure Lawyer to help you as your negotiate the purchase of a foreclosed home or condo can make all the difference in getting a good deal, and protecting your best interests before and after closing.
Most Florida real estate lawyers, like Larry Tolchinsky, will offer a free initial consultation to answer your questions.
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