Buying a Foreclosure in Florida

How Florida foreclosure works, in brief

Florida is a judicial foreclosure state. The lender files a lawsuit in circuit court, the court enters a final judgment, and the judgment sets a sale date. The sale is run by the county clerk of court, and most Florida counties now hold these auctions online.

After the sale, the clerk issues a certificate of sale. Interested parties have 10 days to file objections. If none are filed, the clerk issues a certificate of title to the buyer, which is what transfers ownership. The former owner's right to redeem generally ends when the certificate of sale is filed, unless the judgment sets a different time.

Most homes at auction are bought back by the foreclosing lender with a credit bid, often up to the judgment amount. Those homes later become bank-owned listings.

Buying at the county auction

Auction buying is fast, cash-based and blind. The basic mechanics are set by state law, with details that vary by county:

• Deposit: the winning bidder pays 5% of the final bid at the sale. Many counties ask you to fund a deposit with the clerk before you can bid.
• Balance: due quickly in cash, cashier's check or wire. Some counties require it by a set hour on the sale day, others by the next business day. Miss it and you lose the deposit.
• Fees and taxes: the buyer pays the clerk's registry fee and the documentary stamp tax on the deed, $0.70 per $100 of the bid, when the certificate of title is issued.
• No financing contingency, no inspection, no title guarantee. The clerk does not promise clear title.
• Possession: if someone still lives in the home, you need a writ of possession through the court before you can take the property.

Read your county clerk's posted rules before you register. They are short and specific, and they differ on deadlines and payment methods. Watch a few sales online before you bid on your first one, so you see how quickly the bidding moves and how often sales are cancelled when the owner files bankruptcy or the lender postpones.

Liens and debts that can survive the sale

A foreclosure wipes out liens junior to the one being foreclosed, if those lienholders were properly named in the lawsuit. Several things often survive:

• Property taxes and tax certificates. They stay with the property.
• Senior mortgages. If an HOA or second lender is the one foreclosing, the first mortgage stays in place, and you take the home subject to it.
• Unpaid condo or HOA assessments. Under Florida's condo and HOA statutes, a third-party buyer at a foreclosure sale can be liable for unpaid assessments that came due before taking title. The foreclosing first mortgage lender gets a limited safe harbor, but auction buyers generally do not.
• Municipal code enforcement liens and utility liens, depending on the local ordinance and how they were recorded.
• Federal liens, such as IRS tax liens, can carry a federal redemption period after the sale.

Before bidding, have a title professional or real estate attorney run a full title search on the specific case. That search, plus a call to the association for an estoppel figure, is how you find out what the real price is. This isn't legal advice; a Florida attorney should review any auction purchase.

Bank-owned (REO) homes: the safer route for most buyers

When the lender takes the property back at auction, it usually clears title problems, evicts any occupant, and lists the home with an agent. You buy it like any other listing, with some differences:

• Financing is allowed. Conventional, FHA, VA and cash offers are all possible, subject to the property's condition passing the lender's appraisal standards.
• Inspections are allowed. Banks typically sell AS IS and won't repair, but you still get an inspection period to cancel if you don't like what you find.
• Bank addenda: expect the seller's own addendum on top of the Florida contract. It often limits the seller's liability, shortens deadlines, sets per-day penalties for late closing and gives the bank a special warranty deed instead of a general one.
• Response times are slower. Counteroffers can take days because they pass through asset managers.

Bank-owned homes have often been vacant for months. In Florida that means mold, roof leaks, stolen copper, dead HVAC systems and pool damage are common. Budget for a full inspection, a 4-point and wind mitigation report for insurance, and a mold check if anything looks or smells wrong.

Short sales and pre-foreclosures

A short sale happens when the owner sells for less than the mortgage balance and the lender agrees to accept the shortfall. You make an offer to the owner, who then submits it to the lender for approval.

The upside is that you're buying an occupied, often better-maintained home with normal financing and inspections. The downside is time. Lender approval can take weeks to months, and the lender can counter or refuse. Keep your inspection period and loan deadlines tied to the date of lender approval, which the Florida short sale addendum is built to do.

Pre-foreclosure buyers who approach owners directly should be careful. Florida has specific rules on foreclosure rescue transactions, and an attorney should handle any deal outside a normal listing.

Getting the real cost before you commit

The sticker price on a foreclosure is only the start. To compare a foreclosure with a regular listing, add up:

• The price or bid.
• Back taxes, unpaid association dues and any surviving liens.
• Repairs, priced by a contractor, and the cost of carrying the home while work is done.
• Insurance, which can be hard to get on a vacant home with an old roof or water damage.
• Closing costs, including doc stamps and title insurance.

On a home near the statewide value of $375,361, a new roof, an HVAC replacement, some repiping and a year of unpaid association dues can add up to more than the discount. Get contractor quotes in writing before you bid or during the inspection period. When a foreclosure still comes out ahead after that math, it's a good buy. When it doesn't, a regular listing in the same neighborhood is often the better deal.

If you're interested in bank-owned homes in a specific county, ask for a shortlist and I'll flag the ones with financing-friendly condition.