Buyer Beware – Foreclosure Auction Landmines

It’s often said, the greater the risk, the greater the reward. But if you’re going for gold, crossing a minefield blindfolded isn’t the best start.

It’s a common story – some industrious person or group of people come together and decide they want to put their talents to work purchase a property needing some work, fix it up, and sell it again for a profit. And its not a bad idea! Many people make a good, honest living doing exactly this kind of work. Part of the nature of such a business is to scope out properties that can be acquired cheaply. And this is where the unaware can find themselves stepping on a legal landmine and thousands of investors have been caught unaware and put into a near-impossible position.

If you go to the foreclosure auction website and look at any given day, you see the basic information – the property address, its assessed value, and the final judgment amount against the property. But it also lists a case number and taking the time to investigate that series of digits can mean the difference between making a sound investment and losing everything.

One of the biggest clues for an investor that they might be walking into a minefield is who the plaintiff is. Are they an HOA or a Condo association? Sure, the judgment amount might be only ten or twenty thousand dollars, and you might encounter few other bidders, but there’s probably a reason why you’re able to obtain a property for a fraction of its value. This is a public auction. It’s not a secret that the property is for sale and there are many other businesses that share the business model of buying cheap, fixing, and flipping. The reason you might win such a property on a low bid may have nothing to do with the condition of the property itself. You might be buying it subject to the mortgage. Meaning even though you aren’t responsible for paying the mortgage, the property could go back up for auction and sell right out from under you to pay off that mortgage. And here’s where the story can go really bad.

If the amount owed on the mortgage the investor didn’t know about is substantially higher than the property is worth, the entire investment might be lost when the property is put back into a foreclosure sale, including any value added to the property by improvements done by the investor.

Even worse, if the property was also already involved in a second foreclosure case at the time the investor purchased it, even if it sells for more than enough to cover the judgment, the surplus goes back to the title holder at the time the case was initiated. This means, the amount an investor bid on the property, and everything the investor paid for improvements to the property, every last dollar could be lost.

These are just a few reasons why it is very important to research properties involved in foreclosure auctions before bidding. But mistakes happen. And that’s when you want the best legal representation you can get to help navigate the next steps. Contact our Florida foreclosure defense lawyer.

Loan Lawyers has helped over 7,000 South Florida homeowners and consumers with their debt problems, we have saved over 3,000 homes from foreclosure, eliminated more than $100 million dollars in mortgage principal and consumer debt, and recovered over $25 million dollars on behalf of our clients due to bank, loan servicer, and debt collector violations.  Contact us for a free consultation to see how we may be able to help you.