Background: Foreclosure
- Pre-foreclosure occurs when a borrower falls behind on making its monthly mortgage payments. If a payment is missed, most loans include a grace period of 10-15 days after which time the bank will charge a late fee. The bank will send a “breach letter” before asking the court to step in.
- Foreclosure is a process in which the bank forces a sale of the property if the homeowner-borrower fails to pay its mortgage including principal, interest, fees and costs. Unlike some states, Florida law requires the bank to file a lawsuit against the borrower, also known as a judicial foreclosure.
- Under federal law, the bank cannot begin a foreclosure until the borrower is more than 120 days past due on payments (12 C.F.R. § 1024.41).
- Once the bank files a lawsuit, the has 20 days to file an answer i.e., respond to the bank’s lawsuit. If the borrower does not respond, the lender will ask and likely receive a default judgment, allowing the bank to hold a foreclosure sale.
- Florida law does not provide a statutory right to reinstate the loan before the sale. However, the lender may agree to allow reinstatement of the loan before the sale takes place. This allows the borrower to catch up with all missed payments and associated fees. It is important to check your loan documents to find if you get a reinstatement right.
- One way to stop a foreclosure is by “redeeming” the property by right of redemption. To redeem, you must pay off the entire loan balance and fees before the sale. In Florida, you can “redeem” the property by paying off the full amount of the loan before a) either the time specified on the foreclosure judgment or b) when the clerk files the certificate of sale, whichever is later. As an alternative, courts in Florida can refer the foreclosure lawsuit to mediation.
- If the court allows the lender to proceed with the sale, the sale of your property must occur within 20 to 35 days of the judgment (Fla. Stat. § 45.031). The sale is an auction, open to the public.
- The lender must publish a notice of foreclosure sale on a publicly listed website for at least 2 consecutive weeks before the sale. Or, they can publish a notice in a newspaper once a week for 2 consecutive weeks, with the second publication at least five days before the sale (Fla. Stat. § 45.031).
- At the sale, the bank usually makes a credit bid. It can bid up to the total amount owed, including fees and costs, or it may bid less. If the bank is the highest bidder, the property becomes “Other Real Estate Owned” or OREO. If the bank wins by bidding less than the total debt, it can get a deficiency judgment against the borrower. If a third party bidder – you – wins by offering more than what is owned i.e., excess proceeds (money over and above what’s needed to pay off all the liens on the property), the borrower is entitled to that surplus money.
- Once the property is sold at a foreclosure, the clerk of court must promptly file a certificate of sale. This usually happens within a day of the sale. The borrower then has 10 days after the filing of the certificate of sale to file an objection to the sale. If no one objects, the clerk confirms the sale and issues a certificate of title to the purchaser (Fla. Stat. § 45.031).
Process: Purchasing Foreclosed Properties in Miami-Dade
- Miami-Dade holds auctions on line. Create an account here.
- Click on Calendar to see which properties are going to be auctioned via foreclosure or tax deed sale.
- Click on one of the days to see the properties listed for auction.
- Note Final Judgment Amount. That is the amount that bank wants to recover. The bidding may go above or under this amount.
- Preliminarily, you could look up all the properties on google and determine whether it is a property would want to purchase.
- Once you have identified such a property, search the property address and or parcel ID also known as Folio under the Miami-Dade Property Appraiser‘s website. The result will provide you with all the basic information such as the owner’s name, property layout and size. Note the owner’s name, which will be important in looking up any existing liens on the property. Also note when the property was purchased. This is found under Sales Information on the property appraiser’s website. In this case, current owner bought it on 06/01/2005.
- Next, go the Miami-Dade Clerk of Court and search the owner’s name under County Recorder’s Official Record. Set the date range to the date when the owner purchased the property. Make sure you do a thorough examination of all the documents associated with the property. Specifically, search LIEN under Document Type. That will show you the list of existing liens on the property.
- In the alternative, you can order a Title Search with an attorney or title company to confirm any encumbrances on the property such as easements, liens, etc. There is always a charge associated with this task. The title company typically charges $250 to run this search.
- Next, take note of all the liens and parties/agencies that need to be paid.
- By clicking on the most recent, you will see that there is a lien for failure to pay a water/sewer bill or what ever other liens may be imposed on the property.
- Once you’ve completed your office due diligence, it is advisable that you engage in field due diligence. Drive to the address and scope out the neighborhood and general exterior condition of the property.
- Do not attempt to enter the property unless you are invited by the owner. The likelihood of this happening is slim to none, since the owner is already going through the foreclosure process and may soon be kicked out. Attempt to speak with the neighbors to learn about any accidents to the subject property such as limbs falling on the roof, when the roof was last replaced, any known issues, etc.
- Notice the condition of the property from afar, taking note of any structural damages, roof condition, and overall appearance. Does the property look run down from the outside? If yes, then there is high probability that the interior will require work, especially if the owner has been going through the foreclosure process for some time. People tend to give up on maintaining the property if they know they may lose it soon.
- Once you decided to bid on this property and have a maximum bid amount set in your mind, make sure you make a pre-bidding deposit, which is 10% of your maximum intended bid.
- On bid day, make sure you bid to your max bid number. Click on the “Enter Bid” button right next to the property you wish to bid on, enter the highest bid you intend to make, and then sit back and wait for the results.
- If you have won the bid, congratulations! Now, you need to confirm your identity and discuss payment arrangements with the County Clerk. After deducting any pre-auction deposits, you will owe the county the amount of your winning bid plus a number of small county fees less whatever deposit you made before the auction. Those include:
- Balance of your final bid
- Documentary stamp taxes
- Court registry fees
- Online auction fee
- Publication fees
- Clerk’s services fees
- Winning bid payments can be made by wire transfer or in-person via cash or cashiers check. ACH deposits are not accepted. You will loose your deposit if you won the auction and failed to make the payment in full by 12 PM on the business day after the auction.
- Wait until you receive a Certificate of Title before entering the property or making any changes, since the purchase and sale of your new property can be voided within the 10-day period.