Why NOT to buy properties at the courthouse auction
People contact us on a daily basis who have bought property at the courthouse. In almost every scenario, they have purchased a total dud for “a steal”. We cringe and feel horrible for them, we really do. But the reality is consumers have no business in the auction game. The risk is simply too great for the novice. Even as a title company we don’t bid because of the calamities we witness every week.
Buyers wishing to risk their hard earned money should at least conduct a Title Search on the property . Since this is not title insurance, it offers no assurances or guarantees but is better than nothing. Buying at a courthouse auction is the riskiest form of purchase.
We discourage our clients from buying property at courthouse auctions for the following reasons:
- HOA/Condo: If an Homeowner Association or Condominium Association exists, the new buyer will inherit and be responsible for any and all past due balances from prior owners. Very few owners of properties in foreclosure are current on their maintenance dues. A common myth is that a foreclosure “wipes out” the maintenance dues. This is false information and is most likely a reference to Florida Statute 720.3085 which addresses lender’s responsibilities to pay homeowner dues for maximum of 12 months. A consumer is not a lender and is not afforded the protection of this law. The maintenance dues will need to be paid or the condo can begin their own foreclosure proceeding against the new owner.
- Outstanding mortgages: We see more HOA/Condo associations foreclosing on their owners in order to get their past maintenance fees paid. One caller had just purchased a luxurious condo at Continuum on South Beach worth an estimated $1 million dollars for $30,000. After ordering a title search he learned that he had purchased the “condo lien” and was simply paying off the condo. He was left with a $1.5 million dollar open mortgage that was also in the process of foreclosure. He lost the $30,0000. The mortgage was “attached” to the property and either had to be paid or he would lose the property.
- Other liens or judgments: We have seen other types of liens or judgments causing title defects such as :
- IRS tax liens
- County code violation liens
- Credit card judgements
- Child support liens
- U.S. Government Restitution Liens (criminal activity) or government seizures
- Objection to sale (usually filed by homeowner in attempt to stop auction sale)
All of the above issues can create significant title defects and make the property’s title unmarketable (unable to be sold).
We encourage buyers to utilize traditional methods to purchase such as a realtor, a for sale buy owner or even a short sale that is properly handled.
You can order a title search online at our website at the following link Title Search Order Form
If you are considering buying an auction property and have questions, please contact our office at 305.271.0100 x701 or [email protected]
