To understand and minimize your risk, you should be well informed prior to the time of purchase. Speak with experienced counsel before the online auction.
It is not news to many Floridians that the latest hot real estate market has been soaring for a while. We are continuing to see a heavy influx of new Floridians. These monied transplants and well-funded private equity buyers have contributed to the ongoing rise in demand for real estate. This increased demand is in turn accompanied by a tight supply of available properties.
Some buyers have turned to less traditional methods of purchasing real property in Florida, hoping to find hidden gems and bargains. While there are certainly opportunities to purchase property through online auctions and tax deed sales, it is important to be knowledgeable about the process before taking action. Prepared buyers can do well. However, for those who fail to do their due diligence before they buy, the pitfalls can be daunting.
Online auctions of foreclosed properties
As the courts sought to deal with the crush of foreclosed properties following the Great Recession, online auctions for foreclosed properties replaced bidding at the courthouse steps. The online auction process allows properties to be sold to bidders quickly and regularly through frequently scheduled auctions.
However, when purchasing foreclosed properties at online auctions, inexperienced buyers seeking bargains can be dragged into litigation unexpectedly. Although a purchaser may be the successful bidder, the perceived bargain is quickly dampened when valid lien-holders emerge and demand payment from the new buyer. The unprepared buyer can encounter unexpected, unsatisfied mortgages, homeowners’ association liens and other liens. Many of these encumbrances can be found in advance through proper searches of the appropriate public records.
To avoid both unpleasant surprises and potential post-purchase litigation, it is prudent to conduct proper research on any real properties you are considering purchasing. Become informed about the process of online buying before you take the plunge. Given the difficulty buyers are experiencing with making competitive offers in what has been labeled a sellers’ market, online buyers need to protect themselves by conducting appropriate due diligence.
To understand and minimize your risk, you should be well informed prior to the time of purchase. Before the online auction is scheduled to be conducted, speak with experienced counsel to request an owners and encumbrances title search which can identify existing liens and encumbrances that may be on the property. Such reports cost a modest $75–$250 and can be obtained within three to ten business days. These reasonable and simple steps may save a purchaser from buying encumbered property and a potential lawsuit to collect the debt.
What Are Tax Deed Sales?
Florida tax deed sales opportunities arise when the owners of real property fail to pay their real estate taxes for three years in a row. When this happens, the property will likely be subject to a tax deed sale. Pursuant to Chapter 197 of the Florida Statutes, the proceeds from a tax deed sale are used to pay delinquent, unpaid taxes and sale costs. Sometimes these tax deed sales result in a surplus and there is another process for the distribution of surplus proceeds.
When an excess of funds remains, the Clerk of Court for the county where the property is located must send a Notice of Surplus Funds from Tax Deed Sale form to the appropriate parties pursuant to Section 197.582 of the Florida Statutes. Lien-holders and owners of record then have 120 days to submit a notarized statement to the Clerk and Comptroller.
However, it is important to be wary of companies that purport to solicit property owners who are entitled to collect any surplus, as these companies seek a large fee from an owner’s surplus for very little work and no legal representation. This pitfall can be avoided by obtaining representation by experienced counsel who can ensure that the owner receives sound legal advice and the funds to which they are entitled.
This is true because if no claims by others are received, there is a conclusive presumption that the legal titleholder of record is entitled to the surplus funds pursuant to Section 197.582(9) of the Florida Statutes.
It is wise for inexperienced persons to engage proficient counsel ahead of time to avoid certain unfavorable outcomes given the complexities of online auctions and tax deed sales.
Given the increased litigation we have encountered related to unprepared buyers, it is strongly suggested to plan ahead by conducting appropriate due diligence, and then navigate these opportunities with the assistance of experienced counsel. For more information, contact: Mary Fabre LeVine,941.748.0100, mlevine@blalockwalters.com or Jonathan Tortorici at 941.748.0100, jtortorici@blalockwalters.com
Mary Fabre LeVine, Esq.
Business Litigation
Jonathan T. Tortorici, Esq.
Business Litigation
