Buying Foreclosed Homes

Purchasing foreclosed homes in the sunny state of Florida presents a lucrative opportunity for both rental investors and regular homebuyers. Apart from securing a home at a significant discount, the advantage lies in a quicker closing process compared to traditional home sales. Considering a pre-foreclosure or foreclosed property could be a favorable prospect for you. Bank-owned properties often come with a price tag lower than the current market value. The banks primary goal is to remove real estate-owned (REO) properties from their books.

What is a foreclosed property?

To grasp the process of purchasing foreclosed homes, you should familiarize yourself with the intricacies of the foreclosure process. “Foreclosure” is a broad term that encompasses various property types and stages within the foreclosure process.

  • Pre-foreclosure – These homes have received notices of impending foreclosure and are now listed on the open market to prevent an actual foreclosure from taking place.
  • Homes being sold at auction – Homes that have been publicly advertised for a minimum of two weeks and are slated for auction by the clerk of the court.
  • Bank-owned foreclosures (RE)s) – Properties not sold at auction during foreclosures are acquired by the bank and subsequently listed on the open market through real estate agents as real estate owned (REO) properties.
  • HUD Homes – FHA foreclosures from the Department of Housing and Urban Development (HUD) are available through online auctions. This presents a favorable choice for prospective homeowners, as HUD typically maintains a substantial inventory and gives preference to buyers intending to occupy the property.

Buying Pre-foreclosures

Pre-foreclosures involve properties where owners have been informed of impending foreclosure, typically due to overdue mortgage and/or tax payments. In Florida, the pre-foreclosure period can extend from 8 to 14 months, starting from when the borrower initially began missing payments until the bank finalizes the foreclosure on the property.

Similar to any legal proceeding, there are court filings, preliminary hearings, summonses, and other legal procedures that can potentially impede the process. The foreclosure sale is then scheduled within a window of 30 to 60 days.

Purchasing pre-foreclosures shares similarities with buying any other home. But the key difference lies in the distressed nature of the seller who must sell by a looming deadline. While this situation presents a potential opportunity for a favorable deal, it’s crucial to approach with empathy. You must consider the seller’s challenging circumstances. Additionally, be prepared for a quick closing, as the timeframe for completing the transaction can vary from several months to just a few weeks, depending on how close the property is to the auction date.

Buying Homes at Foreclosure Auctions

Should the lender successfully file a lawsuit for foreclosure against a delinquent borrower, and if the borrower fails to repay their debt or declare bankruptcy within 20 to 35 days, the property will be scheduled for auction.

When Florida properties are auctioned publicly, the auction must be openly advertised to the general public. The advertisement is required to specify the location, time, and date of the auction. The highest bidder will secure the auctioned property.

Auctions can occur either in person or online, contingent on the property’s location and the county’s procedures. In the event that no winning bid is submitted at the auction, the property reverts to the bank or government. They then assumes possession and proceeds to sell it on the open market.

Buying Bank-Owned Foreclosures (REOs)

If a property remains unsold at auction, the lender assumes ownership and endeavors to sell the property. These are known as a real estate-owned (REO) foreclosures.

Purchasing an REO is comparable to buying traditional homes. The distinction though is that you are acquiring directly from the bank rather than an individual. REO properties are typically marketed on the open market through the assistance of real estate agents.

Getting favorable deals is possible. However, it’s essential to note that the bank aims to recover as much of their investment as possible. Don’t expect big discount on these.

Buying HUD Homes

HUD homes share similarities with REOs as they both result from properties not being sold at auction and repossessed. However, the distinction lies in the fact that, as HUD home mortgages were government-backed, the government assumes possession after foreclosure instead of a bank.

Steps to Buy Foreclosure in Florida

  1. Secure Financing: Determine your financing options for purchasing a pre-foreclosure, REO, or HUD home in Florida. Traditional financing may be suitable depending on the property’s condition. If bidding at auctions, having cash on hand is usually necessary, whether it’s yours or from a private investor.
  2. Property Search: Explore local MLS listings, Zillow, RealtyTrac, and your county sheriff’s website for pre-foreclosures, REOs, and auction homes. HUD homes can be found on the HUD Home Store.
  3. Due Diligence: Conduct a title search to identify any outstanding liens or property issues. Consider inspections and appraisals, and while not mandatory in Florida, seeking guidance from an experienced attorney or agent is advisable.
  4. Offer or Bid: Approach the pre-foreclosure stage with respect. For REOs or HUD homes, carefully follow specific instructions provided for each type.
  5. Closing Process: If you acquire a property at auction, ensure the deal is confirmed after the sale, and the redemption period is over. In Florida, wait at least 10 days post-sale to begin renovations.
  6. Move or Rent: After closing, move in and enjoy your new property, unless there’s a tenant in place. In that case, allow at least 90 days for them to vacate. Landlords must honor the terms of existing leases.