In Southeast

About a week ago or so, my sister, Angela, asked me how to buy a house at auction in Florida. She’d been wanting to invest in single-family homes ever since she saw how successful I’d gotten doing it and assumed that I’d found most of my best deals at property auctions. In truth, these days I find the majority of my investment properties a different way. But, at the beginning of my career, I attended as many auctions as I could, so I’m pretty well versed on the subject. And, whether our work and personal lives move on the same trajectory or not, I want my little sis to take the path that is right for her—as long as her choice is an informed one. Which is to say, I’m also glad she came to me for advice and let her big brother walk her through the steps of how to successfully buy a foreclosure auction home.

How to Buy a House at Auction in Florida: A Step-by-step Guide

How to Successfully Buy a House at Auction in Florida

Like a lot of states around the country, Florida is a judicial foreclosure state. So, whenever a bank, credit union, or other mortgage holder wants to foreclose on a house whose homeowner has fallen behind on payments, the lender must sue them in court. Winning the case is only the first step in potentially repossessing the home, however. Most of the time, the property gets sent to a local auction, usually a Sheriff’s Sale. So, the majority of homes you find at an auction are those that have entered the foreclosure pipeline. This benefits the lender because they may be able to recoup some, if not all, of the unpaid loan from a sale. This benefits you because you have a chance to purchase a distressed property for less than market value that may provide you with pretty decent returns.

Buying a house from a Florida auction, however, is quite a bit different than purchasing other distressed properties you find. Here are the steps you should take to do it successfully:

  1. Find properties going to auction. You can find foreclosure auctions near you, and the homes being sold there, a number of ways. A quick search online or in your local paper will probably tell you if, where, and when house auctions happen. But, asking around may be just as helpful. Since foreclosure proceedings, including court judgments that send a home to an auction, are made public, check directly with your local government office, too. The Clerk of the Court’s Office in Miami-Dade County, for example, provides an online search tool that lets you review the files for properties being auctioned. Keep in mind, however, that once you find a property you are interested in, you’ll need to continue tracking it up until, and including, the day of the sale. Sales are frequently canceled for a variety of reasons, like a bankruptcy filing. And, showing up for a house that’s not being auctioned won’t exactly feel like a good use of time.
  2. Perform your due diligence. Though you probably won’t be allowed to perform a home inspection on a property, it’s still critical that you do as much due diligence as you can before you bid. Since the condition of foreclosure homes, and whether or not they come with additional liens and encumbrances, is never guaranteed, so the auctions themselves recommend you run a title search at the very least. If you can, I suggest you drive by as well. To even start bidding, you have to put down a deposit and it’s almost always in cash or a cash equivalent, like a certified check. It’s also nonrefundable. So, you can’t get your cash back if your bid was the highest. That particular house—or, money pit as it may be if it comes with foundation issues and liens—is yours. And, in counties like Broward, you’ll need to pay for it in full the day after you win.
  3. Line up funding. If you’re sure about bidding on a house and want to take a chance at buying it from an auction, have your funds lined up and ready. This requires knowing your maximum bid well in advance and having access to cash to cover it fast. Of course, this can be difficult to do, too. First, without an inspection, you can’t know the maximum amount you should pay, even if you know what you can pay. And, because you have to close quickly—sometimes within 24 hours—there is no wiggle room to work with a traditional Florida lender and very little to take out a hard money loan to buy the property. That leaves you with limited options, like moving money from your retirement account or borrowing against the kids’ college fund—unless you’re already flush with funds and don’t mind risking them on a home you haven’t seen.
  4. Attend, bid, and buy. Your next step is to go for it; attend the auction, bid for a property, and, if you win, close the deal. Obviously, it’s not always that easy. But, to make it easier, familiarize yourself with the fine print on every terms of sale for each auction you’re thinking about attending. Similarities on how to bid and buy exist across counties since most now use the same online system to manage their auctions. But, differences exist, too. For example, in Monroe County, you have until 4:00 the following afternoon to pay your winning bid in full. Whereas, in Miami-Dade County, you have only until noon. So, read up on how to proceed, then do so with caution. Of all the foreclosure auction risks you might expose yourself to, not knowing how a sale works are ones you can easily avoid.
  5. Wait. Just because you’ve paid in full, doesn’t mean the property is yours. Depending on your county, the Certificate of Title may not be available for several days to a few weeks. And, during that time, the homeowner can redeem the property if they’re able to come up with the funds, effectively taking it back out of your hands. You will be refunded the cash you paid for the property, but you won’t get reimbursed for any work that you’ve done. So, wait to move forward on any rehabbing until, and if, you get the title. Otherwise, you’ll have wasted your money in addition to your time.

If all goes well, at the end of these steps you’ll have in hand a great property that you can rehab and resell for a good ROI. That possibility is one that keeps new real estate investors coming back to auctions over and over. But, because the foreclosure timeline in Florida is so long—up to three-and-a-half years—it’s also possible to buy better investment properties in Florida, with less risk to your bottom line, directly from the distressed homeowners before they’re foreclosed on. Of course, that means you’ll need to revisit step one and find a new way to locate deals. With the right lead-finding strategy in place, you won’t have to look far.

Put the Brakes on Auctions, Go With Distressed Homeowners Instead

After I reviewed with my sister how to buy a house at a Florida auction, I made sure she also knew that none of my best deals ever came from such a sale. I did alright on a couple of auction properties, but neither ended up being worth the time, effort, and stress that I invested to find and buy them. But, when I became an independently owned and operated HomeVestors® franchisee, I didn’t have to deal with these auctions anymore since homeowners in distress started coming my way. Homeowners are always looking for “solutions for ugly situations®,” like the prospect of losing their house. And thanks to HomeVestors®’ long-running “We Buy Ugly Houses®” national ad campaign, those homeowners find their solutions in franchisees like me. I’m able to purchase a property at a great price and they’re able to sell their home, instead of losing it. That is a bigger win than any auction can provide.

Put the brakes on auctions and get distressed homeowners to come your way instead. Contact HomeVestors to see how you can move forward with a franchise, and your professional investing career, today!

 

Each franchise office is independently owned and operated.

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