The state of Florida has consistently ranked as a highly profitable area for real estate investment. The median purchase price for a home in the Sunshine State was $139,658, but average resale prices reached $196,125. Great property deals can be found in the form of foreclosures – these homes will often be among the best prices in the state. However, buying a foreclosed home in Florida can be a challenge if you don’t know where to start.
As a real estate investor interested in foreclosed homes in Florida, selecting the right property is critical to success. Keep reading to learn how to buy foreclosed homes in Florida:
The Basics of Foreclosure
A foreclosed property has gone through a process where the lending institution has tried to recover some of the outstanding funds from the property owner who has defaulted on their loan. The lender will then usually sell that property at a foreclosure auction for lower prices to get it off their books as soon as possible.
In Florida, this is a civil proceeding filed through the courts. Florida law provides a procedure designed to speed up the foreclosure process in cases where the homeowner does not have a genuine defense. For real estate investors, these types of properties represent good investment potential as it allows them to buy for lower prices. Lenders are not in the business of property management and would rather sell a property that has been defaulted on and avoid paying ongoing maintenance expenses.
In the state of Florida, lenders and banks need to file lawsuits in order to proceed with the foreclosure process. While much of the buying process for a foreclosed home is the same as any other property purchase, investors buying foreclosed homes will find the process to be more nuanced in other ways.
The Foreclosure Auction
Foreclosure auctions often take place in courthouses, county clerk offices or can even happen at the property being auctioned itself. The gamble for investors here is that they are not always allowed to inspect the property before it is auctioned and must take the property at face value and as is. It’s also important to note that as the buyer of a foreclosed home, you can be liable for outstanding expenses like property taxes, so it is important to research the state of the title prior to the auction.
The lower costs associated with foreclosure auctions attract many property investors looking for a cheaper property they can rehab and flip for a better profit so competition will be high. Nowadays, online foreclosure auctions are becoming increasingly popular as a new way of purchasing but can be even more competitive.
A pre-foreclosure is an earlier stage of the foreclosure process. Pre-foreclosures start when the lender files a default notice on the property, informing the owner that foreclosure will be pursued if they cannot repay their debt. The length of the foreclosure process will vary depending on location. In Florida specifically, it can be a lengthy process. Typically, pre-foreclosure can only be initiated when the property owner is three months behind on their loan repayments.
At this point, there is still a chance that the property owner can pay off this debt and reverse the default status. If they cannot, the property will be sold. A pre-foreclosure home that goes up for sale is another outcome, also known as a short sale.
What Else Investors Should Know
The rest of the process is much the same as with other property purchases, and you will need to present an offer to purchase. If you are buying a foreclosed property, you should check that everything has been done in line with the law and a certificate of title has been issued.
Your offer will be taken more seriously if you can provide a proof of funds letter – this sets you apart from other buyers. This is because if foreclosures are popular in your area with other investors, the chances are that you will have to compete and a proof of funds letter adds gravitas to your offer.
If you are planning to bid, decide how much you are willing to do in advance. Be prepared to bid and exceed other offers in set increments until you reach the limit you set for bidding.
Buying a foreclosed property can be a good avenue to finding more affordable homes in Florida. Investors can expect to find properties for better prices at these auctions, but with the caveat of not always being able to inspect them first. If you are prepared for that risk, you should go into the auction with a plan and a maximum bid limit.
Floridian real estate has always performed well and foreclosed properties can be great profit-earners for the right investor.