Florida Foreclosures - How To Buy Foreclosed Homes in Florida

Florida Foreclosure Myth v. Reality - In April 2008, I wrote how it was still too early to be buying foreclosure properties, because prices were headed lower. Indeed, prices headed much lower. In some markets prices have dropped by 30% from April 2008 through July 2009. Overall we are now seeing prices in some markets that are 70% below peak prices, and far below the cost to replace these homes.

July 2009 - As I write this in July 2009, we are seeing thousands of foreclosure properties priced below the market. Lenders are dumping properties, with little regard for values or alternatives. So the time has come where I am recommending foreclosure properties to my investor clients and end users. However, there are a few cautions.

Foreclosure Myth #1 - Flip - I can flip this property and make a bundle. - Response: Don't count on it. If it were that easy, an end user would have already bought the property. Moreover, your financing may restrict a flip.

Foreclosure Myth #2 - Clear Title - I am buying this free and clear. - Response: Unless you have done your homework, you might be buying with a tax lien, a mortgage, a squatter or any variety of legal glitches that have not been totally cleared. Do your homework and make sure you know where to look and how to look.

Foreclosure Myth #3 - Rental Income - I can rent this out and have positive cash flow. Response: We're finally starting to see near positive cash flow. However, the quality of your tenants is now in question, since we are facing further unemployment throughout the country. You must also consider the time and energy involved with being a successful landlord. In the alternative, you higher a property manager like us to handle everything. If you decide to hire a property manager, make sure you build this into you number from the start.

How To Buy Foreclosures - Hire an expert. If you are looking for foreclosed properties in Martin County, Palm Beach County, St. Lucie County or Indian River County Florida . . . we are your experts, so please email or call us for additional information - Mike@FloridaHomes.PRO or 772-260-5448

If you think you can buy a foreclosed home without an expert, you can. But more likely than not, you will regret the decision. There are a number of traps, from lenders skating around disclosure laws to title and marketability issues.

First Step - Fact Gathering - Get the facts. All the facts! And then more facts. You'll want to run a title search on the property in addition to requesting the property details from the party foreclosing. If the property was listed, get the listing . . . and get your hands on the Agent Details as well as the Client Details of the listing. There are two parts to all MLS listings. Consumers only see the Client Details on Realtor.com and other public websites. Only your broker can access the Agent Details. Run a property tax search and a county records search. Even with the tax and county records in hand, you still want to run a title search with a company that is going to stand behind it with a title policy.

Second Step - Inspection - Go see the house AND the neighborhood. Find out how to get access and do a walk through. If you're still serious, spend the money and get it inspected. And be very careful here. You can get a "check the boxes" inspection for as little as $250. But if you want a very thorough inspection, be prepared to pay $750 or more . . . and be prepared to be shocked by what the pros find. I've yet to see my primary inspector come back with anything less than a 25 page report of problems . . . and that's it brand new homes. If you think the local building official actually inspects homes before issuing a Certificate of Occupancy, you are dead wrong. Most municipalities do a very basic "walk through" and other do "drive-bys" (if the house is there and the builder said it is OK, the building official issues a CO). Once you have walked the property and you have a solid inspection report in hand, reevaluate the price.

Third Step - Assessing a Value - Evaluate your basic research. What issues are hanging over this property. Once you have them identified, and you still want to continue, you need an appraisal or a broker price opinion. If you're dealing with a savvy broker, the BPO will be even better than an appraisal. A comprehensive BPO will include information about what has sold and what is on the market, as well as market conditions, property condition inside and out, neighborhood details and enough additional info for you to come up with a price. Yes, you. You're either going to live in it or rent it out. If you are a flipper, forgettaboutit.

Fourth Step - Area Scouting - If you are still interested, scout the area. Talk to some brokers, but get out there and drive around. Make sure there are no surprises. If you are still interested, make sure you visit the home site on a weekend and maybe a Friday night and maybe early in the morning before everyone leaves for work. Get a feel for what's going on. In this market, you have foreclosure neighborhoods that are full of homes with multiple occupants. You have homes that are being trashed by renters that couldn't care less. You have entire neighborhoods that are being trashed by a cycle that can catch you off guard. If you are an investor that is buying the property sight-unseen, because some guy in the Internet told you he is going to find foreclosures for you and rent them out with positive cash flow . . . you are nuts.

Comments: The basic information I am providing above does not apply to everyone, and it is very basic. I tried to put together some general information to give you a flavor for what is involved. If you are serious about foreclosures in Florida, call me. There is much more to this, and it really depends on your particular circumstances. If you have questions, please feel free to call me at 772-260-5448 or email me at Mike@FloridaHomes.PRO


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