Miami Property Auctions

This week I participated in a public auction held by the Miami Dade County Clerk of the Court and wanted to share my thoughts with you. It was an interesting experience and at the conclusion of the day’s events, I left both encouraged and dumbfounded.

The scene started off a bit somber, oh hum, another auction, but rapidly changed to a room full of starving lions circling their sick prey. Imagine a room full of cash buyers, mostly classic old school Miamians, mixed with suits, shorts, gold, polyester, Blackberries and laptops.  There were moments when the amount of testosterone, bidding against each other in $100 increments, was simply overwhelming.

The County had three officials holding the auction, one is the actual auctioneer, and the other two working as liaison between the Court and the Plaintiff (generally the representatives of the bank or condo association). Each property is announced by case number, and if the Plaintiff’s representative is present, then the auction proceeds. The auctioneer then reads the details of the case, including the name of the defendant, subject property legal description and address. Then comes the key moment. The Plaintiff’s representative announces their reserve by stating “We will take up to $X”. The mood in the room changes, some chuckle, someone shouted “NEXT”.

Following a short pause, the auctioneer asks for any bidders to submit their registration forms. Each bidder then delivers their completed form and their valid ID to the auctioneer. The auctioneer then requests all the bidders to step forward to the middle of the room and the bidding starts. The opening bid please Plaintiff? ”$100 is our opening bid,” says the Plaintiff, and so the bidding leaves the starting block. Now remember that the Plaintiff has pre-announced their reserve to be met. Some super smart bidders actually try to bid up to around $5,000 against the Plaintiff, even if the Plaintiff’s reserve is $100,000. Crazy!

Of the two hundred properties to be auctioned, approximately one-third did not take place due to their being no representative present for the Plaintiff, and perhaps another ten percent were cancelled by the Court prior to the commencement of the auction. That left us with approximately sixty percent to be auctioned, or one hundred and twenty properties. Out of this remaining amount, the approximate ten active bidders only actually bid on about twenty of the properties and were successful on about ten of them. In general, the majority of the bidders lost their appetite at $100,000.

I must note that there were a number of properties on which nobody bid that had a low reserve set by the Plaintiff, and in terms of my analysis, the reserve was considerably less than market value of the property. For example, a 3 bedroom, 2 bathroom, 1,800 square foot, single family home in Miami Shores had a reserve of $90,000. According to the property appraiser, this house has an assessed value of $291,000, and my estimated market value was $160,000. Unfortunately for me, my cash allowance for day was spent or I would have jumped on it.

My thinking is that with a few exceptions, that the banks continue to set high reserves, and instead of focusing on lending, they are now active property owners and managers. The fact that one has to pay the full amount in cash or by cashier’s check to the Miami Dade Clerk of the Court by 3 ’o clock on the day of the auction, is keeping the majority of investors out of this auction process. In November 2008, there were over 1,300 properties scheduled to be auctioned, in December this number increased to 1,500, and, this month there are over 2,200 properties scheduled for auction.

Just how much longer can the banks stay in the property business and hold on to these massive portfolios of non-performing assets? With or without TARP money, the days of such high reserves is soon to burst!

Florida Foreclosure Laws

If you are planning on purchasing distressed property in the state of Florida, then you should be knowledgeable of the foreclosure laws. Please find the quick facts:

•  Timeline: Typically 180 days
•  Right of Redemption: Yes
•  Deficiency Judgments Allowed: Yes
•  Primary Security Instruments: Mortgage
•  Judicial Foreclosure Available: Yes
•  Non-Judicial Foreclosure Available: No

All mortgages are foreclosed in equity. The foreclosure claim shall, if tried, be tried in the court without a jury. In a mortgage foreclosure action, the court severs, for separate trial, all counterclaims against the foreclosing lender.

The court order of foreclosure is required to specify how the foreclosure must take place, and the foreclosure must take place on those terms. When a legal advertisement or notice of the foreclosure is required to be placed in the newspaper, then it is the responsibility of the lender or their representative to place such an advertisement or notice.

Equitable Right of Redemption ends at the foreclosure sale. There is a period of time after the sale that “the court reviews the sale to ensure that a fair price has been paid.” This period of time, which is typically ten days, allows parties to object to the sale on the basis that proper procedures were not followed or collusion existed between bidders, for example. Following this period of time, the Certificate of Sale is filed and the sale is confirmed. If the sale is not confirmed, then another sale is ordered. Following the confirmation of the sale, the lender may sue the former borrower to obtain a deficiency judgment.

Recently, mortgage law experts claimed that the incentive to walk away from a home loan is highest in states that have anti-deficiency statutes, which prohibit lenders from suing borrowers for additional funds following foreclosure. This handful of non-recourse mortgage states includes the high-foreclosure states of Florida, California and Arizona. According to Donald Lampe, a North Carolina based mortgage lending attorney “the statutes generally prohibit or limit a lender’s ability to go after the borrower’s assets to satisfy unpaid mortgage debt.”

For more information on buying a foreclosure or bank owned property in Miami, please do not hesitate to contact us at info@miamiangelproperties.com or 305.673.5300.