Miami Short Sales – Know the Law

A few weeks ago I wrote a brief introduction to short sales titled Short Sales 101. As a buyer in today’s Miami real estate market, it is essential that one become an expert to navigate the challenging, and at times, perilous seas of short sales.

This is an example of a typical scenario that I worked on recently, and one in which there was plenty of questionable, unethical and illegal activities. Here is a short version of what transpired:

1. After an exhaustive search for a “steal” in Coral Gables, my client, the buyer, decided that he loved a single family home that was listed as a short sale. He instructed us to make an offer at $1.8 million.
2. The seller’s agent, upon receipt of the offer, disclosed to us that the buyer had engaged a “loss mitigation” expert to handle the deal. When asked about this individual the listing agent did not know  this “expert’s” role or how they were to be compensated.
3. The following day, the contract was accepted and returned with the buyer’s name altered to that of the “loss mitigation expert” along with a limited power of attorney.
4. We contacted the “expert” to discuss our concerns over the power of attorney and questioned how they were to be compensated. He stated that ”the seller tried to handle this himself and he could not get it done with the lender,” and “he is too busy to deal with his own property,” and “there is no problem as I have the authority to legally bind the seller,” and “don’t worry about compensation, i have this worked out with the seller on the side!” Say what?
5. Following many further heated discussions to determine what is really going on the deal was exposed. The “expert” had an agreement with the seller to get paid a $15,000 “loss mitigation fee” at closing [on the HUD] and had his own purchase contract in with the lender to purchase the property at a lower price. He would then close in double escrow, pocket the difference of around $150,000 plus the loss mitigation fee.
6. You can only imagine my next conversation with the “expert,” who was essentially asking my client to pay more than what the lender was willing to accept, and swindle the new lender, existing seller and buyer all at the same time. Does this sound familiar?
7. Upon our clear objection to such a scheme, the “experts” next offer was to be paid just a straight real estate commission instead of the loss mitigation fee. 
8. As such, we immediately informed our client that he should cancel the contract and walk away from the deal. Additionally, that we were not willing to be party to the transaction. The buyer signed the release and escrow monies were returned.

This leads me to my next point. It is important to be aware and knowledgeable of the new Florida law titled Foreclosure Rescue Fraud Prevention Act, which took effect on October 1, 2008. This law protects homeowners who face the threat of foreclosure from individuals who would prey upon them, including the payment of any upfront fees to mitigate any loss.

The flood of Miami short sales has no end in sight. You need to be motivated and willing to do the work. To help navigate the way for you in buying a short sale property in Miami, please contact Ross now at info@miamiangelproperties.com or call 305.673.5300.

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.