Advice on buying a property that may be foreclosed on soon

In My Humble Opinion
1

There’s a property in Hillsborough County, Florida that Zillow lists as being in ‘pre-foreclosure,’ that is, the owner is behind on his payments, and the owner of this property has been served a Notice of Lis Pendens.

I’ve called the foreclosure attorney, to ask if there’s an auction date set for the property, and if so, when. The person I spoke with said they can tell me nothing, for confidentiality reasons; I should talk with the owner.

To make things even more confusing, the owner of the property is listed in the county records as being the “Estate of Xxxxx.”

The images in the street view in Google Maps suggest that, at least at the time of these images, multiple people are living in the house. There were a couple of cars out front, and from the next block, I could see another one in the back. So these people may or many not be renting from the actual owner.

I am interested in this particular property, for reasons I won’t go into here. I’d strongly prefer to buy this house than an essentially identical one a block or two away, though that’s a fallback position if push comes to shove.

So:

  1. What can I find through public records?

a) Would a Notice of Lis Pendens have to be filed with the county, and would it be a public record?

b) How about the estate? Would I be able to find out who the executor is, and whether the decedent died recently, or years ago?

c) If this property is to be sold at auction, how would I find out ahead of time?

d) Other?

  1. Once I find out what I can find out through such means, what is my best approach here? Should I try to buy the property at auction? Should I let the bank itself buy it at auction (apparently this is what usually happens), and try to buy it when the bank puts it on the market? Should I try to see if the owner (if I can find the owner) is open to a deal?

And needless to say, I’d like to have a pro inspect the property somewhere along the way. The thought has occurred to me that it might be worth seeing if the tenants (if it’s tenants) would take $50 or so to let an inspector in. It’s always good to know what shape the roof and the plumbing and so forth are in before buying a house, and I gather that once a property’s up for auction, my hopes of any sort of inspection are out the window.

Thoughts?

2

Bearing in mind that I have zero experience in this, my first move would be to speak with a realtor who works in that area, preferably one who handles foreclosed properties. Beyond that, I have nothing to offer.

3

Not familiar with Florida, but in Missouri you should be able to find the executor through the probate court in that county.

4

Can you go by in person, or hire a realtor to go by, knock on the door, and ask the people living there what’s up?

Also, why can’t the attorney put you in touch with the owner? If nothing else, it can’t violate confidentiality for them to pass on your name and contact info to the owner, saying you’re a potential buyer.

I’m no expert, but I’ve heard stories (maybe a few years old now) about how slow banks are to do anything once foreclosure starts. I think your best bet is to try and make the sale happen before its foreclosed, assuming the current owner wants to sell, and that you’re willing to pay enough to cover the outstanding mortgage. If so, I bet the bank would hold off foreclosing long enough for you to buy it in the typical way (after all, bank is much happier just getting paid off through a sale, than all the expenses of foreclosure).

5

Realtor[sup]TM[/sup] here. I’ve been thru transactions like this. Considering your lack of experience, it might be a really good idea to engage the services of an agent and sign a Buyer’s Agency Agreement with him/her, assuming your state allows that. You can word the agreement to limit his agency to the one property or a specific time frame if you wish.

At that moment, he is working for you (and you may be responsible for paying a commission at some point). He should be able to obtain most of the data you are asking for, but if things get too dicey, it would be wise to consider using an attorney as well.

Public records should show you who the owner of record is, what taxes have been paid or are delinquent, and what mortgages are applicable. They won’t show data about renters.

If you came to me, I would immediately order a Search & Hold through a title company, which would dig up almost everything you ask all at once. Our title company does not charge agents for that, which is another advantage of using an agent.

With regards to the question of should you wait for an auction – It depends on how important it is to you to obtain this property vs. getting the best price. You might get the best price at an auction, but you might lose out to another bidder. If you really want this property, you need to immediately make an offer to buy. Banks don’t like foreclosures, and they’ll do almost anything to avoid them.

You will probably have to have cash for such an offer. At the very least, you should be pre-approved for a loan and have a big chunk of cash for earnest money, but that puts you in line behind those who do have liquid cash. In a foreclosure, a bank will usually reject outright a prospective buyer who includes a loan contingency in an offer.

Banks are the hardest-ass and slowest negotiators you ever will see. Sometimes they make you sign reams of paper and will not even look at an offer that has ANY contingency, so be prepared. And it’s unlikely that you will be able to talk directly to any of the underwriters who make the actual decisions; they usually communicate thru layers of clerks with little or no authority.

As far as inspections, it’s a negotiation item. Usually banks will allow them at your expense, but refuse up front to modify the price or repair anything, so act accordingly. Most properties like this are sold “as is”, and it’s risky business for an inexperienced buyer.

Good luck, my friend. You are entering a minefield.

6

If you wait until it is foreclosed on you are most likely going to be too late; knock on the door and make a tentative offer to see if they are interested. Banks can drag their feet on some properties and you or relator may not know why. I tried buying a house on a short sale and they dragged it out so long I bought a house down the street. Only to find that the previous owner had made some sort of a deal to get back into the home; either by renting from the person who bought it or buy purchasing it back through a relative.

And I see now that Musicat has given some excellent advice that basically says the same thing but in more useful detail. :slight_smile:

7

IANA real estate anybody but I’ve recently bought & moved to a residence in FL. It was an eye-opening experience compared to purchases I’ve made in other states.

Everybody and their brother down here is either a real estate agent or a speculator or both. And every bank has their pet buyers with inside access. If you get the property it’ll only be because the smarter money let it go.

I’ve looked into the idea of entering real estate investment as a 2nd job / post-retirement income. Traveling how-to seminars & nights-and-weekends training schools are almost as common as used car dealers. And people play the game for blood down here.

I’m reminded of the timeless advice for poker players: When you sit down to play, look around the table to identify the patsy. If you can’t see who it is, it’s you.

An honest agent who works mostly in the relevant zip code would be worth far more than the commission you’d have to pay if the deal works out. A dishonest agent could still help you get a lot of info more readily than you could yourself. Which at least will let you walk away satisfied that the Zillow listing was effectively a mirage; not something you could actually buy for a reasonable price.

8

Another vote for finding an experienced “Buyer’s Agent” familiar with the neighborhood.

If you are asking some of these questions, you are at the bottom of a steep learning curve, and a desirable home in distress is not going to wait for you to learn how to do a title search, find an estate executor, formulate an offer.

Also, this is where cash is king - if you don’t have the full purchase price (including cloosing costs), at least get a pre-approval for well above what the property will bring.

And find out where the foreclosure auctions are held and attend one or two - in SF, there are usually no properties actually get to the Courthouse (actually City Hall in SF) steps - some money got to the right pocket before the sale date came.

9

Thanks for all the helpful suggestions.

  1. Musicat, I will take your advice and engage a realtor as soon as possible. Because you (and several others here) are right: I just plain don’t know enough, and don’t have time enough to learn, to navigate this terrain by myself. And will ask if FL allows Buyer’s Agency Agreements. And that Search and Hold sounds like an extremely useful thing.

  2. We have cash for a 20% down payment and then some, and can easily get pre-approved for a loan on the rest. We just finished paying off the mortgage on our own house up here in Maryland, and our incomes are secure, so the money part should be the easiest part of this. So that’s the next thing on the to-do list.

  3. We’ve already checked the land records online. As mentioned, the named owner is an estate. The property appears to be current on taxes.

  4. We have relatives down in this part of Florida, and this prospective purchase is related to that fact. But we’re 800 miles away, and our local relatives are, with one exception, aged and infirm. The one exception is intermittently willing to be helpful, but I’m not sure if my wife wants to confide in him yet. But this means that any personal investigation - knocking on the door and asking questions, etc. - would have to wait for one of our occasional visits down there. So we REALLY need an agent, just to have someone local.

  5. A question, Musicat - would this Search and Hold show how much they owe the bank? My thoughts regarding a negotiation with the owner are probably kinda basic, but are along the lines of “if you let the bank foreclose on you, you lose the house and come away with nothing. If you sell to me, you still lose the house, but I pay off your loan, and you walk away with $____ in your pocket.” But knowing what amount is needed to pay off the loan is obviously key to such an approach.

  6. Another question, Musicat - any thoughts about how best to arrange for an inspection, or should I leave that in my agent’s hands?

  7. I’ve been watching this particular neighborhood for awhile, so I’ve got a decent sense of what properties sell for in this neighborhood. So to the extent that this is a game of poker, I’ve got that, and I’ve got the fact that nobody I deal with has to know about the added value I’m placing on this particular property, let alone what that added value might be.

10

Don’t delay talking to your bank. And rather than applying for a future mortgage loan, consider getting an equity loan set up for any existing property you own. Until you actually draw on the loan, there should be little or no costs, but you will have instant cash available.

Probably not. It will show any documents recorded against the property, like mortgages, but monthly payments are not recorded by the government, so all you can find out here is the original loan amount (and that’s not always recorded, either).

A title researcher can, under the right circumstances, contact the lender and request a demand letter, which will have the amount due, to the penny. I’m a little fuzzy on this, but I think a sale contract would be needed first. Ask a title company, agent, or lawyer.

Your best bet is to contact the owner. You might be doing him a service, so approach it that way. He might be grateful for a quick buyer to get him off the hook.

How you proceed will be modified by what you know, so get as informed as you can as soon as you can. If the status of the property has deteriorated much, you may be able to work with the bank, but privacy concerns will tie their hands at first. Later in the process, less so.

If you can work out an arrangement with the owner, and it is approved by the bank (short sales will have to be; others, less so), you will have pushed other interested parties out in the cold.

But if you wait for the foreclosure process to proceed, at some point, the owner may have the right of re-possession, even after the title has transferred. This is not what you want. The details on this are subject to state law. Ask an attorney before you get in too deep.

Talk to your agent. It’s for sure, for legal safety, you will need written permission for any inspection or tests, but I’m unsure if a tenant’s approval is sufficient. That might be a question for an attorney. And you don’t know if there is a tenant yet, do you?

Line up a professional inspector, ready to proceed on a moment’s notice. Pay him an advance fee if you have to. Considering you could lose your shirt if the property has hidden, expensive-to-fix flaws, this might be cheap insurance.

Right you are. You don’t want to appear TOO anxious! Don’t forget how attractive a cash offer might be to a seller or a bank, even if the offer seems low re market. Talk to a title company, thru your agent. Can they close on a deal in 5 days?! If so, you are a dream buyer to a bank, and yes, it can be done. (You may have an eviction to handle after that.)

If there is a tenant, you need to find out the terms of the agreement, if any, or the state’s default terms for month-to-month leases. Usually the lease runs with the property, not the owner. You don’t want to be burdened with 5 years remaining on the lease, do you? (A lease may or may not be filed with the courthouse.)

Here’s a weird idea. Contact the owner, and find out what he owes. Make him an offer – you will advance him the due amount (and more?) in return for an option to buy the property at some future date, for a specified price. Would this work for you? Make sure everything is in writing, prepared by an attorney, and recorded in the County Courthouse (or whatever they use in Florida). That might give the owner some living/breathing room, and you can take possession of the property at some other time.

Good luck!

11

I’ve seen Zillow list multiple properties in my town as “pre-foreclosure” for over a year each, so I wouldn’t get my hopes up too high if I were you.

12

I’m not a realtor - but that last bit (option to purchase) would seem VERY risky.

Yeah, you’d have everything on paper and documented by an attorney - but what if the residents decide they don’t want to move after all. Then you’re out the money, and you have to go to court to force them to exercise the contract, with no guarantee it’d go in your favor. At best you’d be out legal fees and face a significant delay. I wouldn’t touch an option like that with an 800-mile pole.

Re people living in the place but owned by “estate of” - they may be truly tenants (in which case I think there are legal protections regarding when you can make them move out), or they may be family members living in Mom and Dad’s house while the estate is settled.

You definitely want a local agent involved given how far away you are. We worked with one when we bought a place in Palm Beach County last year Our place was also owned by an estate (though unoccupied). It wasn’t facing bank foreclosure but it turned out it was within a month or so of being forclosed on by the HOA for 2+ years back dues - that’s something else you need to check on. All those debts need to be settled before you can purchase the place.

13

I don’t disagree with you at all. But just about everything in this kind of transaction is risky.

However, not all sales are adversarial; not all landlords are Simon Legree; and not all tenants are assholes. I only threw that idea out as one that could work, under the right circumstances, with the right safeguards, yet might not have occurred to either party. It certainly wouldn’t be my first choice.

Yes, web sites like this are not to be trusted absolutely. Remember, they earn money for the eyeballs they attract, and the more listings they post, the more eyeballs, so the incentive is to inflate rather than be accurate. A wise investor verifies his sources.