Buying Miami Condo Foreclosures for Sale: A How-to Guide

Founder, Condoblackbook.com & Owner/Broker, HB Roswell Realty
Buying Miami Condo Foreclosures for Sale: A How-to Guide
Founder, Condoblackbook.com & Owner/Broker, HB Roswell Realty

Mar 14, 2019 March 14, 2019

Everyone wants a great deal on Miami area condo, and historically there has never been a better way to get a deal than to purchase a Miami condo foreclosure put for sale by a lender or sold at auction. While buying a foreclosure is not for everyone, you will be surprised to find that it is very accessible to almost anyone if you know how to maneuver. In this blog, we will give you a solid overview of what you need to know to get started on buying your next condo in foreclosure and to be able to jump on the next foreclosure condo that comes up for sale.


A Quick Overview of How Most Miami Condos Get Foreclosed

Condo Public Auction

When an owner fails to pay their mortgage, the bank or lender can file to foreclose on the property at the courts. After going through various legal steps, the courts deliver a final judgment and set an auction date. In Miami-Dade county, once an auction date is set, you can find the property listed here. Keep reading for tips on what to look out for when buying at the county auction further below.

What Kinds of Condos Come up for Foreclosure?

The simple answer is any kind. You can find a beachfront multi-million dollar condo in mint condition up for foreclosure sale, as well as a completely destroyed condo in the worst neighborhood. In the world of distressed condos, anything goes, because financial problems happen whether you are rich or not so rich.


Tips on Where to Buy Miami Condo Foreclosures for Sale

Young couple searching for listings

There are different ways you can get access to foreclosed miami condos, some of which are as easy as buying a non-distressed property from a regular seller, with most or all the protections you are used to, while others are a bit more risky or unfamiliar to the typical buyer. Here are a few of the most common ways you can find foreclosed Miami condos for sale.


Benefits of Buying a Miami Condo in Foreclosure

  1. Motivated sellers. As with all foreclosed properties, the seller is motivated to sell the property as soon as possible.
  2. Best condo deals. You have a bigger chance at getting a discount off market price on a foreclosure property than on a non-distressed listing (although many great deals happen from regular sellers as well).
  3. Hidden deal opportunities for those in-the-know. Institutions sometimes assign foreclosed listings to agents that may not be as knowledgeable about a certain building or neighborhood, which can create situations where properties are priced incorrectly on the low side.


Miami County Foreclosure Auction Sales

As we mentioned above, the first stop of any foreclosed property is the county public auction, which in Miami-Dade county is conducted online. Here is a rundown of things that you need to check yourself or won’t have access to that work differently than a typical sale. The below are some pros and cons give you a general understanding of risks, but this is by no means complete:


Pros of Buying at County Foreclosure Auction Sales

  1. Best property deals. You have the highest likelihood of getting a great deal, since there is a smaller number of people that have the stomach to buy a property sight unseen with limited information on it.

  2. Advanced notice. Through the online bidding system and the courts, you know a property is coming up for sale before it actually becomes available for bidding. So you have time to research the property in advance of the sale.


Cons of Buying at County Foreclosure Auction Sales

  1. Money spent BEFORE bidding. You must get someone to run title, lien and permit search prior to bidding on the property to ensure you are getting clean title. This costs money, and many times you have to bid on 10 or 20 or more properties before you win won at the price you are willing to buy at. So the expenses can add up pretty quickly.

  2. Money deposited before bidding. You are required to have 5% of your expected maximum bidding price in the county clerk of courts, and the system will stop your bidding once you hit that 5% ratio.

  3. No inspections before after sale. Typically you can’t access the interior of the property to know the condition, and there is no inspection period. You can’t back out after winning the auction if you don’t like the property condition.

  4. No due diligence period after sale. You have no due diligence period after winning the auction bid. You can’t back out if you find something you don’t like.

  5. Hidden expenses like past due HOA fees. You won’t be able to easily verify if there are any past due association fees, and then as the new owner you may get a bill for thousands or tens of thousands of dollars.

  6. You may need to evict occupants. There may be occupants in the unit that you will have to evict once you become owner.

  7. Beware of buying in an inferior lien foreclosure. You need to ensure you are buying a foreclosure where the primary lienholder (as opposed to a second mortgage lender for example) is the one foreclosing and there are no “super property liens” on the property like past HOA dues or IRS tax liens.

You must do your due diligence on every property separately by consulting an attorney and or title company so they can let you know all your risks and title/lien/permit issues you might run into on that particular property.

While the above list may seem scary, buying at the auction can be lucrative. We have bought plenty of properties there, although we typically don’t purchase on behalf of clients.


Buy a Foreclosure for Sale on the Open Market via MLS Search

In many cases, the lender may believe they can get the biggest return out of the property by outbidding investors at the county auction, taking ownership of the foreclosed condo and listing it on the open market. In fact, most properties that are bought back by the lender at the county auction are in turn listed on the MLS for anyone to be able to make an offer. Here is a quick rundown of the benefits and risks of buying a foreclosed condo on the open market or MLS.


Pros of Buying a Foreclosure in the Open Market / MLS

  1. You can visit the property before buying. Most of the time these properties allow showings, so are able to view the property prior to making an offer.

  2. Offer process is familiar. Those who have purchased any kind of property before will feel more familiar with the general offer process. The process is quite similar to any non-distressed property, with some minor exceptions like proof of funds requirements and possible bank addenda.

  3. Inspection period. Even after you go under contract for the property, you many times have the contractual right to inspect and cancel during the inspection period if you find something you don’t like about the property condition.

  4. Free and clear title. You typically receive a property with free and clear title, like you would in a regular sale.

  5. Financing is allowed. You can typically buy the bank-owned condo using a mortgage and have a financing contingency to back out in case the mortgage doesn’t work out.


Cons of Buying a Foreclosed Property in the Open Market / MLS

  1. More competition. You will have more competition since it is on the open market, which means it may not always end up getting you the best condo deal.

  2. Lots of paperwork required to make an offer. Many times the lenders have a process that requires a lot of paperwork, including proof of funds, state purchase contract, bank addenda, offer information forms. It sometimes feels like you are applying for a job, and that’s just to be able to make the offer. However if you are working with a good real estate agent, they will be able to do most of the heavy lifting for you.

The above are just common circumstances. Every property and contract are different, so make sure to consult a real estate professional or attorney before making your condo purchase.

Click here to search a list of foreclosed miami condos for sale now


Foreclosures for Sale at Public Auction

Some financial institutions foreclose at the county, and then turn around and utilize a public auction site like hubzu, auction.com, xome or other similar auction site. Sometimes they are simultaneously listed in the MLS and sometimes they aren’t. Either way, you can still have a knowledgeable real estate professional represent you to make sure you don’t overpay and that you have a clear understanding of the process. Typical pros and cons:


Pros of Buying a Condo or Property in Foreclosure Public Auctions

  1. Bid in comfort. You can bid from the comfort of your home, since most of these public foreclosure auctions have online bidding.

  2. Due diligence. As compared to buying at the county auction, you typically will have more chance due diligence, depending on the property. Some of them may allow access to the unit prior to bidding, others might allow inspection or financing contingencies.


Cons of Buying a Property in Foreclosure Public Auction

  1. Lots of varying rules. Each auction website has their own rules and processes for their foreclosed properties, and sometimes within a site each property may have its own set of rules. For example, one property may be up for sale vacant and free and clear of all liens and past due fees. For another property, they may not guarantee that the foreclosed condo is up to date with HOA fees, or they may not guarantee that the property is vacant.

  2. Varying seller-specific contracts. Many times you will have to read through a long, unfamiliar contract and make sure you understand all details before moving forward.

  3. Buyer premiums. You will typically pay up to an additional 5% of your purchase price for the property in the form of a “buyer’s premium”. It’s simply a way for the auction company and seller to make more money off the sale.

  4. Minimum reserves. You may win a bid on a foreclosure property for sale and then find out that you didn’t meet the minimum reserve. And the result is that the seller may “counter” your winning bid or simply put it back up for sale again at a later date.


Myths about Condo Foreclosure Sales

The TRUTH about foreclosures

Myth: You can only buy a foreclosure if you have cash

Since many foreclosures hit the open market, they are completely financeable, and the institutions that own them are often open to going under contract with buyers that need financing.


Myth: You always get the best deals when buying a foreclosed property

There is no doubt that bidding on a bank-owned property is a great way to get a great property at a discount. I have seen many amazing deals on foreclosed condos, but I have also seen quite a few foreclosed properties sell above what I would consider market value. (I have been hired by large institutions to sell hundreds of Miami are properties and have some very interesting stories to tell on how different banks go about selling their properties!) Either way, it makes a lot of sense to first look at what options you have in foreclosed condos if you are looking for a great deal. But don’t discount the possibility that there are also great deals in non-foreclosed properties too!


Myth: You can’t buy a foreclosed condo with clean title

In fact, most foreclosed condos you buy on the open market (for example on the MLS) come with contracts that require title to be clean at closing. Just be sure to get a real estate professional or attorney to make sure that is in fact the kind of contract you are signing, so that you are getting what you expect.


Myth: Foreclosed condos are in bad condition

Many condos that are foreclosed on are indiscernible from any other non-distressed condo. Some had homeowners who meticulously took care of the unit until the day of foreclosure. Others went through significant upgrades before the owner got into financial trouble, and thus you inherit a premium property. There is no generalizing on the condition of foreclosed condos in this great, unpredictable city of Miami and Miami Beach.


Miami Beach Foreclosed Condos for Sale

Miami Beach is known for its eclectic mix of beautiful gorgeous art deco style condos, modern all-glass high rise condos and everything in between. Miami Beach’s options for foreclosed condos for sale is equally eclectic. You can search for foreclosure condos in Miami Beach here.


Miami Foreclosed Condos for Sale

The city of Miami has a few key neighborhoods where you might find the foreclosed condo you are looking for. Some of the most popular condo neighborhoods are in the greater Downtown Miami are, including Brickell, Brickell Key, Downtown Miami, Edgewater, Midtown and Wynwood. At any one time you will find condo foreclosures in any one of these neighborhoods. You can start your search for Miami area foreclosed condos here.

Photo credit: fourseasons.com

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