How to Buy Foreclosures for Cheap in South Florida

For several months, my friend Joe G, 47, a former investment banker living in New York, has been busy trying to find a home in South Florida.  A Miami native, he’d been longing to return to the less stressful environment of his youth for many years.  He’d been stashing money into savings in effort to realize his dream, although, until recently, home ownership was beyond his reach.  Then came the foreclosure crisis of 2008 and the situation changed.  He began researching the foreclosure market in books and on the Web, diligently perusing the listings and making note of the ones that grabbed him.  He’d fly down whenever he could to explore neighborhoods throughout Miami, Hollywood and north to St. Lucie County.   

A few weeks ago, Joe found his dream home in Port St. Lucie and scooped it up for only about $54,000 cash.  I was eager to learn his secrets, and Joe was gracious enough to sit down and share a few with me.

ASIDE FROM THE DESIRABILITY OF LOCATION, WHAT ELSE MAKES SOUTH FLORIDA A PARTICULARLY GOOD PLACE TO LOOK FOR FORECLOSURE PROPERTIES?

“There are huge numbers of foreclosure properties available in So. Florida and with the even greater number of short sales (pre-foreclosures) listed, there will probably be a steady stream of available properties coming on the foreclosure market for months and months to come.” 

WHAT ARE SOME OF THE WEBSITES YOU LIKED TO USE WHEN LOOKING FOR YOUR PROPERTIES? ARE THERE ANY WEBSITES OR SERVICES YOU FEEL ARE MISLEADING AND SHOULD BE AVOIDED?

“I used Zillow, but Zillow at times seemed counterproductive as Zillow is user-created information.  Trulia and Blockshopper were even less helpful.  Mostly, I found buyers’ agents who had little or no real information about properties who had listed foreclosures or short sales on Zillow, but really didn’t have enough clout or knowhow to make the sale. A Zillow search will also come up with hundreds of short sales which are properties that are really in a sort of legal limbo.” 

“The owner can’t pay his or her mortgage but has not gone into foreclosure yet, and they and the bank are trying to set an agreed upon sale price to a new owner, that the bank will take relative to the amount owed on the property by the current defaulting owner. The foreclosure process, aside from not getting compensated for the outstanding loan, costs the bank a lot in fees.  Sometimes it behooves the bank to approve a short sale and avoid all of the costs of taking the property over in a foreclosure.  But most of them go into foreclosure eventually, I think, or the owner has a turnaround in their financial situation and is able to start paying their mortgage again.  Either way, short sales take time to get approved if they ever do.  I suppose it’s possible to follow a property from short sale to foreclosure to bidding to purchase, but I say, why bother – there are plenty of properties already in foreclosure out there and new ones coming on the market every day.

“The best thing to do to find out if a property is a short sale, if it doesn’t say so on the Zillow page (which it usually won’t), is go to the property appraisor’s website for the county that the property is located. For Broward County , it’s BCPA.net, for example.  You can search by property address and see who the current owner is.  If the house is owned by the bank, it’s a foreclosure.  If it’s owned by an individual and the asking price is a lot lower than what they paid for it (which will also show on the appraisor’s site as well as tax info), then most likely it’s a short sale.  Or you can just call the agent listed, but I like to do the work myself.

“The best thing to do to find properties and agents, I found was to look up REO (real estate-owned)  properties on specific bank sites.  A lot of banks, like Chase, Countrywide and Indymac have search pages where you can enter a specific city, state or zip code or any combination of the three and pull up current lists of properties they own.

“I did a search for Chase REO properties, for example on Google and found the link for the search page that way.  The listings on the bank sites seem pretty up to date and they list the seller’s (bank) agent and phone number that has been contracted for the sale of the property.  Once you have a name of an agent and/or an agency name, you can do a search for that particular agent and the city where they’re located and often they have multiple foreclosure listings on their own or their agencies’ website. This is how I found the property I ultimately bought.  The seller’s agent was listed on a property I saw listed on a bank site, I searched his name and it turned out he was a seller’s agent for many foreclosure properties in the area and he had them all listed on his site.  I contacted him, and he hooked me up with a buyer’s agent in his office (conflict of interest,  yes I know,  but it seems to happen all the time) who showed me the properties.”

DID YOU FIND THE PRICES LISTED WERE CURRENT AND ACCURATE IN THESE ONLINE LISTINGS?

“Yes, if you go through the bank site listings as described above.  I didn’t go the route of paying for listings with one or any of the hundreds of sites like foreclosure.com that claim to give you access to many foreclosure listings.  I can’t make any claims as to the effectiveness of buying listings from these sites. It just seemed like there was enough for me to search finding my own listings.” 

(above) JOE CHECKS OUT A HOLLYWOOD, FL FORECLOSURE

“I also didn’t go the auction route.  There are both in-person auctions and online being conducted all over the country for foreclosure properties.  I looked into in-person auctions (REDC – http://www.auction.com) in the area I currently live in New York and found that, in addition to having to pay the auction house a fee on top of the sale price (I think it was $2,500), the auction starting prices listed are basically just to get peoples’ interest piqued.  There is a reserve price that is not stated, which is the lowest price that the bank will be willing to sell the property for, which is often 3-5 times more than the listed auction starting price. Supposedly what happens at the auctions is that as soon as a lot comes up for bid on auction day, the starting price is tossed out the window and the reserve price basically becomes the new starting price. The whole process seemed deceptive to me and I just discarded it, but I’m not saying that all auctions out there are like this one and that good deals can’t be had at foreclosure auctions.”

ARE THE ADS PRETTY UP FRONT ABOUT THE CONDITION OF THE LISTINGS? 

“No, you really have to see the property for yourself.  Most foreclosure listings give you little or no condition information and if there are pictures, it’s really not enough to go by.  You really want to at least do a drive by.  The problem with a lot of foreclosures is that they tend to be in undesirable neighborhoods, which was especially the case that I found in Hollywood, FL.  The zoning of Hollywood is such that low-rent drifter-type efficiency rental properties can be located right next door to mid-level reasonable rental buildings, and in turn, right in the middle of single family homes.  It makes for a hodge-podge of properties that are in varying states of repair or disrepair. 

“Ultimately, I didn’t buy in Hollywood because of this, although what first attracted me there was that for So. Florida , the prices east of I-95 seem to be the cheapest in Hollywood of anywhere in So. Florida .  It’s just a matter of finding the right property on the right street at the right price, I suppose, but I tired of the chase.”

HOW DOES THE PROCESS BASICALLY WORK? 

“The bank contracts a seller’s agent to represent them and all information must be gotten from them.  There is no person at the bank to contact, believe me, I cried, moaned, cajoled and tried to guilt them into putting me in contact with a live representative in the bank, and it just is not done.  You can and probably should initially contact the designated seller’s agent to make sure of the accuracy and status of the listing, but at that point, if the property is available, you’re going to have to find a buyer’s agent to show you the property. 

“But the seller’s agents are sometimes more than happy to refer you to one, especially if they can keep the whole transaction in-house.  The only problem is that I have found that the people dealing as buyer’s agents on foreclosures are usually inexperienced or just part-timers, so you really have to be willing to deal with some incompetence in the process and understand that the process might be a learning process for them as well as yourself. 

“Here might be a good time to discuss a bit of Florida real estate law I have learned.  It is illegal for an agent to take a bid from you, no matter how low, and not enter it with the seller.  If you enter a bid – any bid – on an available property, the agent must present it to the seller.  The seller doesn’t have to reply to it, necessarily, but you have the right to get a written confirmation that the seller has received the bid.  A lot of agent’s will scoff and complain that the bid is too low if you’re low-balling, which I think everyone should be at this time, but they can’t withhold the bid.  Just tell them that you’ll file a complaint with the real estate commission if they don’t enter the bid.” 

CAN YOU USE AN AGENT OF YOUR CHOICE TO NEGOTIATE WITH THE ONE APPOINTED BY THE BANK, OR IS THAT A WASTE OF TIME?

“If you find an agent that is willing to work with you on foreclosure properties (many of them are snobs and won’t touch foreclosures) and you feel comfortable with them, go for it.  They don’t have to work for the same agency as the seller’s agent, but it seemed to speed the process along a little for me in my transaction.”

WHAT ARE SOME OF THE TACTICS THE BANK AND THE AGENTS USE TO DRIVE UP THE PRICE? WHAT CAN YOU AS THE BUYER DO TO PREVENT THEM FROM TAKING ADVANTAGE OF YOU?

“I think the best thing you can do is prepare yourself mentally to look at a multitude of properties, either online, in person, with or without an agent or all of the above.  Don’t rely on an agent to show you properties, go out and search neighborhoods, and online listings yourself.  If you find an agent who is willing to do so, they can do listing searches in specific areas, find out the status of anything that comes up, and feed you the lockbox numbers for the houses so you can check them out yourself without any pressure.  Don’t fall in love with any one property and have your heart set on getting that and only that property.  This can cost you big time.  Although with foreclosures, I’ve found that they’re all in varying states of disrepair and nothing will be the absolutely perfect situation for anyone, so falling in love with a property without question probably won’t happen.

“Now, on to the bidding process.  I have found that in the markets I have been looking, the banks price the properties pretty realistically.  Depending on the desirability of the location, mostly, a house can go on the market, have several bids on it, and there can be many situations when the sale price ends up higher than the asking price.  But usually in these cases, the asking price was low to begin with.  Do agents instigate bidding wars if they see that properties are desirable – undoubtedly.  But remember, don’t fall in love.  If you think the bidding on something is going too high or you’re being jerked around by an unscrupulous seller’s agent, move on to the next property. 

“Agents will also try to use mind games like telling you to make sure you are entering the HIGHEST and BEST offer on a property even after you have entered what you thought was your HIGHEST and BEST offer.  Don’t let it get to you.  If you think the place is worth it, up your bid, if not, let your bid stand or let it go.”

HOW DIFFICULT IS IT THESE DAYS TO QUALIFY? WHAT DO THEY ASK FOR? 

“Pay cash if at all possible for foreclosures.  If it’s not possible, it’s been my experience that it’s still very difficult to get financing. But I don’t have a substantial income right now, so if you have good or excellent credit and a sizeable income, it might not be that difficult to get financing.” 

HOW WAS THE EXPERIENCE DIFFERENT LOOKING IN MIAMI VS BROWARD VS PORT ST. LUCIE?

“I found that in Miami and Broward, if a foreclosure comes on the market that is in good condition, it ends up going pretty fast and often for all cash.  Investors seem to be snapping up properties faster in order to rent them out, particularly in places like Hollywood.  In Port St. Lucie, it’s not as dog-eat-dog, maybe because there’s not as active a rental market.

(above) YOU GET MORE BANG FOR YOUR BUCK IN ST LUCIE COUNTY

“I found the asking prices in general to be much lower in Port St. Lucie, while the condition of the properties to be much better than in Dade and Broward.  I think a lot more properties end up going for higher than the asking price there because the banks are purposely setting prices very low in order to get people to “blind bid” with their HIGHEST and BEST offers.  But I still think Port St. Lucie has better deals, more inventory relative to demand, and less stress in finding agents to deal with.”

ARE THERE ANY HIDDEN FEES OR OTHER SURCHARGES THAT A FORECLOSURE BUYER SHOULD BE AWARE OF?

“Other than fees charged by listing and auction houses, I can’t really think of any in the pre-sale aspect of the foreclosure process.  I didn’t hire a lawyer to represent me in the buying process.  I am not recommending that you don’t hire a lawyer, but I figured that since I’m paying all cash, aside from all of the red tape with the title company and complications of buyer’s and seller’s real estate agents, it’s basically a pretty straightforward deal – I give you the cash, you give me the keys. 

“One further thing to be aware of is that often foreclosure properties, or any real estate properties for that matter, have been updated or repaired or added on to without obtaining all the proper permits for said refurbishments from the city.  Your buyer’s agent is obligated by law to disclose any such unpermitted improvements or improvements that may have pending permits with the city, i.e., things that permits may have been applied for, but never approved by city inspectors (like a home addition).  These can cost the buyer in the end if the bank or the seller is not willing to obtain all permits before the sale goes through. You may also have to pay late fees or double permit fees for pending permits or unpermitted improvements.  This is usually not going to be into the thousands of dollars and there doesn’t seem to be a force of jack-booted inspectors anywhere putting people out of their homes for permit violations.  They are often a matter of a few hundred dollars and really only become an issue of you intend to make further improvements of your own and need to go to the city to obtain new permits for those improvements.  I think these permits go ignored a lot as many people do DIY projects that they don’t even know they need permits for.”

THEY SAY HINDSIGHT’S 20-20.  LOOKING BACK ON IT NOW, IS THERE ANYTHING YOU WOULD’VE DONE DIFFERENTLY IN ORDER TO HAVE MADE YOUR EXPERIENCE LESS STRESSFUL? 

“I can’t say that I would have done anything differently.  Maybe I wouldn’t have started out looking in Miami and Broward as that process added a lot of stress.  But it did sort of educate me about the process and I might not have been led to Port St. Lucie if I hadn’t gone through the whole Dade/Broward search experience to begin with.”

Related Categories: Miami: Local News, Douglas Eames is a freelance writer, homespun philosopher and budget bon vivant who divides his time between Southern California and South Beach. See more articles by Doug. See more articles by Doug Was This Post Helpful? Please Share It With Others! Tweet

Commenting is not available in this weblog entry.

Discuss the surrounding area in our hugely popular Miami forum.