I once had a woman call me who introduced herself by saying, “I am the smartest person you have spoken to all day!” Fortunately, someone who introduces herself like that isn’t looking for a response. I didn’t know what to say. I thought maybe she had been asked to lead the discussion group at a Mensa meeting. Instead, she had closed the book on another day of buying and then reselling foreclosed properties. It’s been a long time since I was young and stupid. Primarily because everyone seems to agree that I’m no longer young. Imagine people feeling successful after they have played Russian roulette and lived to tell about it.
When a bank takes title through foreclosure, there are at least several dozen different things that can go wrong during foreclosure. Not one of them will automatically stop a foreclosure sale. Most of them will cause bad title. Residential foreclosures today are mostly handled by foreclosure mills, most located in south Florida. Once that machine starts rolling it won’t stop unless someone does something in court to stop it. A judge will seldom have time to examine the file to assure that the attorney has attended to the detail involved in a foreclosure, or even that the attorney knows what those are. When a clerk sells property in a sale, the clerk is following a court order.
Many times in my life I’ve had a client tell me that they felt safe in buying a foreclosure because it is the clerk who sells the property. Please understand if you hear nothing else in this article: the clerk, by conducting a sale, is not assuring you of good title. Only you, or someone hired by you, can do that. If I buy a portrait at an art sale, I may buy badly. But I can see what I buy, and understand the risk that others may not like it. Foreclosed real estate is not like that. You will never see the mistakes made in a real estate foreclosure unless you know where to look and spend the time and money necessary to investigate. A chain of title will never take you to the right answer. For instance, a court’s jurisdiction to decide a question of title in a real estate foreclosure is never invoked unless there is service of process on the right defendant. The fact that property is being auctioned from the courthouse steps is not a guarantee that all of the right people were served, or that the right real estate descriptions were used, or the right parties joined in a foreclosure action.
Today’s real estate foreclosures are often done by law firms that we in north Florida call “foreclosure mills.” They are done for a standard price that does not allow the firm to give attention to every case. A judge does not have time, and it isn’t his job, to inspect the work of the attorney in a foreclosure to make sure the attorney has done everything that should be done to put the right people and the right documents before the court.
Real estate foreclosure is one of the world’s last zero-sum games. That is to say, there is only a certain value in a property, and claims often exceed that value. When the music stops, some will be left standing. The result is that if you buy a foreclosure in which a procedural mistake was made, every claimant who didn’t get paid is the natural enemy of every other claimant. If you buy that property and you learn that the foreclosure was not handled competently, you will get no sympathy from those whose claims also did not get paid. You are no more an innocent loser than they.
If good title is important to you, get the court file into the hands of someone who knows what can go wrong. Normally, that will be an experienced real property lawyer. He will not be cheap and he will probably have no idea when you call him how much it will cost to give you an opinion. Then, once you’ve bought the property, get him or her to write a title policy.
Buying property in foreclosure is not like buying tax certificates, or tax deeds. Tax buyers move to the front of the line, ahead of mortgages, judgments, and heirs to an estate, living or dead. Your mortgage foreclosure does not.