Winning a Florida Foreclosure Auction?????

Question

I'm having a hard time understanding which Florida foreclosure auctions can actually be won by a third party bidder, and would love some help.  After looking at about 6 months worth of my local transactions, probably 95% of the auctions are won by the plaintiff.  (Makes perfect sense, because they can use the money they are owed by the borrower to bid).

In virtually all cases, the total amount of the judgement is way over the value of the property so the lender can easily win almost every auction with no cash expenditure.  However, in some cases a "Third Party Bidder" wins the auction.

So which auctions can a third party bidder win?  It is economically unfeasible to bid on every auction in the hope of winning a couple because you really have to pay for a title search on the property before bidding.  Theoretically, there is a "Plaintiff Max Bid" field in the online auction process but this is never revealed.

The only thing I can think of is that perhaps a Third Party Bidder has a better chance of winning when the property value to judgement amount ratio is relatively low.

Anyone with experience winning Florida auctions?

Brandon M. · Answer

@Mark Bosworth - what does he end up doing with the properties? Can you go back a few months on the site and find some properties he won, and then google them to see if they have hit MLS since then? Our site goes back pretty far, maybe up to a year.

Or, if any are close to you take a quick drive by and see if there is any work being done to the property. He could just be sticking them back on MLS quickly with a markup from what he paid, or he could be fixing them up himself to hold/rent out or flip.

All might not be lost on this, you could possibly track him down and see if there is any ability to buy the properties from him once he buys them at auction. That would allow you to finance them if you needed, whereas you must pay 100% in cash by the end of the same business day on any auctions you win. It might at least be worth some research and possibly a call, you never know what could happen unless you give it a try. Worst case scenario he tells you "I am not sharing any info with you" and hangs up on you.

Patrick L. · Answer

There are some companies that will buy these up to wholesale them, I know there are a couple that specialize in it around here.  If you have staff dedicated to doing title research and inspections of every property you can come up with a number for every property in the auction and set a proxy bid for each one.  You'll definitely win some but there's going to be a large resource commitment to pull it off.

Brandon M. · Answer

Sending you a PM

David Sicherman · Answer

You might be able to save some on the title searches if you had O&E reports done just to find liens or judgments on the properties you're thinking about bidding on instead of full title searches. Just always be sure to do your own Due diligence, and read over the supporting docs of the lien search, and ask questions if you don't understand something. Make sure you understand what exactly the scope of the search is, if they check for just liens & judgement or do they also check the tax status, federal tax lien search etc...

Wayne Brooks · Answer

@Mark Bosworth

As the one local bidder, figuring out the code.....just bid higher than everyone else.  If you auction site is like ours, and you can see all the bids on each property after the bid closes, you'll likely see that bidder bids almost every property.

Mark Bosworth · Answer

Thanks Brandon & Patrick.  Good advice.  I guess there is just not a silver bullet here.  I thought perhaps there was something obvious I was missing.

As a side note, virtually all the auctions won by third party bidders go to one local investor. So he has figured out the code.... but he probably does not want to share.  I'll look into tax deed properties.

Thanks for the help!

Patrick L. · Answer

I still do tax deed properties because it's a true free market and the highest bidder will get the property and everything will go 3rd party if it has any bids.  The only downside is the houses are generally much rougher and many have been abandoned for ~5 years and you will generally have a lot of city liens to clear up (utilities, lot clearing, code enforcement)

Patrick L. · Answer

I gave up on them.  I've seen some people get some killer deals but unfortunately I just don't have the time to research and inspect every property.  I wish more plaintiffs would disclose their maximum bid so I'd know which ones to go inspect but I was physically looking at and doing title research on 200 properties to buy 1.  If that was my only job I guess I could do it but I have rentals to manage and another business that I own.  When the max bid is hidden you are just taking a shot that the bank has set a reasonable price.  Sometimes they get a BPO done ahead of time and sometimes they don't.  If they don't know the value they're going to bid the judgement amount and then put it on MLS to get fair market for it.

On a lot of them the bids get stupid anyway, I've bought many REO's for 25%+ less than what the highest 3rd party bidder was willing to pay at the auction and I got title insurance, time to inspect and the property cleaned out first.

There was one I bid on that I was willing to go up to $18k on but another 3rd party bidder took the bidding up to $26k.   A few months later I closed on it for $12k and the bank was nice enough to tent it for termites, haul a house full of trash off, and give me title insurance.

Wayne Brooks · Answer

As @Brandon M. says, it's a crap shoot.  If the bank has done the research to establish what they think the house is worth, they'll place a reasonable Max bid.  If not, they'll just go with the judgment amount.

Brandon M. · Answer

Mark,

I watch the auctions for the 3 counties in the TB area every morning so I can add some insight. I am not familiar with the way your county runs it specifically, as not every Florida county is on the online auction system yet.

For the online auctions, any of them CAN be won by a third party bidder, but it really is a crapshoot. Here not many of the plantiffs will post a max bid, so there is no way of knowing what it will take to win the auction. and 95% is the approximate rate here as well for auctions won by plantiffs.

You are right, most of the judgments are far over what the property is truly worth/auctions are won for, but generally speaking most of the houses hitting foreclosure these days were purchased in the mid-to-late 2000s at the peak of the market and are no longer worth what they were then. That is why they are getting foreclosed on, they can't be sold for enough to cover the amount borrowed. These days most of the banks typically want to take back possession of the property because they think they can recover more of their money by taking the property back at auction and giving it to a local broker.

The ones that are winning auctions in my county are typically the bigger shops, institutional investors, etc. You tend to see the same few third party winners over and over again. They have access to do title searches for cheap/free so that isn't an issue, and sometimes they have relationships with these bigger banks who are doing the foreclosures so they can still get into the properties even if they were never listed with an agent. All this to say the odds are stacked against an individual investor to win many auctions on a one-off basis. Some of the third parties that buy on auctions here will simply stick the property back on MLS at a marked up price, so you could always reach out to one of the ones who you see buying a lot of properties in your area and see what they typically do with the property. You might be able to work with them directly and buy from them without them listing on MLS at all.

My suggestion would be to look through the upcoming auctions, target a few in your desired areas, and start doing the research. Do a drive-by, peek in the windows if it is unoccupied, run some comps, figure out your ARV and estimate what you think it will take to fix it up. You may then want to try and find a title company or another way you can do title searches for cheap (there are some companies that do a cheaper rate if you pre-pay for a certain amount of searches).

Hope that helps some.

Winning a Florida Foreclosure Auction?????

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