I take calls on a weekly basis from someone who has purchased a property at a foreclosure sale wanting to know whether they can receive the Florida Foreclosure Sale Surplus Funds. These are called Third-Party purchasers. They are called a “third-party” because they are not a party to the original foreclosure case. They have now purchased this property at a foreclosure sale and have become the new owners of the property by way of a Certificate of Title. Now that they own the property, they may have realized there are other encumbrances on the property, such as additional mortgage liens that are not able to be paid off with the Florida Foreclosure Sale Surplus Funds. What can they do now? In short, not much.
Florida Statute 45.033(1) states, “There is established a rebuttable presumption that the owner of record of real property on the date of the filing of a lis pendens is the person entitled to surplus funds after payment of subordinate lienholders who have timely filed a claim.” This means that the person who owned the property prior to the foreclosure action is the person who is entitled to the Florida Foreclosure Sale Surplus Funds, after any subordinate lienholders are paid (if any). The third-party purchaser does not fit the definition of either of these. They receive a Certificate of Title after the sale is complete and the Clerk has received the required funds. This gives the third-party purchaser ownership of the property, with the caveat that they take it subject to any and all encumbrances on the property.
How is a Certificate of Title different from a Warranty Deed? A Warranty Deed is usually issued by a title company, along with title insurance, and guarantees there are no encumbrances on the property when sold to the new owner. A Certificate of Title that is issued at a Florida Foreclosure sale only grants the purchaser ownership. It in no way guarantees whether or not there are any encumbrances (mortgages or liens) still attached to the property. Florida courts have continuously ruled that any party that purchases a property at auction must do their own due diligence prior to the purchase of the property. The term “caveat emptor” or “let the buyer beware” has been used in the vast majority of these cases. When you purchase a property at a Florida Foreclosure Auction, you do take title to the property, but you take it with all encumbrances attached.
This means that if you purchase the property at a homeowner’s association foreclosure sale and there is a mortgage still attached, you take title subject to that mortgage. The prior owner is likely to stop paying that mortgage, because they no longer have ownership to the property. You have no legal basis to sue the prior homeowner, the plaintiff, the court or the clerk of courts because with a Certificate of Title, you are given no guarantees other than ownership of the property. Additionally, the courts have ruled that once a lien has been recorded with the clerk of court, everyone has (at the very least) constructive notice that there are liens on the property.
Since you have not been guaranteed anything regarding encumbrances and you have constructive notice of the liens that may be on the property, you have no rights to sue anyone simply because you didn’t do your due diligence regarding a title search before you shelled out thousands of dollars. A simple title search with a title company might cost you as little as a hundred and fifty dollars. This could save you tens or hundreds of thousands of dollars in the future.
If you have purchased a property at a foreclosure sale and have found out there are liens still on the property, such as a mortgage, try to negotiate with the mortgage holder. If they won’t negotiate, try reselling the property to pay them off and make some of your money back. If you are a former homeowner who has lost your property to a Foreclosure Sale or Tax Deed Sale in any County in the State of Florida and you believe there might be Surplus Funds from that sale, please give me a call for a Free Consultation. I handle Foreclosure Sale Surplus and Tax Deed Sale Surplus Funds in every County in the State of Florida, and I don’t get paid unless you do.