How to Buy Foreclosed Homes in Florida

By PropertyClub Team
May 16th 2024
Buying a foreclosed home in Florida can be a great way to make some money if you're a savvy real estate investor. Whether you're purchasing a pre-foreclosure an REO sale or a house at auction, here's what you need to know.

Florida is a popular state for investors because the taxes are low, and there is a consistent flow of residents and vacationers eager to rent properties. Buying a house in Florida is relatively straightforward, but what if you're considering purchasing a foreclosed home? Buying a foreclosed home in Florida is a bit trickier and requires more knowledge, but it can be a great way to make a handsome profit. Here is everything you need to know about buying a foreclosed home in Florida to add to your investment portfolio.

hash-markHow to Buy a Foreclosed Home In Florida in 6 Steps

  1. Hire a Florida Realtor Experienced in Foreclosures
  2. Find Homes Being Foreclosed
  3. Look at Compas and Perform Due Diligence
  4. Secure Financing
  5. Attend the Auction, Bid, and Win
  6. Wait Until You Receive the Title

hash-markWhat Is a Foreclosed Home?

Let’s start with the basics. A foreclosed home is a property that has been through the foreclosure process. This means the homeowner defaulted on the mortgage, and the lender has reposed the property. Foreclosed properties are often offered at discounted prices because lenders are not interested in rehabbing or marketing the properties well enough to get fair market value.

An average of 250,000 homes enter foreclosure every three months. Going through the trouble of r renovating each foreclosed property and advertising it to the public at market value poses too much risk for a bank or other lending institution. Instead, they sell them in as-is condition for whatever they can get just to get the property off their balance sheet. These foreclosed properties are typically sold at a loss and, therefore, present exciting opportunities to investors.

There are many opportunities to buy foreclosed homes in Florida if you know where to look, but you have to be careful. Buying in foreclosure is not the same as buying a regular property. You’re often unable to view the home before buying, and you need the cash available or be preapproved for a loan to purchase a decent foreclosed home. They go quickly, and if you have to wait for a loan, you will likely miss out on the opportunity. 

hash-markWhere Do You Buy Foreclosed Homes in Florida?

There are three stages of the foreclosure process that present buying opportunities for investors; pre-foreclosure, auction, or an REO sale. Here's a rundown of how each to buy a house in Florida at each stage of the foreclosure process. 

hash-markBuying a Florida Home in Pre-Foreclosure

Pre-foreclosure means that the homeowner is behind on the mortgage, but the bank has not yet foreclosed on the property officially. In Florida, the pre-foreclosure process can last anywhere from 8 to 14 months from when the first payment is missed before the bank repossesses the property. 

Pre-foreclosures present the best opportunity to view the property before you purchase. You would be buying the home directly from the homeowner, not the bank or other lender. A homeowner still living in the property may be willing to grant you access, whereas a bank likely won’t. In pre-foreclosure, homeowners often make a deal with the lender to short sale the house before it’s repossessed. That way, they can satisfy some of the debt and save the bank the hassle of repossessing it and selling it at auction. But keep in mind that you may be responsible for paying the outstanding balance on the mortgage or any other liens on the property.

hash-markFlorida House Auctions

 If the homeowner does not short sale the property, it will be repossessed and sold at an auction to the highest bidder. Florida house auctions can be a great way to snag a great deal on an investment property. But you have to have thick skin and know what you’re getting yourself into. Auctions move quickly, and it’s essential to know precisely what you want and the price point you’re after before attending the auction. Otherwise, you may get caught up in the excitement or get stuck with a money pit. 

Auctions are typically held live in front of the county courthouse or at a location approved by the local government. You can also bid on foreclosed properties online. In some cases, you may be able to contact a representative of the lender and inspect the property before the auction. But there are no guarantees, and once the bidding starts, the property is sold as-is.

hash-markFlorida REO Sales

The final stage you can purchase a foreclosed home is in a Real Estate Owned (REO) sale. This means that the property did not sell at auction and is simply sitting on the lender’s books waiting for a buyer. You can typically get these properties at a steep discount – but for good reason. If it didn’t sell at auction, there is likely something wrong with it. You may find a diamond in the rough that other buyers simply overlooked. But, most properties with serious investment potential tend to get snatched up quickly. So be aware that there is likely a reason the property wasn’t purchased at auction, and it may require serious work or be in an undesirable location for investing.  

Be sure to read our article on how to buy a house in Florida to fully understand what the process entails.

hash-markTips For Getting a Good Deal at a Florida Property Auction 

  • Know What You Want: If you want to make money at a Florida property auction, it’s important to crunch the numbers beforehand and know your bottom line. In other words, know what you would like to pay as well as the absolute most you can pay and still turn a profit. It’s easy to get carried away and overpay for a property at auction. It can be challenging to get an accurate read on how much work is necessary until the property is sold, and you’re able to inspect it. Therefore, it’s essential to know your limits and what makes sense for the investment strategy you’re using before you even visit the auction.    
  • Don’t Get Caught Up in the Moment: Florida house auctions are notoriously action-packed. You may have a certain number in your head. But in the heat of the moment, it’s easy to get caught up in the competition of it and accidentally overbid. Getting stuck with a dud because you got carried away may turn you off from real estate investing forever. The best thing to do is to be calm and stick to your plan. Discipline is a huge part of investing, and buying a house at auction requires patience and a cool head.
  • Hope for the Best but Prepare for the Worst: When buying a foreclosure, it’s wise to be prepared for the worst. Unless you’re able to gain access to the property beforehand, there is no way of telling what the physical condition of the property is like. You may be pleasantly surprised if you assume that the house will need a gut renovation or maybe even demolishment, and it doesn’t. But if your budget for a cosmetic renovation only to find out the former tenant destroyed the property, you will likely be in serious hot water.