Cunning South Florida real estate investors are buying titles to homes on the cheap through community association foreclosures then renting them out until the bank catches up.
It’s the latest tactic aimed at capitalizing on South Florida’s quagmire of vacant and foreclosed homes.
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Smart rental tips
• Check the Palm Beach County Property Appraiser website to find out who owns the property, www.co.palm-beach.fl.us/papa.
• Read the lease carefully and look for language that says the property is subject to an outstanding bank loan.
• Check official records to see whether the property is in foreclosure at the Palm Beach County Clerk and Comptroller’s website, www.mypalmbeachclerk.com.
• If the property is in a community association, the association will probably know whether it is in foreclosure and what the rental rules are for that community.
• For more information on landlord and tenant rights go to the Division of Consumer Services at www.800helpfla.com/landlord_text.html, or call 800-435-7352.
How the rental plan works:
1. Investor looks for homes that have been foreclosed on by a community association for unpaid dues. The ideal house is not yet in bank foreclosure or the foreclosure case has been idle for a long time.
2. Investor buys title to the home through the community association foreclosure auction, typically at a much lower price than what is owed on the mortgage. The purchase gives the investor a title to the property, but it is subject to the primary lien held by the bank.
3. The home is rented out by the investor who collects payments, maintains the property and pays association dues.
4. If the home is already in a bank foreclosure, the investor may try to stall the proceedings by intervening in the case. He may also try to negotiate with the bank to purchase the home for slightly more than what the bank would get at a traditional foreclosure auction.
5. When the bank forecloses, the investor’s claim is superceded.
6. If the bank ultimately repossesses the home, tenants are covered by the Protecting Tenants at Foreclosure Act of 2009, which says the bank must honor the lease unless the home is sold to a third party who plans to live in it as the principal residence. In that case tenants get a 90-day notice.