By REGINA CORCORAN Citizen Columnist
Just start shaking your head now. Because you still haven't heard it all. Even if it is legal, it still reeks like a full refrigerator 30 days after electricity was shut off.
Here's the deal. The property owners are 12 months behind on homes association or condo fees. The condo association enforces its lien and gets a judgment against the owner. Then the condo association proceeds to enforce its lien by foreclosing the property and forcing its sale.
Investors, potential buyers gather at the court house steps to bid on the unit for sale. Starting price is the amount due the homes association for back dues and fees. Overcome with giddiness, the buyers bid the property up until one wins the bid for, say, $20,000.
What does the winning bidder get? He or she gets title to the property. Woo Hoo!
Is it a clean title? Nooo! We are learning to call it a "dirty deed." That is because Aardvark Mortgage Company still holds a $400,000 mortgage on the property.
Why would anybody want to win that bid then? After all, if the prior owners were behind on the HOA fees, they were probably behind on the mortgage, too. The lender already has or soon would start foreclosure procedures.
Even if the loan is not delinquent, every mortgage I ever read says that if title is transferred without lender approval and without paying off the loan, it will result in default. If the loan goes into default, the lender may foreclose.
By the way, did I mention you MUST check with your attorney regarding all these issues?
So, now the winning bidder is the proud owner of a "dirty deed." What's the plan, Sam? The intent would be to rent the place. For this to work, the investors must be able to rent the dwelling long enough to recover the bid price and to cover HOA fees and taxes.
The unsuspecting renters have no idea that a "beat the clock" game is underway between the new owners and the old lender. Imagine their surprise after paying first month's rent, last month's rent and security deposit when the bank sends them notice a few months later that they have to move out. And, the bank, channeling Sgt Schultz of Hogan's Heroes fame ("I know nothing! I know nothing!") has no clue where the tenant's last month's rent and security deposit is.
Here are three possible parachutes for the tenants. First, check out your landlords. How long have they owned the property? Is the ink still wet on the deed?
Second, be especially suspicious if the landlord won't sign a 12-month lease. Some new foreclosure regulations require the lenders to honor the remaining term of a lease even if they foreclose.
Third, believe it or not, National Mortgage News reported April 24, 2013 that "Banks have begun walking away from thousands of vacant properties after beginning foreclosure then dropping the cases because they don't want to be on the hook for maintaining abandoned properties."
RealtyTrac also reported that 35 percent of the one million homes currently in the foreclosure process are vacant with the bank not having claimed title to them.
Bear in mind, it is a two-step process. Step one is for the lender gets a judgment for the money owed. Step two is to foreclose and get possession of the dwelling.
These banks are saying, "before we snatch this property, let's think it over." They have to pay taxes, maintenance, repairs, HOA fees. What's the rush?
For the investors buying these "dirty deeds" and the renters, this has the ring of Las Vegas.
What do you think?
Regina E. Corcoran, SRA, is a Florida real estate broker, state-certified residential appraiser and residential contractor. She is president of AmeriRealty Corp. and vice president of AmeriMortgage Corp. She can be reached at ReginaECorcoran@cs.com. Corcoran writes her column exclusively for The Citizen. It appears every other Sunday.