To put it into its truest form, items which are superior to the certificate of title (FYI-in Florida a certificate of title is the document of conveyance received as the winning foreclosure bidder) will be the responsibility of the winning bidder once the property is conveyed. Items inferior to the certificate of title will be those which are nullified by the issuance.
Florida Foreclosure Point: Some encumbrances are always superior and some are always superior with exceptions. One such item of encumbrance superiority with exception is described in 28 USC Sec. 2410 further in F.S. Sec. 7425 Title 26 Subtitle F, Chapter 76, SubChapter B. This lays down the rules by which a lien can be made null under specific guidelines even though it is superior.
Florida Foreclosure Point: With the coming of F.S. Chapter 720 further 720.312 former s. 617.312 and 720.3085(1) there is a new wrinkle for investors as HOA liens are now superior regardless of whether the property is conveyed through judicial or non judicial means. Meaning: Attorney’s fees, costs, liens and assessments made by the HOA survive and are superior. Not a big deal if you know about it but under new Florida guidelines getting the home owners association to release payoff information has gotten much more difficult.
2 Types Of Judicial Foreclosure Auctions
Foreclosure Of Mortgage
With foreclosure of mortgage auctions the order of superiority follows this basic guideline. Mortgages recorded prior to the foreclosing mortgage are superior, those recorded in the counties official records after the foreclosing mortgage are inferior. I.E. 2nd mortgage holder is foreclosing 1st mortgage is superior and 3rd mortgage is inferior.
Florida Foreclosure Point: Regardless of superior or inferior, overage from the auction is divided up amongst the lien and mortgage holders based on their order and are issued payment by Clerk of Courts from funds in the Clerk’s Registry. I.E. 2nd mortgage forecloses for $5.00, 1st mortgage of $3, County Lien For $2, 3rd mortgage for $1, HOA lien for $1, go to auction win at $10. Here’s what happens. 2nd mortgage holder receives their $5.00, the balance goes into the Clerk’s Registry and over the next 90 days all those having an interest in the property can file their claim form for the overage. Here’s the breakdown: County gets $2, 1st mortgage holder gets their $3, after auction you pay HOA their $1, 3rd mortgage is inferior.
Foreclosure Of Lien
With foreclosure of lien auctions there is a very different order of superiority than that of a foreclosure of mortgage. When a judicial lien is foreclosed, such as a county BOCC lien or Home Owners Association lien, all encumbrances of record prior to the time of liens recording are superior. I.E. Board of County Commissioners places a lien on your property on 5/1/2012 and the lien amount is $2. The lien was recorded in the counties official records 5/5/2012. You have a first mortgage on the property recorded on 2/2/2010 for $20 and a lien (tax certificate) was issued against the property for non payment of real estate taxes on 6/1/2011, face amount of certificate $1 interest at 18%.
If the BOCC forecloses on their lien, all the others in this scenario are superior, all will need to be satisfied either by payment or from auction overage. You place the winning bid of $10. BOCC gets their $2 plus costs & interest and fees so lets say total of $3. $1 is paid from Clerk’s registry to satisfy tax lien (tax certificate) plus interest accrued on certificate lets say total of $1.20. You are still indebted for $15.80 to the first mortgage holder as the left over amount in overage will be applied to the encumbrance outstanding. If you won the auction for $10 believing the market value of the property was $20 and then had to shell over another $15.80, repair the property, market the property, pay carrying cost and closing costs, you have lost money.
I receive calls of this nature all the time and it always comes down to a lack of Florida foreclosure knowledge. Some of the callers are wanting to have the transaction overturned and are seeking guidance, many have inherited hundreds of thousands of dollars in debt because they were unaware of the superiority of prior mortgages in a lien foreclosure. Know the rules or lose money.
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