In Florida, there are currently over 40,000 homes in the preforeclosure state, and almost 60,000 in foreclosure. Add to that the 277,000 tax liens, and it is obvious that this is a significant issue in Florida, as well as the rest of the country. In Jacksonville, where I live, there are over 1,100 homes in foreclosure. While this is a devastating situation to many, it is the perfect opportunity for others to buy a home they could otherwise not afford. This is a reflection of life itself, really. One occurrence can mean ten different things to ten different people. The umpire who calls someone “out” at home brings joy to millions who swear his vision is absolutely impeccable, but to millions of others, science hasn’t invented eyeglasses thick and sophisticated enough to cure this man’s obvious physical impairment.

To those who now may be in a position to get the house of their dreams let me offer some education.

First off, the most popular method of mortgage foreclosure in Florida is judicial. This means the sale of the mortgaged property is under the supervision of a court. Proceeds then go first to satisfy the mortgage, second to other lien holders and, finally, the mortgagor/borrower if any proceeds are left. Like all other legal actions, all parties must be notified of the foreclosure. This could take six months or more from the time a property owner receives a notice of default until the property is sold at a public foreclosure auction sale. Please note that in order to keep costs down, you shouldn’t wait until the house becomes what is termed “Real Estate Owned” (REO) after the auction because the property will cost more than it would in preforeclosure. A property becomes REO when it remains the property of the owner of the mortgage. This can occur when the property was unable to attract reasonable auction bids, usually because the remaining mortgage balance is higher than the actual home value. Because of this, the owner/servicer will try to sell it through the standard real estate channels.

Purchasing directly from the bank is the most popular way to buy foreclosed homes because it is simpler and safer than other methods. There are several ways to find properties, but checking the county courthouse or going through the newspapers is a good start. Listing services and Realtors can also be very useful, depending on your level of expertise in this area. There are state-specific laws that govern foreclosures, and for Florida, you can find out more information by calling 1-800-342-1827.

Foreclosures can be a rite of passage, but education and preparation are the best ways to get the maximum possible benefit from this transition.

by Dan Padgug, owner of Padgug and Associates and ManageYourMortgage.org contributor