Florida Real Estate Market and Tax Defaulted Properties with Mortgages

There’s an issue at stake in Florida – one of the country’s hardest hit states in terms of the real estate market – of whether or not a mortgage lender will try to redeem a tax lien certificate. That’s the key question investors in Florida tax lien properties need to ask before placing a bid on a house encumbered by a mortgage loan.

Of course the biggest factor affecting redemption is the real estate market itself. So many Florida homeowners are underwater on their mortgages that surrounding properties are being negatively affected. Values of real estate in Florida are extremely low and continuing to decline. Lenders realize this, and they must make a choice of whether to save a property that is worth far less than the outstanding mortgage balance. In addition to the loan balance, the bank gets hit with other costs, such as the continued real estate taxes, HOA fees, etc. The lender must also consider the possibility of the mortgagee defaulting on the loan – if the collateral securing the note doesn’t cover the balance, the bank could lose a lot if the homeowner decides to walk away. And finally, if there’s no reason to believe that even once the bank recovered the property that it would sell, you can see why sometimes lenders just let the real estate be offered at the tax defaulted auction.

What does this mean for tax lien investors? For one thing, it means that there is lots of Florida real estate up for auction. For another, this situation requires the investor to be very careful and diligently research a property before bidding. The costs of paying the back taxes and then obtaining clear title to the property might not be worthwhile. You must allow the homeowner two years to redeem the tax lien certificate and market conditions could be worse by then – although many pundits believe the real estate market should be in the beginning phases of recovery by then.

There is still a way to make Florida tax lien certificate investments profitable, and that’s by buying low. If you can get a valuable property cheap enough, it leaves lots of room for profit even if you must sell the real estate at a fire sale price. Be diligent and do your homework – never invest in a property until you know exactly what you’re getting.