Investor Accidentally Pays $238,000 for Burned Down House
$238,000 for a Burned Down House
A Florida Man and local Palm Beach County investor buys a house at the foreclosure auction with a winning bid of $238,000. When the investor drives by the property an hour after winning it at auction, he sees a smoldering pile of ashes, complete with police tape and a group of people huddled pointing and staring at the scene of destruction that took place overnight. Unfortunately for the Palm Beach County Foreclosure auction winner, the county requires a 5% deposit of any amount you PLAN ON BIDDING at the auction, and then requires the other 95% of the winning bid after the auction. The 5% deposit required to make the winning bid of $238,000 at the Palm Beach County foreclosure auction is a whopping $11,780 it’s 100% non-refundable. When the investor called the County Clerk who is in charge of the Foreclosure Auctions, he was told that the only way to get the money back is if a Judge orders the Clerk to return the money. The case is being brought before the judge currently and is pending legal hearings.
Is the Investor at Fault?
The investor (who wished to remain anonymous) said to PropertyOnion.com:
“I did my due diligence and drove by the property and took pictures on Thursday before the auction, the god-damn property burned to the ground about 12 hours later!! This is completely unfair, and I plan on asking for my deposit back!”
The investor also told Propertyonion.com:
“I’m not holding my breath for that refund, as everyone bidding knows the rules of the game, great deals are to be had because the risks are higher. Certainly, you would think, since the property was gone the auction should have been canceled by the County. The county services were used to extinguish the fire, various county services were at the property in the aftermath, a record was created within the County, so the County was aware. There should be a mechanism to cancel these auctions if a property is destroyed right before the auction.”
Investors commonly bid on properties without viewing inside the property, and investors typically do a “drive-by” just to be sure the property isn’t caved in, and to make sure they are in fact houses at all. The reason why they have to bid “sight unseen”, is that all the properties being sold by the County at foreclosure auction are owned by the people being foreclosed on UNTIL the end of the auction. So, there is no way to view the interior of the property until after you win the auction. Sounds crazy right? But this is the way it’s always been and will most likely always be.
Did the Guy Seriously Burn Down his own House?!
Initially one could easily jump to the conclusion that the person being foreclosed on simply burned his own house down rather than losing it to foreclosure just before the auction. A simple last act of defiance that many could sympathize with, although it’s still very illegal and dangerous of course.
Since the great recession, it was pretty common to hear of homeowners ruining their houses before losing it to foreclosure. People would rip out the kitchen cabinets and sell them on Craigslist for pocket money. Other homeowners would do things out of spite, like smash floor tiles, break windows, even go so far as pouring concrete down toilets, shower & sink drains to ruin the plumbing.
After speaking with the fire department and viewing the fire report, we quickly concluded this was not the case, not at all. Gregory Landers, the homeowner at the time, said his dogs were acting strangely late at night so he placed his dogs in their crates. Soon after he said, the power cut off and upon going outside on the patio he noticed an oder of smoke. He quickly grabbed his dogs from inside the house and dialed 911.
The fire was out of control by the time the fire crews arrived a few minutes later, and they could not save the home. The fire report stated the fire originated from a faulty box fan left on in the garage attic for an extended period of time. No foul play was suspected according to the fire inspector report. The homeowner ended up in the hospital for smoke inhalation but was expected to make a complete speedy recovery. So foreclosure or no foreclosure, this homeowner lost his home that night. Some seriously bad luck for him, and bad luck for the investor buying it at auction that morning.
If County Auctions are so Risky, Why do Investors Bid?
The odds of a property burning down just before the auction are probably on par with getting struck by lightning at any given time. Many seasoned investors that buy at the county auctions typically do not even drive-by the house before the auction, they wait until after. Although it sounds crazy, losing your 5% deposit to a “walk away” because you bought something bad is just a cost of doing business, and they know the next deal will make up for it. Many of the County foreclosure auctions end up selling for 20% to 50% discount. The discounted sales prices reflect the level of risk involved in buying these properties without seeing them, and in many cases with other liens that will need to be paid off before owning them free and clear.
Here’s how to avoid these Nightmare investing Stories:
- Do your homework on each property, check the title, liens and other title encumbrances and bid accordingly. Make sure you are bidding on the property you think you are bidding on!
- Do more research on each property you did your homework on.
- Have professionals research the research you did on these properties.
- Check the research the professionals did on the research you did (Yes, Seriously).
- Drive by the property as close as you can to the time before the auction begins.
- Do a google search on the address 30 minutes before you bid on the property. If it burned down or something else crazy happened at that address, the news story will probably show up!
- After winning an auction, drive by the property before paying the rest of the money owed to the Clerk of Courts.
It really is that simple, do your homework, don’t take any shortcuts. Even if you make a whopper of a mistake like buying a burned down house, it’s not the end of the world. Educate yourself, and find more deals. If you don’t want to end up with a $238,000 pile of ashes or a $9,100 strip of grass join us at Propertyonion.com to learn how to invest like a pro and find a better deal!
After we reported the above article, the foreclosure sold again. That’s right, this burned down pile of ashes was placed back on the auction block and sold to another buyer!
This time for $206,100 on Thursday 5th of September at Palm Beach County Auction. It gets even better now:
PropertyOnion.com obtained court papers today where the original property owner Gregory Landers filed court papers to at first cancel the sale on the morning of the sale which did not happen because of time restraints and the sale subsequently proceeded.
Landers then filed on the 17th September a motion to deny the new owners Morning 5 LLC the certificate of title claiming that he (Landers) had filed bankruptcy prior to the auction but the motion got delayed due to hurricane Dorian. He further claims in his motion that the new buyers are a fake company set up by the mortgagee’s attorneys and that both the lenders and the attorneys are trying to collect funds twice over. He claims that the mortgagees new full well the fire had destroyed the house and waisted the courts time but not revealing the fact. Since the fire Landers claims he is now waiting for an insurance settlement that will no doubt settle all his creditors.
Propertyonion.com is in no position to refute or agree Landers claims but is simply reporting what is on public record, however, what is factual is that the land value of the property is only $62,788 according to the Pam Beach Property Appraiser’s office and to rebuild a four bedroom, three bathroom 2, 749 SQ.FT would cost circa $750,000 with the maximum amount you could possibly achieve by way of a resale being $550,000 at best. Additional you have to buy the buy the land and pay the associated sale costs, whichever way you cut it the only outcome is a huge loss!
However, Landers or the mortgagees could rely on the insurance company to rebuild the house which is the only way it works for either party but as an investment play even if you were given the land for free it just does not work, go figure?
So, what about our member investor that lost his deposit, well we can happily report that he brought a motion to Palm Beach County Court to get his deposit back setting out the circumstances, they agreed and made an order for the court to give him back his money. Lessons learned (for some of us), happy days?