With home prices still down across the Bay Area, some people believe now is still a great time to buy an investment property. However, they are quickly learning a lesson: You'd better be careful what you bid on, even if the clerk of the court is selling it.
Eric Dalhberg is an amateur investor who has learned a hard lesson after bidding on a property in Pasco County.
"I thought I got a ridiculous good deal," said Dalhberg, who bought a three-bedroom townhouse in Wesley Chapel's Saddle Creek Manor for just over $8,000.
What Dalhberg didn't realize is he did not buy a mortgage foreclosure from a bank, but rather a foreclosure brought on by the homeowners association. So when he took possession of the title, he learned the property had a first mortgage of $184,000. The debt was left by the previous owner.
Nick Lang, a real estate attorney in St. Petersburg who is often hired by homeowners associations, has heard plenty of stories of amateur investors in the Bay Area making the same mistake.
"They're acquiring it subject to a first mortgage. But the public is often unaware of that circumstance and there are probably inadequate available disclosures to the public with the clerk's offices in the various counties."
Dalhberg says if he had known it was a homeowners, or HOA, foreclosure, he never would have bid on it.
"Being a state-run auction, I really thought that, hey, it's the highest bidder wins. They did have the disclaimers saying buyer beware, but nowadays everything has that disclaimer and I just assumed."
It's an assumption that likely cost him his investment. Paula O'Neil, Pasco County clerk, says she's sympathetic, but points out there are numerous warnings on the site which should not be ignored.
"It's property exchange; you need to know what you are doing," said O'Neil.
The Pasco County Clerk's Office is now looking at adding an additional warning that specifically alerts buyers to the fact the property may carry a big first mortgage.
Dahlberg knows it's too late for him and he's likely out $8,000 because he plans to let the bank keep the house, which is valued at just under $80,000.
"I do kick myself in the butt for not doing more research ahead of time. I just don't want to see somebody lose their life savings trying to invest in a home they are not going to get."
FOX 13 / WTVT-TV
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