When you want to purchase real estate at a foreclosure auction:

1. Pay for a title search. If you search the public records on your own, start from the date of the deed to the current owners. Determine if the mortgage being foreclosed is a first mortgage.
2. Read the Complaint in the foreclosure lawsuit. Be sure the junior mortgages, homeowners association, and any other lienholders are included as defendants.
3. Check the Tax Collector website to determine if there are real estate taxes owed.
4. You will inherit the past due HOA obligations - the foreclosure does not extinguish them.
5. Often the homeowners will try to sell the property before the foreclosure auction. Go see the condition of the house, and maybe you can strike a deal with them – or run away.
6. Seek the advice of an experienced real estate attorney.

Michael S. Price, J.D., MBA has been a member of the Florida Bar since 1983, and has experience in foreclosure acquisition, title disputes, and real estate transactional law.

For your first investment real estate purchase, before creating an entity such as an LLC, I suggest getting the property under contract in your individual name. The contract should have a sentence that the “Buyer may assign the contract to an entity owned in whole or part by Buyer.” A week or so before closing, the LLC can be formed online. The title company will need that week to update the Title Commitment for the LLC.

The disadvantage of forming the LLC before you have a property under contract is that you may not get a suitable property under contract and then you have an entity that requires a tax return, the cost of setting up the LLC, the recurring annual State fees, and accountant fees.

Most importantly, I suggest having a real estate attorney draft or review the contract, and follow the transaction through to closing. It’s like the old Midas Muffler commercial “Pay now or pay later.”

Also, if the LLC has 2 or more Members (owners), you should have an Operating Agreement that among other things prescribes buy-out upon death, restrictions on the transfer of Membership interests, duties of the Members, and any other concerns of the Members.

Credit to: Green Energy Builders & Solutions / Green Energy Spray Foam Insulation

When you build a new home, common problems include the following:

1. Wood framing is not as tight as it should be, because it is held together by a fastener.  In other words, 2 pieces of wood should be tight together and very strong and then you fasten them to each other.  However, in some new construction for houses the wood is being connected by a 4” to 6” fastener which should not be the case.
2. Private inspectors are being used instead of county inspector.  That is the reason that counties across Florida started sending county inspectors without notice to the jobsite just to investigate the construction process before the finished project.  There is a need for more checks and balances throughout the building process.
3. House concrete pads where the dirt is laid down should be completely compacted more and concrete slabs should be given more time to cure in order to eliminate cracks of the tile after the customer has moved in, which is generally about 6 months from the time construction starts, which is a very small window.
4. Electrical outlets, wires, and boxes are very small (the minimum size) for the building code for residential houses, so if you want to rewire or add any outlets there is not enough room on the electrical box for anything to be installed.
5. Plumbing slope is very bad inside the house.  When you flush toilets or any other utilities, water does not flush to the sewer lines. You have to call a plumber and go to the roof to flush the system.  The size of the drain pipe is wrong and there is NOT enough slope, if any, to let the water go to the sewer drain.
6. Roof trusses may be sitting on an interior door frame, with the headers built with the layers of wood lying on top of each other instead of side by side. This puts pressure on the headers, bending it down and not providing enough support for the roof truss.

Homeowners put a lot of trust in a new home builder, but the trust may be misplaced. Have an independent architect, builder or inspector who can inspect the building plans, schedule for construction, and be a check and balance. Unfortunately, most home builders will prohibit a third party to be involved. Importantly, have a real estate attorney review your contract for your rights and duties and do not feel pressured to agree to the builder’s unilateral terms.

Travelling at 70 miles per hour is 103 feet per second. A car of 15 feet in length travels almost 7 car lengths in only 1 second. Kids, cellphone or any other distraction can occupy your attention for way more than 1 second. In just 1 extra second you will have traveled 14 car lengths – blind to the front. That’s how accidents happen.

When you replace your roof, the wrong procedure for paying the roofer can result in a lien on your property and paying twice for the work. Here are the proper steps:

1. From your home insurance company, get its specifications for the roof to obtain the maximum insurance premium discount.
2. Get bids from 2 - 3 roofing companies, and share your insurance company’s specifications to incorporate into the bids. Compare the specifications of the roofing companies and combine the best specifications into a list.
3. Have a real estate attorney prepare an addendum to the roofer’s contract using your list of specifications and the precautions in the following steps.
4. If your roof is a complicated roof, have a professional roof inspector who does not also install roofs (to avoid a conflict of interest) inspect your roof, review the roofers’ bids, and the proposed contract and addendum. The addendum should include that the roof pass your inspector’s inspection(s) before payment.
5. Before work is started, the roofer should post a Notice of Commencement with the government permit on your property. This informs the supplier of the roofing material who owns the property. The supplier can then send a Notice to Owner to you as to whom the supplier is.
6. Do not write a check to only the roofer. Write the check jointly to the roofer and the supplier. This way the supplier will get paid. If you pay only the roofer, the roofer may not pay the supplier, and you will be responsible to pay the supplier again.
7. At time of payment, require the roofer to give to you a Final Release and Waiver of Lien. Your real estate attorney should give you the form to look for.
8. To avoid feeling awkward in these protective payment steps, you can arrange for your attorney to hold your money in their trust account and then the attorney will pay the roofing company. This and the other steps should be in your contract addendum.

Once the contractor starts your home improvement, the construction costs and payments can quickly get confusing. As the homeowner, you are busy enough just watching the demolition and improvements take place, and making adjustments as necessary. Despite you and the contractor meticulously negotiating the contract, formalities easily deteriorate for change orders.

The first and most important safeguard is to budget and pay for your own accounting as the job progresses. This should be done before each payment to the contractor by you or your lender. The accounting complexity is enormous if time slips by after payments are made, and the contractor is less than motivated to take the time to review records for overpayments.

Credits may be due to the homeowner for different reasons. First, the contract may allow a credit if the cost of certain items is less than the contract allowances. Also, the homeowner may have had to pay third parties for work included in the contract price. Third, the homeowner should get a credit for contract items that the contractor did not do.

Obtain the services of a person (“Construction Finance Manager” or “CFM”) not a party to the contract to oversee all aspects of the construction contract. That person can ensure no work or materials for a change order are started or delivered without an itemized change order showing itemized prices, deadline for completion, and the change order is signed by both the contractor and homeowner. The CFM should monitor all contract deadlines, work completed, contract price as increased or decreased by change orders, payments already made, and advise the homeowner whether or not to approve the draw request of the contractor.

More and more small businesses are springing up. The businesses usually need to lease space. Existing businesses need to continue leasing. Commercial tenants are at a huge disadvantage and are at the Landlord’s mercy if the Tenants do not know their rights and options in negotiating a new lease or the terms of a lease extension.

Critical considerations in entering a lease include the following:

• Budgeting for professional services, CPA and attorney
• Selection of the business entity
• Personally guaranteeing the lease
• Term of the lease
• The real additional costs for common area expenses
• Option to Renew the lease term
• Rent amount for the lease term
• Early termination of the lease
• Selling your business with continuing lease terms

Thousands of distressed and foreclosed properties are being sold at auction. There are very expensive pitfalls in buying property through auction. The auction company often posts on the internet a Preliminary Title Report along with the contract form and disclaimers and disclosures.

In one case, I looked at the Preliminary Title Report. The Preliminary Title Report is a Commitment to Insure Title, which is promise by a title insurance company to issue a Policy of Title Insurance after the closing to protect the buyer from liens that should have been paid off before closing or defects in the title. Never purchase real estate without the contract requiring a Policy of Title Insurance.

The Preliminary Title Report  in this instance showed exceptions for City of Jacksonville liens. I also looked at the contract form, which said that the title and title insurance would be subject to any exceptions shown in the Preliminary Title Report. One matter shown as an exception was a fine since January 5, 2010 of $50 per day, which would have been $18,250 within just a couple months after the auction! The unsuspecting high bidder will have to pay off that lien before selling the property, adding significantly more price than expected. 

When looking at properties to buy at auction, carefully read the Preliminary Title Report (also known as the Title Commitment). This is very informative, and you will become a savvy investor. Also, get a copy of all the documents listed on the Exceptions portion of the Title Commitment. There are 3 parts to Preliminary Title Report (Title Commitment): (1) Schedule A, which identifies the proposed buyer, the current owner, and the legal description of the property; (2) Schedule B-1, which shows the requirements to be satisfied before the title insurance company may issue a title insurance policy; and (3) Schedule B-2, which shows the exceptions to the title insurance policy, just like exclusions in a health insurance policy.

“Pay now or pay later.” That was a famous Midas Muffler commercial slogan. It also applies to real estate transactions.

One home buyer (“Betsy”) was told by the real estate agent that the home had a septic system. Two (2) years after the purchase, the next door neighbor (“Fred”) was banging on Betsy’s front door demanding that Betsy pay Fred for half of the cost to repair the septic system. For the first time, Betsy found out that she did not have a septic system on her property. Fred then cut off Betsy’s use of the septic system, causing flooding of sewage into Betsy’s home, ruining her wood floors and causing Betsy plenty of grief.

Betsy had a home inspection before buying. The home inspector probably just flushed the toilets for the extent of his sewerage inspection. Betsy should have obtained a separate septic tank inspection. Then the septic tank inspector would have looked for the septic tank and discovered it was not on Betsy’s property.

After Betsy came to see me, I thought to look for an easement that may have given Betsy the right to use the septic system on the neighbor’s property. Betsy did not have her Owner’s Policy of Title Insurance, so I ordered the policy from the closing agent. There it was – a Declaration of Restrictions requiring the home owner and the neighbor to obtain a maintenance contract with a third party approved by the Department of Environmental Protection to regularly inspect the septic system.

Why did the closing agent, a law firm, not review the exception in the title policy for the Declaration of Restrictions so the new homeowner would then at least know she did not have her own septic system? That is why home buyers need to understand the need for and the language in title policies. That is also why home buyers need to have their own attorney knowledgeable in real estate transactions to review the (a) contract before signing it, (b) the title Commitment, and (c) the closing documents. For an explanation of a title Commitment, see my Article titled “Is the High Bid the Real Price.”

1. What is your experience in reviewing and negotiating leases?
2. Do you want to protect your personal assets from financial losses?
3. Do you know whether to form a corporation, limited liability company or other entity?
4. Do you want to generate only regular income from your business or also have the ability to sell your business for a multiple of your business’ income?
5. When you sell your business, do you want to continue to be personally liable for the new business owner’s financial obligations to the Landlord?
6. Do you want the ability to extend the lease term in case you want to continue or sell your business?
7. Do you want the Landlord to have the uncontrolled ability to charge expenses of the center to you?

When you buy, sell or refinance a property, make sure:

1. You get the reduced rate on the title insurance premium. Provide a copy of your current owner’s policy of title insurance policy early in the transaction to the closing agent.
2. Within the contract deadline, you review the survey and the commitment to insure title to know what encroachments, easements and other matters affect or restrict the title you are buying (you may not want the property).

• Establish timelines for case or transaction progress
• Encourage client participation in their case
• Encourage client office visits to maintain case momentum
• Focus on refining strategy as the case and time progress
• One-on-one attorney and client interaction
• Primary goal to give you peace of mind