ORLANDO, Fla. - More than a year after courthouse foreclosure auctions moved online in parts of Florida, bidders are still making mistakes, some worth tens of thousands of dollars.
Novice investors who think they're getting great deals ultimately discover they've bought worthless second mortgages or other junior liens.
The errors could have been prevented had the investors spent roughly $100 each for title searches, auctions officials say.
Gus Armenakis of Coconut Creek, Fla., said he didn't pay for a title search but did his own due diligence on a fourbedroom Parkland home and determined it had only one mortgage worth $90,500. Armenakis won the auction with a $102,600 bid.
He didn't find out until after the sale that Wells Fargo also had a first mortgage worth $386,593. Broward County appraises the home at $325,800.
Armenakis' attorney filed an objection to the sale, which was denied last week by a Broward judge. Wells Fargo has filed to foreclose on the home May 4.
Armenakis said he considers himself a victim of "predatory selling."
"It might be legal, but ethically it's not right," said the 38year-old doctor, who used savings and a line of credit to pay for the transaction. "Wells Fargo should have enough decency to return our money." A spokesman for Wells Fargo could not be reached for comment, despite attempts by phone.
It's unclear how many other people bidding on South Florida properties have mistakenly bought junior liens, but those who follow the auctions say it's fairly common.
"It happens every day," said Luis Valdeon, who publishes detailed reports for investors on homes to be auctioned in Broward and Miami-Dade counties. "People who get into this and don't know what they're doing will lose their (money) in 15 minutes."
The errors occurred even when auctions were held at the courthouse, but the complaints have intensified. After auctions in Palm Beach, Broward and Miami-Dade counties moved online, more people bid on properties. Dozens of bidders attended the live events, while online auctions are accessible to anyone worldwide with a computer.
Lloyd McClendon, head of the Plantation-based company that runs Broward's online auctions, said he feels for Armenakis but insists he didn't do the proper research to find a second mortgage.
"Any title search would have found it in 30 seconds," said McClendon of Realauction.com. In addition, the Broward auction's website offers training sessions for bidders and warns them that they are responsible for determining whether a property has multiple liens. Palm Beach County's website, has a similar setup.
Bidders in Broward must indicate that they understand the risks each time they make an offer on a new property, McClendon said.
At courthouse auctions, there were no warnings posted, and some seasoned investors intentionally let novice bidders make offers on junior liens in hopes that they wouldn't return, McClendon said.
In Armenakis' case, he was the only bidder, a clear signal that other investors knew there was a second mortgage, McClendon said.
Judges aren't sympathetic in these cases because bidders are warned about the risks upfront, said Sunrise real estate lawyer Gary M. Singer, who reviewed the Armenakis sale but was not involved in it. "It was so good of a deal, it should have made him nervous," Singer said.
Broward's auctions went online March 30, 2010, about two months after Palm Beach and Miami-Dade counties made the move.
Clerks of courts have said moving online has saved time and manpower, helping to reduce foreclosure backlogs with more frequent and faster auctions.
"We've seen nothing but efficiencies, and we've really gotten no complaints from the public," said Sharon Bock, Palm Beach County's clerk.