Bulletin: FL000061

Dear Associates:

Foreclosure sales sometimes result in a property being sold for a very small percentage of the owners equity in the property. This is particularly so when the foreclosure sale is based upon unpaid condominium or homeowner association assessments or a construction lien claim.

There have been several Florida cases dealing with this subject and unfortunately these cases yield no standard as to what might be considered a fair amount to be bid at a foreclosure sale. However, the cases clearly encourage the court to use equitable principles encouraging the trial courts to find a way to set aside the sale when the price is low compared to the value of the property, mentioning operative words such as "inadvertence", "mistake", "accident", "surprise", "fraud", "misconduct" or "irregularity". There are also cases indicating that the service of process will be closely scrutinized in such cases.

Accordingly, we hereby establish an underwriting standard requiring that for insuring a sale out of a foreclosure, the insuring agent is under a duty to reasonably approximate the fair market value of the property and insuring the clerk's Certificate of Title, where the sale is to a third party, only upon establishing that the amount of the foreclosure judgment, together with any other outstanding liens or mortgages, was not less than 50% of the established fair market value where the foreclosure sale results from the foreclosure of a condominium or homeowners association dues/assessments, or a construction lien.

Fair market value may be approximated in a variety of ways, i.e., by an analysis of the property appraiser's records as compared to fair market analysis in that county; by contacting a condominium association management in the foreclosure of a condominium; by obtaining a comparable market analysis from a Realtor friend; and by other means. Your file should reflect in detail the analysis and computation made.