Foreclosure Market Explodes in Jacksonville

The Florida housing market may be cooling overall, but you wouldn’t know it by visiting the Duval County Courthouse, where the foreclosure market is booming.

According to the Jacksonville Daily Record, rising interest rates and an ample supply of inventory might mean that “For Sale” signs are lingering longer in front yards. But foreclosed property auctions attract crowds of buyers. An auction Tuesday saw eight properties sell in under an hour.

The number of foreclosed properties has been on the rise this year in North Florida, with several buyers attributing the increase to the popularity of adjustable-rate Florida home loans.

As interest rates climb, those mortgages have adjusted and are now becoming unaffordable for many middle- and low-income homeowners, according to April Charney, a consumer attorney for Jacksonville Area Legal Aid. Charney, who specializes in foreclosure defense, keeps clients out of the auctions by working ahead of time to settle their debts.

“Particularly in poor neighborhoods, we’re drowning in foreclosures,” she said, adding that the auctions are becoming commonplace.

It’s not just on the supply side that the auctions are growing, as many new buyers now crowd the Courthouse to bid on the properties. Cheap houses are hard to find in this state, so Florida foreclosure property draws a diverse crowd, ranging from real estate attorneys in suits to contractors in jeans and boots. The crowds make it harder to walk away with a bargain.

“I used to come out here and there’d be two or three people out here,” said John Kern, an entrepreneur who bid on his first foreclosed property four years ago. “Now you’ve got all these people just bidding up and bidding up.”

Many are lured by tales of the quick flipping and big profits.

“A lot of people think they’re going to make a lot money. Some call them speculators, some people have worse names for them,” said Mark Kessler, an attorney bidding on properties for his clients.

But even at half the market value, the homes aren’t always sure things, says Herb Rinderer, a title examiner who also invests in properties and believes novice bidders sometimes receive unpleasant surprises along with their winning bids.

“If you don’t do title research, you don’t know what you might be getting,” he said. “You could be buying a second mortgage on that property. I did a search for one client and the property had a $77,000 IRS lien attached.”

Title researchers like Rinderer are part of the spin-off business created by the auctions. The auctions for properties with loans in delinquent status attract buyers, and right along with them a slew of title search firms, contractors and real estate attorneys.

Charney wishes she could get all that manpower involved before properties end up on foreclosure rolls in the first place. Ironically, she thinks a lot of properties could be had early at a discount, before the foreclosure price is ramped up by fees from lawyers and lenders. Or, owners might be able to dodge this bullet via refinancing.

“There’s a lot of smart people in this room. It’s too bad the living they make comes along with a heavy human toll and a toll on the community,” she said.

While foreclosure rates are on the rise across the state, the increases have been moderate, more so than some analysts predicted. Florida ranks eighth nationwide in foreclosures per capita. But, if and when the average Florida home loan (currently the average 30-year, fixed-rate mortgage is 6.78 percent) rises into the 7-7.5 percent range — or the 8 percent range — we could see a deluge of new properties entering this undesirable stage.