Business Law 101 / Foreclosure Sales

By Albert L Kelley, Esq.

What happens at a foreclosure sale? The sale is handled by the Clerk of the Court. Anyone may place a bid on property up for foreclosure. The bids can start as low as one dollar. They continue taking bids until the highest bid is reached. However, if the high bidder is also the judgment holder, they are given a credit for the full amount of the judgment. In other words, at the auction, the judgment holder may bid up to the amount of their judgment without having to pay any money to the Clerk of the Court towards the property.

If the high bid is less than the judgment amount, the money received is applied towards the balance owed to the judgment holder. The amount received is deducted from the judgment but the balance of the judgment continues to be owed. Often the judgment holder will attend the auction to ensure that the bid reaches at least the judgment amount (Often the judgment holder will start bidding far below the judgment amount. They do this so that if they obtain the property being foreclosed they still retain a balance on the judgment which can be collected later).      If the property sells for more than the judgment amount, the amount of the judgment is paid to the judgment holder and the excess is paid to the foreclosed party. There is an exception to this rule when there are other secured parties who have filed claims in the Court during the foreclosure process. If other secured creditors come forward, the excess funds may be paid to them after the judgment holder is paid.

Once the auction is over the winning bidder must post a deposit immediately with the clerk equal to 5% of the winning bid. They then have a specified amount of time (usually by the end of the day) to pay the remaining balance. Once paid, the money is held in trust by the Clerk. The Clerk issues a Certificate of Sale and forwards copies of it to all parties to the foreclosure action. During the 10 days immediately following the sale, the parties may object to the form or process of the sale. They may not object simply based on the right to hold the sale, as that right was granted by the Court.   If an objection is not filed within the 10 day period, the Clerk issues a Certificate of Title which confirms the sale and passes the title of the property to the successful bidder. The Clerk then issues a Certificate of Disbursements and pays the appropriate funds to the judgment holder.

Before the Clerk files the Certificate of Sale, the debtor may still redeem the property by paying to the Clerk of Court the total amount stated in the judgment of foreclosure, or if the judgment has not yet been entered, by paying all of the amounts due under the security agreement, including interest, the reasonable costs to file the foreclosure action and the reasonable attorney fees and costs of the creditor. If the above amounts are not paid prior to the issuance of the Certificate of Sale (or other period specified in the Foreclosure Order), the property may not be redeemed and the property will pass to the successful bidder.

Al Kelley is a Florida business law attorney located in Key West and previously taught business law, personnel law and labor law at St. Leo University. He is also the author of “Basics of Business Law” and “Basics of Florida’s Small Claims Court” (Absolutely Amazing e-Books). This article is being offered as a public service and is not intended to provide specific legal advice. If you have any questions about legal issues, you should confer with a licensed Florida attorney.

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