i'm not a realtor but i have been looking into this myself. i have been googleing foreclosures, foreclosures in florida, etc. wikipedia has good but complex info on forclosure. then i google some of the terms used and add florida at the end. also go to ask.com. lot of good info out there but it is presented in pieces for you to put together here is some of what i have gleamed from diff sites:
2 VERY important things
1) caveat emptor which is latin for BUYER BEWARE. YOU have to get a title search BEFORE you buy and disclosure (financial and condition of property) is not the banks responsibility.
2)IF SOMETHING SEEMS TO GOOD TO BE TRUE - it probably isn't true.
i'm not a lawyer but it seems that there are first mortgage lenders who can file for foreclosure and secondary (and 3rd, 4th etc) lenders (usually called equity loans at higher interest rates) and home owner associations (HOA) or tax collectors who can file to foreclose on a home. in florida specifically, contractors who have provided services and materials which have increased the value of a house who have NOT been paid can also file a foreclosure. additionally, ANYONE can go to court to get a judgement of lien against the property when the original borrower owes them money. Only the foreclosure will result in a transfer of title or deed to whoever "wins" in the court's judgement. the smaller the judgment, the smaller the opening bid, the smaller the fish who forced the foreclosure. a lien against the property just stays there until the title is transferred at which time the minnow will come to feed. the senior lender (first mortgage lender) basically has all power. they can payoff secondaries to protect their interest and then force the borrower to pay THEM and go for the foreclosure if not paid. they can piggyback onto the original foreclosure if the borrower is in arrears with them too or they can do nothing. no matter what, they get the first piece of the pie. they get the biggest piece of pie or the whole pie if it isn't big enough to go around. if they file first or piggyback then they get a final judgment for more than what is due on the first mortgage principal (plus interest, fines, expenses, fees, etc.). once the final judgment has been won, the property goes to auction. if no one bids, the title transfers to the winner (who is considered the highest bidder) for the amount of the judgment. in this market that is usually MUCH more than what the house could sell for. the higher the amount then the bigger the fish who foreclosed. Also, when the biggest fish files for foreclosure or joins in the case, the title or deed WILL TRANSFER CLEAN and they (and ALL of the smaller fish) can only file a default against the original owner/borrower. the diff of all monies due becomes an unsecrured debt against the foreclosed upon home owner - NOT AGAINST THE PROPERTY. when the secondary or "junior" lenders (tax collector, HOA and contractor) file and the senior doesn't join in the fun then the title transfers WITH ALL OF THE JUDGEMENTS AND LIENS STILL IN PLACE!!! This means that the "new owner", the HOA or whomever, kind of just assumes the debt or legal liabilities. today, generally the balance due exceeds market value. generally the smaller fish just let the biggest fish foreclose on that. i'm not positive but i think if you buy a house from the small fish in an auction on the court house steps then you just bought the debt, too. you may get a $ 300,000 house for $16k but it could come with a $600,000 mortgage that you weren't expecting to be responsible for. I think the other secured and unsecured debts are also now your problem too. you might also have to remove the original owner yourself (or maybe go to court to get them evicted by the sheriff after 30 days or more). also, you might get a great house or you might just get a house that has been completely trashed by an angry and/or dis-functional original owner. a property that has completed the auction phase is Bank Owned - or REO. i think that usually means the house is unoccupied and the first mortgage lender or bank holds a completely clean title (but they don't have to disclose liens, title or condition problems to you). again, DO YOUR HOMEWORK BEFORE YOU BUY. either way -
GET THE HOME INSPECTED AFTER ORIGINAL OWNER HAS BEEN REMOVED.
GET A TITLE SEARCH.
TALK TO A LAWYER AND MAYBE EVEN A REALTOR TO FIND OUT ABOUT OTHER POTENTIAL PROBLEMS. my guess is there are a lot of other pits that you could fall into. if you could get a great home for 16k then everyone would be doing just that.