Novice Bidders In Online Condo-Lien Foreclosure Sales Left Holding The Bag As They Unwittingly Buy Units Subject To Unpaid, Big-Balance 1st Mortgages

In Sarasota, Florida, the Sarasota Herald Tribune reports:

• Erika Ginsberg-Klemmt and William Anderson met online, but not in a good way. Driven by the misconception that they had stumbled on a brilliant formula that would allow them to buy a Siesta Key condominium for pennies on the dollar, the two novice real estate investors began unknowingly bidding against each other on Sarasota County's new online auction Web site. Anderson ended up prevailing with a bid of $86,001 and believed that he held unencumbered title to a condo once valued at $327,000. But all Anderson really won was the right to pay off $20,000 in unpaid association dues.

• More than a dozen investors who made similar mistakes in Sarasota and Duval counties since July are now out hundreds of thousand of dollars. Though they acknowledge that they were "suckers" and "stupid," they also question why government-run Web sites do not do more to warn novice bidders. "Okay, I'm an idiot," said Ginsberg-Klemmt, who settled in Sarasota in 2005 and began buying liens this summer after living on a sailboat with her husband for more than a decade. "But I'm not alone. Every day another sucker believes what we did."(1)

• The fact that inexperienced investors have been burned by bidding for foreclosures on the sites calls into question whether Florida counties have rushed into this brave new world of online bidding.

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• Thanks to a law passed by the Florida Legislature in 2008, counties across the state began to look at removing the auction process from the courthouse steps. The goal was to reduce costs and allow anyone to bid on foreclosed properties remotely. The first winning bidder for a sale held for Manatee County was someone from Montana, said Craig McIntyre, vice president at Realauction.com, the counties' auction company.

• "Anyone on the Internet anywhere in the world can participate," he said. "You don't need to leave home and you can bid in your pajamas." Maybe that is the problem, burned investors say. Just because you are in your PJs does not mean you can skip a title search, property inspection or other basics before buying a property. But the process makes you feel like you can.(2)

For more, see When government auctions went online, what was for sale got lost.

(1) Ginsberg-Klemmt, the winning bidder on five condo association liens in Sarasota, Manatee and Duval counties, has been hyperactive in contacting people who have made the same mistakes, urging them to fight to get their money back and to force counties to change the process, the story states.

(2) According to the story, the attorney for Sarasota County Clerk Karen Rushing's office said, "Whether it be a sale in the courthouse or online it doesn't alleviate the onus of responsibility to research it."