Possible Pitfalls When Purchasing Florida Real Property at Auction

By:  Edward Hale Fort Myers Board Certified Real Estate Attorney

Recently, we have seen an increase in property sales at auctions.  Auctions can be an effective way for sellers to sell property fast.  And buyers can get a great deal. 

But if you purchase property at an auction, be sure you have either fully conducted due diligence on the property before you purchase it, or that you are allowed some due diligence period after the contract is signed in which you can cancel the deal and get a refund of your earnest money deposit if the property has title problems or if some other mistake arises. This is because in the sales contract, the auction company and the seller will probably require you to agree to a sweeping disclaimer of their liabilities in the event that a problem or mistake is discovered later.

Take the Florida First District Court of Appeals case of Rawston v. UMLIC VP, LLC, 933 So.2d 1206 (Fla. 1st DCA 2006).  In that case, the buyers executed a real estate sales contract at an auction for three parcels of land in Escambia county and received a general warranty deed from the seller, which was later discovered to have contained incorrect legal descriptions for two of the parcels. After the mistake was discovered, the buyers sued the seller, and sought to rescind the sales contract based on the legal doctrine of “mutual mistake.”  Significantly, note that the buyers did not allege, nor did the court find, any fraud on the part of the seller. 

The court ruled for the seller, stating that the auction real estate sales contract had sweeping disclaimers which:

1. placed the risk of mistake on the buyers,
2. disclaimed warranties and reliance, and
3. required the buyers to do their own due diligence, which they had failed to do.

The court went on to say that those contract disclaimers did not except, and therefore trumped, warranties of title in the deed for purposes of allocating the risk of mistake.

As this case shows, buying Florida property at an auction can be very profitable—but also very risky. 

Edward Hale is a Board Certified Real Estate Attorney in Fort Myers. He is also the owner of Hale Law Group.