Would you be surprised to discover that the property you would like to purchase, which is subject to a foreclosure suit, has an invalid assignment of bid rights?
Improper Assignment of Bid Rights
As a transactional real estate attorney, I am surprised at the frequency I am discovering improper assignments of bid rights filed in foreclosure cases. An improper assignment of bid rights is signed by the plaintiff's attorney rather than being signed by the lender, without any documentation being provided to reflect the authority of the attorney to sign the assignment. This renders the assignment of bid rights invalid and creates possible title problems for the subsequent purchaser of the property.
Does this mean the foreclosure sale is invalid? Does this mean you, as the subsequent purchaser, do not have clear title to the property? The answers to these questions require review of many documents, including the pleadings filed in the foreclosure suit, your contract to purchase, all signed closing documents and the exceptions listed in your owner's title insurance policy (assuming you obtained an owner's title insurance policy).
Best Practice Tips
To avoid creating this title problem, the lender should sign an assignment of bid rights and the assignment should then be filed in the foreclosure case. If the lender's attorney signs the assignment of bid rights, a power of attorney signed by the lender authorizing the attorney to execute said document is required. The power of attorney must comply with Florida Statutes to be valid, should be recorded in the official records in the county where the property is located and should be attached to the assignment of bid rights filed in the foreclosure case.
To avoid another unpleasant surprise, it is important to confirm the plaintiff/lender complied with all judicial administrative orders concerning the assignment of bid rights. For instance, Polk County, Florida requires all assignments of bid rights made after the sale be approved by the Court and filed in the court file.
The best way to avoid unpleasant surprises if you are purchasing a property currently subject to a pending foreclosure suit or property already foreclosed upon is to be thorough in your due diligence, including review the of the foreclosure case and review of documents of record impacting title to the property.