What is a Third-Party Purchaser?

When most people think of foreclosures, the two parties instantly discussed are the owner that is being foreclosed upon and the bank that is doing the foreclosing. However, when the property is headed to the auction block there is another party that comes into the picture: third party purchasers. When the bank lists the property at the foreclosure auction, a third-party purchaser often decides to buy the property if he or she believes it is a good deal. Third-party purchaser can take strategic risks and make money through legal loopholes.

When most people think of foreclosures, the two parties instantly discussed are the owner that is being foreclosed upon and the bank that is doing the foreclosing. However, when the property is headed to the auction block there is another party that comes into the picture: third party purchasers. When the bank lists the property at the foreclosure auction, a third-party purchaser often decides to buy the property if he or she believes it is a good deal. Third-party purchaser can take strategic risks and make money through legal loopholes.

What are the Risks of Being a Third-Party Purchaser?

While searching through the foreclosure auctions may reveal an appealing investment, third-party purchasers need to be aware of the risks associated with purchasing foreclosed upon property. The biggest risk is a superior lien on the property. A third-party purchaser takes the foreclosed upon property subject to all superior liens. For example, if the previous owners had two mortgages and the second mortgaging bank forecloses on the property, the third-party purchaser, although not personally liable for the payment of the first mortgage, risks losing the property.

What are the Benefits of Being a Third-Party Purchaser?

Some savvy individuals have used the foreclosure process to their advantage. For example, because foreclosures can take up to a year to be completed, third-party purchasers have frequently rented out the property until the superior lienholder has completed the foreclosure process. These investors are often able to turn a quick profit by taking advantage of knowing the law or by having an attorney that is knowledgeable on foreclosure law.

Florida Statute 702.07 – Bonafide Purchaser

If you are considering becoming a third-party purchaser, one statute to be aware of is Florida Statute 702.07. This statute allows the court to “rescind, vacate, and set aside a decree of foreclosure of a mortgage of property at any time before the sale thereof has been actually made pursuant to the terms of such decree, and to dismiss the foreclosure proceeding upon the payment of all court costs.” As a third-party purchaser this means you run the risk of the initial owner of the house quickly coming up with the money to buy back the house after you have already bid on it at auction. However, once the time period for the initial owner to pay off the mortgage has passed, any bonafide, third-party purchaser has the right to retain the property.


If you are considering becoming a third party purchaser, do not hesitate to contact one of our experienced lawyers at EPGD Business Law. EPGD Business Law is located in beautiful Coral Gables, West Palm Beach and historic Washington D.C. Call us at (786) 837-6787, or contact us through the website to schedule a consultation.

*Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship.*

Categories: Business Law | Franchise Law

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