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Delinquent HOA Dues and Short Sales! Let's stop these HOA companies from killing our deals!

By
Real Estate Agent with Prudential California Realty

HOA companies aren't necessarily the most caring people to work with when doing a Short Sale. Delinquent HOA dues, Upfront Fees, and Transfer Fees are things that need to be paid before closing a Short Sale. Most times, banks will not pay for the delinquent HOA dues nor will they pay for the HOA doc fees. Most of the time, however, they will pay the $100-$300 transfer fee. Most HOA companies in California are governed by the State Dept. and when the dues become delinquent, the account is transferred to a collection agency. Most companies in Northern CA transfer the account to a collection company called Allied Trustee Services, who handle the collection of the unpaid dues. On top of the dues and late fees associated with the accounts, Allied Trustee Services also charges their own fees which add on approx. $1,000-$3,000 dollars to the amount originally delinquent. This makes everything a lot more complicated and not only is it a pain to have to go back and forth when negotiating the amount to settle the dues, it is also very difficult to come to a settlement with these companies because right off the bat, they say they are unwilling to accept settlements. I believe we as CA Realtors, should start a class action suit against these HOA companies and try to get something signed into law in order to prevent these companies from adding more burden to the already distressed Short Sale properties.

Pat Champion
John Roberts Realty - Eustis, FL
Call the "CHAMPION" for all your real estate needs

Sounds like something could be done-if not handled how will they get a new owner so the fees can start being paid again.

Jun 01, 2009 07:59 AM
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F

Don't you just love short sales?  Start negotiating with the HOA as early in the process as you can.

Jun 02, 2009 02:43 AM
Melissa Zavala
Broadpoint Properties - Escondido, CA
Broker, Escondido Real Estate, San Diego County

In So Cal we have seen a lot of delinquent HOA becoming liens against the property that the banks do not want to pay. Once the lien is filed, the costs owed become excessive and this (as you state in your blog) makes the short sale so much more fun ;-)

Jun 02, 2009 03:30 PM
Anonymous
Team Jenkins

This is a problem in most places that have distressed inventory. While there isn't much you can do once the lien is filed you can consult with new short sale clients that at the very minimum hoa and utilities must remain current. If not then the entire purpose of short selling to avoid the devastating effects of foreclosure are wasted. If the client isn't willing to at least take care of those things then my suggestion would be to move on.

A successful short sale is a partnership between the agent and the seller until it funds and records. All too often though once they have resigned themselves to accepting a short sale they become complacent in the process and remove themselves and you become a property manager. It is important to future pace the entire process, get the short sale paperwork completed before listing the property.

Jun 02, 2009 04:28 PM
#4
Kimberly Dotseth
Blend Real Estate, broker/owner - San Diego, CA
Try Our "Cancel Anytime" Listing!

I would NEVER take a short sale listing on a condo. Period. The HOA management companies are so out of hand with excessive fees for just about everything and the liens won't be paid by the new buyer, the seller or the bank. So it's a real mess.  An HOA killed a deal for me two weeks ago and it was a full equity sale! My seller owns the property free and clear. But the HOA (deliberately? it felt like it) filled out a hideous condo cert, then explained why they scribbled a bunch of notes in the margin..."to protect themselves."

Meanwhile, their notes were highly subjective and the lender bailed. And the buyer bailed. I can only imagine if it had been a short sale. There are too many stories about runaway HOA management companies being horrible during escrow. Good riddance to them I wish!

Jun 03, 2009 09:52 AM
Anonymous
V. King

Actually, it appears that most here know nothing of HOA's at all. 

First, they are managed by property managers.  They collect HOA assessments, per the law and also enforce collection policies per the law. 

Second, the management companies charge the HOA for their services up front. 

Third, the HOA is really the sum total of all the owners in the complex.  They are not a separate entity.  They are an Association of all the owners. 

Fourth, if the Association/HOA is charged a fee by the management company to collect past due assessments, pursuant to the lawful collection policies that MUST be adhered to equally, as to all delinquent owners, then naturally the delinquent owner will be responsible for the fees THE OWNER ACCRUED for failure to perform their legal duty to pay their monthly assessments.

Most Associations will work out payment plans if they are contacted before there is a problem.  Once it goes to lien, the fees add up and the Association has no choice in how those fees add up.  They also have no choice to tell the management company they won't pay the fees up front.  To do so would violate the Association's contract of obligations with the management company.

Lastly and first of all, Association dues are for monthly upkeep of the common areas and to fund the reserves for often deferred major repairs, such as roofs, siding, replacement of pool equipment, etc.  HOA's are run by volunteers that do not get paid.  If you can't pay the dues and don't read the docs before you buy or fail to be responsible in contacting the HOA to work out a payment plan, which will stop the fees charged by management, how is that the fault of the HOA?

 

 

Jul 03, 2009 04:32 AM
#6
Anonymous
V. King

An addendum to the above post #6

Should have signed that I'm a licensed CA R.E. agent; paralegal, condo owner and President of an HOA.  If you agents knew your jobs you would be advising your clients better both before and after they buy into condo complexes.  Our complex is full of owners that didn't have a clue because they bought through agents that only wanted to get that commission for the sale.  R.E. agents are all part of the circle of the problem that caused this real estate mess.  Greed and very lacking ethics and willingness to actually do their jobs to know what they are selling.

Jul 03, 2009 04:38 AM
#7
Anonymous
M. Higdon

I am a first time home buyer and we are suppose to be closing next week.  It is a short sale so we have been waiting quite a long time for this time to happen.  I got a phone call last night from my realtor stating that the property management company is requesting that we pay all of the HOA late fees that have been accruing for the last 2 years.  Why should I have to pay late fees from the previous owners?  Is this even possible? 

Jul 24, 2009 12:43 AM
#8
Anonymous
smith law

Stay awat from HOA!  My first home was in an association...I would never ever by a home in an HOA.  A waste of money and a pain in the butt.  Walk awayl if you can.  The action of this association says it all.  IT IS ALL ABOUT GETTING YOUR MONEY.

Oct 08, 2009 09:13 AM
#9
Anonymous
Ex HOA Board Member

V. King is so right. Realtors need to start being upfront with their clients and not just wanting the commission. Purchasing in an HOA is the pits. I am so happy to be off of our HOA board in So. California. The management companies and the HOA attorneys are not pro-homeowner. As a Realtor for 9 years, I see so much heartache with owners in HOAs. Never again will I purchase in one. Let's all hope home prices go up so we can all sell our homes and purchase single-family homes.

May 15, 2010 12:24 PM
#10
Anonymous
Boris

"should start a class action suit against these HOA companies and try to get something signed into law in order to prevent these companies from adding more burden to the already distressed Short Sale properties."

Huh?

How about the burden the dead beat owner bestows upon the residents who pay their dues to the HOA to have a nice community?

 

Sep 28, 2010 08:08 AM
#11
Anonymous
Richard Slater

With all due respect folks, these HOA's are getting REEMED through these closing! The problem is that many state laws have traditionally only allowed judicial remedies for delinquent assessments prior to the short sale. So, HOA's end up with exorbitant attorneys fees - which they almost never recoup - on top of the delinquent dues. You may think that they should only be 'grateful' to you for bringing them a new owner to start paying dues, but it's not that simply. They have FAR more land-mines to tread through than you realtors ever do (and I'm been in the real estate finance end for over a decade - I know of which I speak). You wouldn't Believe the exposure these folks have to law suits - it's mind numbing.

HOA's have to find a way to recover these delinquent assets - not have them washed away via short sales - because their Communities have to bare the burden of expenses being borne by fewer and fewer members. Not to mention if they Don't, well let's just say that it probably won't be long before every Government loan stipulates there be no more than a 15% delinquency rate for the entire Community prior to being able to obtain financing.

Here in California, we're starting to provide a simple, inexpensive solution which doesn't trigger the Davis-Stirling Act. It's called a 'Dunning Service'. HOA's can collect their delinquent dues Before they become too big of a problem - and utilize Credit Reporting as part of the process. A Dunning Service fits in nicely between the HOA/Management Company's internal collection efforts, and before sending them to an attorney. If you have questions feel free to email me at rslater@ncspinc.com

Best regards,
Richard Slater

Jan 23, 2011 06:38 PM
#12
Anonymous
RU kidding

Who needs HOA's get rid of them all together resident/board members intimidate and harass, they give out fines just be ecause they don't like you or because you got their number and the lid to the cookie jar has slammed down. These fines end up costing the homeowners and in somecases forcible entry and detainer, leins or anything else they can come up with try proving those fines they always end up in the favor of the association.  I recieved a ticket when I first moved in it was icy and slid through a stop sign, I went to their so called citation hearing and asked to produce the video tape of the gate that proved that I applied the break but their was so much ice that my rear wheel drive had no traction...guess what cameras didn't work and only recorded for 24 hours when working...the tickets stuck...I was unemployed and $75 later, we have gate passes to get through the gate because of that ticket they shut off my gate pass and guest list..meaning anytime anyone visited I would have to go to the gate and drive them in..in their car.  I am not a child I don't need this type of treatment.  I could go on.  I am tire of the abuse of power, when I moved in their was a rumor that someone walked off with a million dollars of HOA money, I asked the General Manager and his response was, their was no paper trail, no paper trail for a million dollars are you kidding me?  I want a refund, I believe I bought into something that was false advertised and not fully disclosed, We do not need these HOA's I have not lived in HOA's up until 6yrs ago and never had the issues I have had living here.  No one told the day of signing that they were held to corporation law and not governmental law..If I knew I could not hold them accountable do you think I would have bought in on..I am tired of the age old statement you knew what you signed...I beg to differ..did anyone say that their documents could change to suit their needs and are worded so they can get away with just about anything. Did anyone tell me the dues can be raise more than 5% each year mine have doubled in 4years or that I can't write the dues off in taxes, the election..wow..true democratic process are you kidding me what a scandal.  Something needs to be done and if legislature is not going to help then give us the option of after 10years the homeowners can decide to get rid of them all together.

Mar 14, 2011 04:59 AM
#13
Anonymous
Steve

Well, maybe if some of these deadbeats would live up to their obligation and pay their HOA monthly assessments and stop sticking it to the other homeowners in their association, maybe they could sell their place as a short sale a little easier. Since when is it ok to stop paying your fair share but to still expect all the benefits, rights, and privileges of living in an association? Why should the neighbors have to pay your share of the water, trash, gardening, insurance, etc.? I think HOA's should not back down from what is rightfully owed to them, especially since the balances owed to them are typically a small fraction of what is owed to the bank and much less that the loss the bank will take if the bank is forced to foreclose on the homeowner. I am sure that the banks would rather pay the past delinquent dues instead of having to foreclose. If now, the hoa can and should go after the homeowner in small claims court. 

May 11, 2012 03:59 PM
#14
Anonymous
Wayne Donsmore

Unless you are stupid, you know when you buy a condo, etc. there will be association dues collected to maintain the property, etc.

If you decide not to pay your HOA dues, then screw you.  You get what you deserve.  I'm sure as hell not going to support you.  You have now become what is commonly called a "DEADBEAT".

You can join the rest of the deadbeats and go live in a tent on the lawn of the White House.

Mar 17, 2013 11:18 AM
#15