Short Sale - Tips on paying mortgage and HOA fees. One of the questions I frequently get with clients that are looking at doing a short sale on their home, is - Should I continue with paying my mortgage payments, and what about my HOA fees?
Short sale tip #1, If you plan on doing a short sale, missing a mortgage payment is not a directive an agent should give you so you can pursue a short sale. That decision is the homeowner's decision, based on your financial position, and/or guidance from a tax consultant or attorney. It is not neccessarily true that you have to miss mortgage payments in order to have a short sale accepted. And missing a payment, will have a significant affect on your credit scores.
Typically, when a homeowner stops making a mortgage payment, they also stop paying on their HOA fees. This is not a good idea! Short sale tip #2 - Stay current on your HOA fees, if you can. HOA fees can become a lien in the amount of the deliquency. In California, HOA liens are usually junior to a mortgage lien and in the case of a foreclosure, they are wiped out. But in a short sale, the deliquent HOA fees have to be addressed before the short sale can close.
Loan services are not inclined to payoff the deliquent HOA fees in a short sale. More often, this goes back to the seller to pay off, or sometimes the buyer is asked to pay the HOA fees in order to close the short sale.
Your agent can help with the HOA fee situation by talking to the homeowner up front. If you are delinquent, have your agent work directly with the Association management company or their attorney to some to some settlement. Because HOA deliquencies are so high right now, the Associations are forced to re-consider their approach because of all the foreclosures and the impact that has had on them financially. Besides losing funds from this one homeowner, HOA's deliquency rates can also negatively impact the community they serve and limit new homeowner's abilities to finance a loan.
So if you are in a short sale process, whether or not you can pay your monthly mortgage fee, do your absolute best to keep paying your HOA fees!
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