The Unintended Consequences Of The HOA in Short Sales!

Totally agree with your use of the word 'extortion' by the Assn legal teams. They are jacking up the legal fees and including them in situations where they already know the house is under contract thus costing the owners more!

In IL we have a newer law that allows the assn to recover up to 6 months worth of dues plus the attorney's fees - which have not been negotiated! It's highway robbery and the new buyer has to foot the bill!  Think of this in a minimum down FHA situation where the buyer needs 3.5% as a down payment but is responsible for more than than from the assn!  So, (sometimes) the lender of the REO figures that out quick & pays it but that can't be counted on.

Alot of agents don't know of these new procedures and are living with their heads under a bucket I think.

Thank you for the information.  I haven't handled a short sale in a complex but will definitely make note of this and follow your suggestions.

Thanks for the heads up - great information. I have not encontered this yet, but I see this could present a problem for closing. I can see that a seller could just 'assume' all the late HOA fees would be paid by the lender at closing.

Wow, grat information.  The HOA's are more powerful than I was aware.  I hadn't heard that they could rent out vacancies for the benefit of the community.  It makes sense but some of these HOA's are not actually led by competent people!  (another discussion) 

I am going to look up the laws here in North Carolina right now!

Thanks.

A timely article for me.... I JUST HAD ONE today fall out of escrow since the Negotiator at ASC REFUSES to pay the $8k the homeowner now owes to the HOA. The wanted the BUYER to pay it to make the deal happen!! Personally, I WISH the HOA would foreclose and bump them out of 1st position!

Here too....I am now requiring buyers to agree to pay past due HOA and estimating the amount for them before accepting or making offers. We need to address it so we don't have any surprises.

Hi,

Thanks for the post.  I have heard that it is advisable for the Seller, of a Short Sale, to keep their HOA dues current, as most of the Lender won't cover this expense.  One negotiator mentioned to me that this is the one fee that the Lenders won't cover, but they'll take the loss on paying the property taxes, then loan balance and realtor commissions.  I am a bit surprised that a lot of HOAs are exercising the Foreclosure procedure, as it's my understanding they'll need to settle with any other Lien Holders on the property (First Mortgagor, Second Mortgagor and probably the County/City for Property Taxes) by bringing them current.  I would think it may be too expensive for many HOAs to bring those current/settled.  What is your experience with this?

Thanks,

Mike

Great post guys!  I love it when Rainers take the time to provide fresh content, instead of just rehashing stuff we've heard a thousand times.  Keep up the good work, and keep generating those content-rich posts.  We all are better for it!

I currently sit on the board of an HOA with 2200 homes (less than 1 month left in position)

We currently have title through foreclosure / auction process that allows us to rent the property as the owners.

One of the properties already had a tenent in place, who started making payments to the association to try and cover the $8000 deficiency in dues from the property owner. After a 12 month rental the association should be caught up on fees and dues that have accumulated.

The second property recently aquired through the foreclosure / auction process is still occupied by the original homeowners who are in foreclosure through their lender and have failed to pay approx $5000 in fees. This past week the HOA board of directors elected to evict the current owners as they are not taking care of the property, nor paying their assessments as dictated in the documents.
We are left with no choice but to protect the homeowners who are paying and try to run a balanced budget.

Many people fail to realize the downfall of homeowners who fail to pay. Currently our community is $250,000 behind in money owed to us for the purpose of running the business. HOA's are non-profit businesses and must account for repair and replacement cost of ammenities all of which help maintain home / property values. So when our community must halt regular service on signs and lawn care due to lack of funds every homeowner suffers or must make up the difference via special assessments all because homeowners fail to stay current.

this post is true and accurate, please advise all clients that the association can and here in Florida, will stand in the way of a sale if they are not paid properly. Law dictates the maximum fees allowed in a short sale to be 1 years of dues or 1% of the sales price, but if the amount is over that, the association has the right to not permit the sale, or prolong the sale through negotiatons, which we all know can kill a deal for someone who has already been waiting months.

Simple problem solving says: keep the dues current and everyone will be happy.
HOA's have found their work around which is file for judgement or foreclosure before the bank does which is sometimes easy as some homeowners stop paying dues first before they stop paying their mortgage. It all comes down to who has recorded the foreclosure first, either the lender or the HOA.

I ran into this recently in NC too.  Homeowner had burned bridges and, consequently, the HOA was just not reasonable.  The homeowner was upside down and foreclosure didn't make much sense since it would force the bank to foreclose.  My phrase for this situation is "my minds made up, don't confuse me with the facts."

I understand non-payment is a huge problem for HOAs and their paying members.  There doesn't seem to be any easy solutions for todays' problems.   

Well how does this work?  buyer owes $200,000 on a condo worth $50,000, BOA is no in a hurry to foreclose, and it is listed for sale....why would a HOA try a forclosure? with these figures the HOA gets nothing....al least if it sells in a short sale the HOA gets something.

Isn't BOA in the first position?