Homeowner Associations Getting Out of Control in Florida
Wow - What a crazy week I had. I am writing this article to let everyone know what is going on with Homeowner Associations during a short sale. First off, I want everyone to understand that Homeowner Associations have the right to personally go after each and every Seller regarding their dues and it can become a personal judgment against the Seller.
Many homeowners are behind on their houses payments are being forced into foreclosure. When it comes to a short sale, all liens or amounts due on the property for potential liens will need to be discounted and/or paid off in full. Florida has many properties that have homeowner associations dues. Some have more than one homeowner association.
It use to be so easy to negotiate with the homeowner association regarding the dues owed on a property. A couple of years ago Florida passed a law that guaranteed the homeowner associations one year worth of dues should the house go into foreclosure. This law did not take into consideration what if the homeowner needed to do a short sale. When the law first past, many homeowner associations would not even consider negotiating on the balance due to them during a short sale because they knew that the Bank would have to pay them at least one year worth of dues should the property go to foreclosure.
Recently, I had not just one deal but three deals where the homeowner associations would not agree to accept the short sale discount that the Bank offered. All three properties were under $60,000 and were getting more than 1 year worth of homeowner association dues. The worst part of negotiating with the homeowner associations they request an estoppel fee to be paid upfront for providing the homeowner with the total amount due for homeowner associations fees. The estoppel fee is either paid to the management company and/or an attorney. The price ranges from $100 to $500. This is totally crazy because if you contacted your mortgage company for a payoff their would be a nominal fee of $15 for the payoff figure. Who do you think is paying the fee prior to finding out of they will NOT agree to the discount? We have to guess at the amount due based on what the homeowner informs us and when we know we are getting close to a short sale approval, the estoppel fee is paid by the title company and/or the homeowner. I am now requesting my sellers to pay for the estoppel if they are more than 1 year behind on their homeowner associations dues. In addition, after reviewing the amount due to the homeowner associations, they are including late fees, interest fees, attorney fees, broken blind fees, non-approved tenant fees and more. A homeowner association bill that was originally $900 for late dues is now $21,000 based on the above junk fees. $1,000 for broken blinds, give me a break they can only see the blinds from outside the unit. I do understand they don't want junky properties however, how would they like boarded up properties or broken windows like there are in many states.
I totally understand that right now it is tough for the homeowner associations as they are taking a big hit due to the non-payers. In addition I feel sorry for all the homeowners whose dues are being raised to cover the homeowners in foreclosure. However, do the homeowners who are current really know what is going on. Do they know that many houses could be sold if the homeowners association would agree to a discount versus allowing the house go to foreclosure which decrease the value of their properties more? I kind of doubt it! If they did, they would be in agreement that having some monies being paid now and a new neighbor paying their homeowner dues is better than waiting the 749 days which is the time line for many foreclosure actions in Florida.
I am still working on two of the three properties dealing with the attorneys from the homeowner associations to get them to accept $4,000 now and a new buyer which would avoid the homeowner going into foreclosure. The last negotiation I had with the attorney for the homeowner associations refused to talk to me and would only speak through her secretary. We were off by $1,800 which the attorney said "have the buyer, realtors and title company take a discount". It is bad enough that the short sale lender is reducing commissions to realtors to 5% or 4% if you a good enough agent to list the property and find a buyer, now the homeowner associations are working against the people who are helping them stabilize their community by selling their homes. This is totally wrong!
If you are a homeowner and you are going through foreclosure, I would recommend to do your best to keep up your homeowner associations dues or they can come after you personally. If you are a realtor, I would highly recommend that you find out from your homeowner how far behind they are on their dues. If you are a homeowner paying your dues, attend your board meetings and find out what are they doing on short sales. You do have the right to speak at a board meeting.
We are all working together to improve the economy, can we all play nice? I would sure hope so. I did close one of the three deals but had to pay $300 towards the homeowner associations dues. I didn't like it at all, however, it was the only way to get the deal through. I would have loved to walk away from the deal and tell them forget it. However, there were circumstances that stopped me from doing so. The short sale approval letter was expiring and the bpo value on the property would be expiring too so that would mean another bpo value from the bank and more paperwork from the homeowners plus my homeowner would still have the same problem next time. The buyer had to be out of their place and had given notice so that would mean possibly a new buyer. I am a great negotiator when in comes to playing poker (that is what I call negotiating), however, I knew when to fold and close the deal for the benefit of all parties including the homeowner associations.
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