I want to address the growing trend of HOA’s foreclosing on owners with the idea of protecting their interest.Â HOA’s have wishful expectations that they will get their past dues from the short sale buyer if they are the seller and controlling the transaction.Â What they find is that Title companies will not insure a foreclosure on a HOA lien, the bank will not negotiate with them, and all that the HOA did was open a can of worms that is very messy.
1. Once the HOA owns the property who signs the documents that sell it to a new buyer?
2. Is the HOA allowed to sell property?
3. Foreclosing on a lien is different than foreclosing on a Note and Deed of Trust.
4. Will the lender on the First, or Second acknowledge the new owner and negotiate with them without the HOA being on their Note and Deed?
5. Can you find anyone in the HOA willing to put their signature on this sale and jump into this can of worms that will only be grief and time consumption for the HOA representative.
The HOA needs to work it out with the home owner before this happens and have them agree to a short sale.Â It is usually easier to let the owner stay in the unit if they are keeping the property in good shape.Â HOA’s need to have these conversations before it gets ugly and the home owner is alienated from the building.Â Short sales are messy and lenders are usually willing to pay some back dues, but there is a limit.Â It can be negotiated with the new buyer that there is a HOA shortage and have them agree to bring it current or close to current.Â HOA’s can’t expect to come out 100% whole but a good realtor should get them close to whole.
If your a HOA and want to talk about this give me a call.Â Don’t just foreclose and hope for theÂ best, it will be a mess.Â Once you foreclose you may have to get the past home owner back to the table with the title company to facilitate the final sale.Â If a foreclosure has taken place and there is bad blood or hurt feelings this could be difficult if not impossible.
Better yet, Call me and I will help with the short sale of the property and finding a willing buyer that will bring the HOAÂ as close to whole as possible.