HOA Foreclosing on homes

Started by KcW • 3 replies • 2366 views

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KcW (Florida)
Posts: 14

Posted:

I am a homeowner not a BOD member.

I attend all meetings and very active in the HOA, I serve on two committees. I don’t agree with some of the things that the BOD does. One of the things I don’t agree with is the fact that they have, about 6 months ago, agreed to foreclose on a home that was behind in dues, about $2000 worth. The BOD, with the advice from the attorney, proceeded to foreclose on this home, now the foreclosure is worth $8000 with legal fees and other cost. This home is in mortgage foreclosure also, so there is no way to recoup this money. The home went to auction, and this home did not sale. Obviously so, no one in their right mind would buy a home from a HOA foreclosure sale. Our HOA now owns the deed to this home, and there are plans to rent it out all while spending Boo Coos of money to get it to a rentable state. The BOD had agreed, with the advice of an attorney, to use the rent money to pay off the debt owed to the HOA and attorney, then they intend on using any remaining money to pay the mortgage off and then HOPEFULLY sale the home. They are hoping that the house does not get Bank owned before they are able to recoup the money and take over the mortgage payments. Yes, this is the way it is happening… crazy I know!!!

There was outrage in the community about this; no one wanted the BOD to foreclose on any property because of the ramifications. However, many of the residents wanted to see how this played out and wanted to use this home as an example. The Bod chose to do this with just one house and that was that. The decision was made, time to move on.

PROBLEM… I check the county records from time to time to see what liens have been placed on homes and to see what is going on the neighborhood. Yes, I am a nosey neighbor, and I know how much people have paid for their homes. Well, being the nosey neighbor I found that the attorney has placed 8 homes in HOA foreclosure for nonpayment of dues, some for just over $1000 with legal fees in accsess of over $3000-$5000, in the past two weeks. HOLY CRAP…8 HOMES!!!!

Not one time, over all the meetings I have been too, which have been all of them in the past year, have mentioned putting any of these homes in HOA foreclosure.

We have a members meeting tomorrow night and if we get a quorum, which I highly doubt, we will have an election and I intend on running. If no election is held, should I bring this up at the meeting? I don’t want to make enemies with the BOD, because one day they may appoint me if someone steps down. Where should I go with this information? This is a huge problem; I see bankruptcy in the near future for HOA if this is the way things are handled.

ADVICE!!! PLEASE!!!

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I have been there and got the T-shirt on this one!!! This EXACTLY what I have been preaching about on this forum on foreclosure ramifications to AVOID. Liens/foreclosures are STILL EXCELLENT TOOLS for HOA and should NOT be taken away. Although there is a price to pay in some situations.

You pretty much posted the down side of foreclosure in a HOA. Unless an HOA can afford to buy a house and upkeep it, they should have avoided this foreclosure or posted it for someone to buy. Foreclosure sales are HOT IF people are aware of them. It sounds like this wasn't the case and was one of the mistakes to AVOID next time. ALWAYS HAVE A BUYER LINED UP WHEN FORECLOSING. Don't keep foreclosing process secret overall. It lets owner's know the HOA means business and it get rid of draining property.

If the property is already being foreclosed on by the bank then do NOT foreclose. Make sure to have a LIEN on that property and ACTIVE instead. Foreclosure information is POSTED in the local newspaper in the CLASSIFIEDS under LEGALS. My newspaper posts it 2 times a week. It is PUBLIC information. Keep following the postings to see if any of those 8 other properties are in there.

Basically, IF the bank is foreclosing on the property and the HOA does to, the HOA is doing the dirty work for the bank. The BANK ALWAYS gets paid first and then the HOA gets whatever is left over. Plus some states allow the foreclosed owner to purchase back the property up to a year plus improvements/debts owed. Which can leave any buyer in a jam for up to a year.

The FIRST bid as you found out goes to the HOA. It's about a $1 more than the money owed to it with all the legal fees and such. Plus the HOA now has to assume the payments of the property, repairs, dues, and legal costs. IF it is lucky they can put the property up for sale and make a profit. Nothing wrong with selling the property and putting the funds back into the HOA.

If the property did not sell at the auction it would then become HUD property. This could take months to a year for them to take action on the property. Most the time they just neglect it and auction it off. No money is made for the HOA or bank. It just gets a new owner to assume paying dues.

My suggestion is do some homework on these other homes. Let the bank foreclose on them if that is the case. If the bank owns the property in the end they have to pay the dues owed eventually. They aren't timely in keeping up with dues until they sell off the property. Just make sure your HOA is in line to be a debtor to be paid off even if the owner files bankruptsy. Put the home up for sale the HOA does own or use it as HOA property like a clubhouse or such.

I've posted too much but can answer more questions.

Former HOA President

JohnO6 (Georgia)
Posts: 424

Posted:

The lien is a useful tool for "possibly" recouping past due assessments if the home were to be sold other than at foreclosure. However, foreclosing on the lien can - as demonstrated by other posts here - be frought with time, trouble, and little if any return financially to the HOA.

Instead, I advise looking carefully in the CCRs for the statements that HOA assessments create a personal liability for the owner of the property at the time the assessments were due.

If you have this in your Declaration, you can then go after the owner personally and independently of the real property for these dues. With a strong collection effort on the individual owners rather than the property, I believe the HOA stands to gain more.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

A Lien and Lawsuit have this in common: They are COURT JUDGEMENTS. The difference is a LAWSUIT JUDGEMENT doesn't guarantee money. A person can go up to 7 to more years NOT paying the judgement. Plus they can simply SELL the property and walk away. If your HOA is like most, the boards changes every year or even management companies every few years. Who is going to keep up with any outstanding judgements to know when to refile or pursue garnishment? Plus it costs money to do either. A HOA MUST have a lawyer to file a lawsuit/represent them in court as they are a corporation.

A LIEN on the other hand holds the owner to the property. They can NOT sell that property until the lien is paid off. It should also accummulate up to the point of sale of the backdues owed/legal fees owed. Placing a lien also doesn't cost money or little cost to file. A lawyer may not be needed to file the lien. This saves money on the legal front versus a lawsuit. A owner can rent out their property indefinetely with a lien on it but it won't go away.

A lawsuit sounds more scary and gets more knee jerk reactions. However, something with real teeth that chomps down for the long term are liens. Foreclosures are easily STOPPED in their tracks if people would just PAY the money owed. Once a HOA takes the foreclosure route they aren't playing any more and gets the bleeding to stop...

Former HOA President

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