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SheliaH (Indiana)
Posts: 6,964

Posted:

We had a homeowner who was extremely delinquent and after years of back and forth, the Association finally got the house in a sherrif's sale and it appears the owner has moved out. It also appears they took the furnace and air conditioner and I'm bracing myself for even more damage once the Sheriff confirms the house is empty (until then, we can't enter the unit to secure it).

My question to all of you is - what did your association do upon taking back a house in a sheriff's sale? If you found lots of damage, how did you respond? I'm wrestling with the following:

Option 1 - go after the homeowner for the damages.
Option 2 - don't spend any more money on pursing these people - they've never paid and are less likely to do so, now that you've tossed them out. Instead, get repair estimates, put the house back into rentable condition and rent it out until the mortgage company decides what it wants to do (after all we've gone through, the company has yet to pursue its own foreclosure)
Option 3 - do nothing, secure the unit - and send the mortgage company photos of the damage (I have suggested to the Board that we go in there with the sherrif and photograph everything with a time and date stamped digital camera)

Thanks in advance for your suggestions!

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

If a homeowner wants to destroy their house, they can. They own it. You cant sue him for taking his own furnace or other damage.

What you do with the place after you foreclose is up to you and at your expense. You will not get that money back from the previous owner. Taking pictures means nothing. The bank doesnt care. When they are finally ready to deal with it they will send in a realtor to take their own photos. The photos will look great if you fixed it up and turned it into a rental.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I am confused about the sheriff's sale. Did the HOA actually do the foreclosure or was it a bank foreclosure? This is imporant because I don't know if the HOA really owns the property. If the HOA did the foreclosure, then the HOA would have had to pay the bid price and assume the mortgage. If the bank did the foreclosure, then it's not the HOA's. It will probably become a HUD foreclosure.

The HOA does NOT want to own this home. They will have to pay for the repairs, mortgage payments, utilities, sales cost if they choose to sell, and other home ownership issues. Basically the HOA owns the home and ALL the cost associated with owning it. Which means paying the dues on the property and budgeting money to afford it. Can your HOA afford to make house payments, repairs, or manage this property? Most likely not...

As for going after the former owner for what they owed...If the HOA did the foreclosing, then the bid costs is the amount the owner owed the HOA. One forecloses on a home for the amount owed. That would have been part of the foreclosure sales. HOwever, if they owed money to the bank, then the bank gets paid FIRST and ALWAYS before the HOA does. Essentially, a HOA foreclosure does the work of the bank with little if any pay off.

If this was indeed a bank foreclosure, then it is all irrelevant as the HOA doesn't own or have rights to this property. It's either the bank or eventually it could turn into a HUD foreclosure. The property will just have to sit there until it gets an owner. Which means that owner will start over with a CLEAN SLATE with the HOA.

Former HOA President

BradP (Kansas)
Posts: 2,640

Posted:

Quote:

Posted By SheliaH on 10/12/2011 4:34 AM
We had a homeowner who was extremely delinquent and after years of back and forth, the Association finally got the house in a sherrif's sale and it appears the owner has moved out. It also appears they took the furnace and air conditioner and I'm bracing myself for even more damage once the Sheriff confirms the house is empty (until then, we can't enter the unit to secure it).

My question to all of you is - what did your association do upon taking back a house in a sheriff's sale? If you found lots of damage, how did you respond? I'm wrestling with the following:

Option 1 - go after the homeowner for the damages.
Option 2 - don't spend any more money on pursing these people - they've never paid and are less likely to do so, now that you've tossed them out. Instead, get repair estimates, put the house back into rentable condition and rent it out until the mortgage company decides what it wants to do (after all we've gone through, the company has yet to pursue its own foreclosure)
Option 3 - do nothing, secure the unit - and send the mortgage company photos of the damage (I have suggested to the Board that we go in there with the sherrif and photograph everything with a time and date stamped digital camera)

Thanks in advance for your suggestions!

Sheila:

you get the house as is...having damage or things missing is not unusual in a foreclosure. Move on

CarolF (Florida)
Posts: 435

Posted:

Sheila - this information is from Fl, and because states have different foreclosure processes I would urge you to search the Indiana laws. However, I believe Melissa is incorrect in stating you would have to make the past owner's mortgage payments. But, perhaps Alabama is different.

Collections/Foreclosures
Q: If my condo or HOA forecloses on its lien for unpaid assessments and takes title to a home, is the association responsible for the mortgage payments?
A: No. Only the homeowner/borrower is responsible for payments on the mortgage note. However, any first mortgage liens and tax liens are superior to the association’s lien and will remain as encumbrance(s) on title. Our Helpful Resources page features an article discussing the elimination of “abandoned” first mortgage liens, allowing your condo or HOA to potentially sell the unit at market value if it takes title to a home.
Q: What debts and other obligations will fall on the condo or homeowners association if it forecloses on its lien for unpaid assessments?
A: Like any unit owner, the association will be responsible for taxes, utilities, insurance and maintenance. The association should secure the unit or home and make sure the HVAC and other systems are functioning properly. It is not necessary to pay the real estate taxes because eventually the property could be sold at a tax sale, which results in a new owner taking over responsibility for condo or HOA assessments. Our Helpful Resources page features an article discussing the dilemma of condo/HOA lien foreclosure in the current bank foreclosure crisis.

The above information was obtained at this legal website
http://www.floridacommunitylaw.com/lawyer-attorney-1612986.html

MelissaP1 (Alabama)
Posts: 13,836

Posted:

This is why it's important to discern if it is a HOA foreclosure or a bank foreclosure. They have different consequences. If the HOA does the foreclosure (which I have done), then IF the owner has an existing bank loan, the HOA (any bidder) has to also get a bank loan. That is because they are still indebted to the bank for the value of the home. It isn't like you get the home for the cost of foreclosure...This is why a HOA foreclosure is more of a "stop the bleeding" than a profit making oportunity.

Basically, if it's a HOA foreclosure, the FIRST bid goes to the HOA for a dollar over the amount owed the HOA. For example: The HOA forecloses on an owner that owes the HOA $5K in back dues. The owner refused to pay the $5K. The house goes up for Foreclosure auction. The HOA gets the first bid for $5001. It then goes up for PUBLIC, to bid on. Which is the best option as the HOA isn't paying their own expenses again. The new owner will pay off the $5K. Unfornately, IF the owner still has a bank note on the property, then whatever is owed has to be secured by the purchaser too. The Bank is still owed money. If your lucky, the owner may only owe $50K on a house valued at $100K. Which means a purchaser gets the home for the winning bid price and gets a $100K house for $50K. Keep in mind that if they allow a HOA to foreclose on them, they most likely aren't paying their bank mortgage either. So the HOA may just be doing the work for the bank in the end.

A bank foreclosure the bid price usually starts out at the amount owed at the $50K price. That's the major difference. The new owner most likely wouldn't be responsible for paying the $5K owed the HOA. (Another long story). However, they would get a clean slate with the HOA to start collecting dues from. Which is basically the band-aid measure the HOA really needs. Plus the house gets occupied/repaired. No real money out of the HOA's pocket except if they had put a lien on the property prior to all of this.

Some states do allow the foreclosed owner to purchase the home back within certain time limits. Alabama it is up to a year after the sale. They just have to pay back what was owed (5K), the cost of the house, and any improvements made by the new owner. So even up to a year after a foreclosure, things can still be a bit up in the air....

Former HOA President

SheliaH (Indiana)
Posts: 6,964

Posted:

Thanks everyone, for your comments!

Melissa, we (the Association) foreclosed on the home after getting a lien and Indiana law works similar to what you described. Obviously, we’d hoped to avoid this step, but when people refuse to cooperate, what can you do? I attended a CAI seminar a year ago where one of the attorney presenters said if a HOA gets its money back from a foreclosure, hooray, but usually the primary objective will be to get the non-paying homeowners out (the sooner they leave the sooner someone can come in who WILL pay fees).

(Indiana law was changed this year to give HOAs 90 days from the date the lien is filed to foreclose – it had been one year and our lien was a little over a year old).

I’d hoped these folks would leave quietly (Lord knows their credit will be in the toilet for the next 7 years or so) and then we could rent the place out to recoup some of our money. But if the furnace and air conditioner are gone, it’s not fit to live in and I’m not interested in spending any more money on these people, especially if the mortgage company decides to come along and sell it for whatever they can get (why they haven’t stepped in before now, I’ll never know).

Steve, Brad and Carol - since posting this, I’ve seen a few more articles on the subject around the web (apparently trashing a house after it’s lost to foreclosure isn’t something new.) I also learned that in some states moving permanent fixtures like an air conditioner after a foreclosure is illegal because it makes the house uninhabitable and the owner no longer owns the house (things that plug in, like a dryer, might be ok to take, but this varies by state). I don’t know what Indiana law says, if anything, about all this – I guess I’ll have to wade around the Indiana Code to see what’s what

Carol, thanks for posting the information on Alabama law – I hope we have something like this in Indiana.

I’ll have a better idea of where we’re at once the inside is inspected (that should be about a week away) – based on what I’m hearing from some of you, it sounds like we may be better off securing the place so vandals don’t come in and let the mortgage company worry about it.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Sheilah your are correct that a foreclosure is a stop the bleeding procedure for a HOA. It isn't a profit making option at all as many perceive. That is a complete myth. I've heard some HOA's renting these properties out, but you can already see that isn't much help.

Don't expect any fast action from the mortgage company. That could take years. The market is saturated with these situations. My bet is this property becomes a HUD foreclosure and sold off to an investor. You are best in closing the house up to protect more damage. Watch out for frozen water pipes and make sure the electric is disconnected for fire protection. Our foreclosed property had a water pipe break, ruining the upstairs bathroom and flooding the downstairs. This is an abandoned house but make sure it doesn't become a hazaard. We were responsible for mowing the lawn so we continued the lawncare for the home to make sure it didn't appear neglected.

It took almost 2 years to get a new owner in that property after the foreclosure. It was a HUD foreclosure after the person who bought at our auction backed out. I suspect the same route for this property. A HUD property is different than a bank foreclosure. It's kind of like the government foreclosing on the bank. Either way, your stuck with an empty house for awhile...and no due payments...

Former HOA President

BradP (Kansas)
Posts: 2,640

Posted:

Quote:

Posted By SheliaH on 10/12/2011 3:53 PM
Thanks everyone, for your comments!

Melissa, we (the Association) foreclosed on the home after getting a lien and Indiana law works similar to what you described. Obviously, we’d hoped to avoid this step, but when people refuse to cooperate, what can you do? I attended a CAI seminar a year ago where one of the attorney presenters said if a HOA gets its money back from a foreclosure, hooray, but usually the primary objective will be to get the non-paying homeowners out (the sooner they leave the sooner someone can come in who WILL pay fees).

(Indiana law was changed this year to give HOAs 90 days from the date the lien is filed to foreclose – it had been one year and our lien was a little over a year old).

I’d hoped these folks would leave quietly (Lord knows their credit will be in the toilet for the next 7 years or so) and then we could rent the place out to recoup some of our money. But if the furnace and air conditioner are gone, it’s not fit to live in and I’m not interested in spending any more money on these people, especially if the mortgage company decides to come along and sell it for whatever they can get (why they haven’t stepped in before now, I’ll never know).

Steve, Brad and Carol - since posting this, I’ve seen a few more articles on the subject around the web (apparently trashing a house after it’s lost to foreclosure isn’t something new.) I also learned that in some states moving permanent fixtures like an air conditioner after a foreclosure is illegal because it makes the house uninhabitable and the owner no longer owns the house (things that plug in, like a dryer, might be ok to take, but this varies by state). I don’t know what Indiana law says, if anything, about all this – I guess I’ll have to wade around the Indiana Code to see what’s what

Carol, thanks for posting the information on Alabama law – I hope we have something like this in Indiana.

I’ll have a better idea of where we’re at once the inside is inspected (that should be about a week away) – based on what I’m hearing from some of you, it sounds like we may be better off securing the place so vandals don’t come in and let the mortgage company worry about it.

Sheila

yes it is illegal but is it worth the time, money and effort to chase them down? They didn't pay before, they won't pay now and after taking their house you have nothing to lien the judgement against. Unless your talking tens of thousands of dollars in damages I would just suck it up and move on

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