Should HOA Board foreclose?

You might want to ask a reputable real estate agent just how desirable these lots would be if the HOA owned them and offered them for sale. Are there mortgages on these properties? In situations like this you just have to sit down with a calculator and ask: Is the HOA going to re-coop any of the past due fees, or is this just stopping the bleeding and hopefully getting a new owner who pays?

Bill,

The chances are not good that the builder/owner will suddenly find funding or buyers with those liens hanging overhead.

I would recommend moving ahead with a foreclosure. There is some chance that the lots will sell at the foreclosure auction but most likely your association will end up with title to two vacant lots that can be sold for market value.

Unlike a home, there is little risk in owning vacant land but you will not receive any assessments and you will have the expense of keeping the property in an attractive condition. You have already noted that you will owe taxes on the lots.

You have already taken a $17,000 hit and foreclosure may add several thousand in expenses, but you have the potential of selling the lots for around $100,000. It makes economic sense to foreclose.

Bill

I am not nor do I play a lawyer.

Any lien holder can initiate a foreclosure. Once a foreclosure is begun, all lien holders get notified. Usually the senior lien holder (first filed and generally the mortgage/note holder) will come out with legal guns firing.

In a foreclosure all liens that can be paid are paid. This does not mean all liens get paid. If there is not enough money to go around so be it. Some do not get paid.

I do not think it will be a cheap/easy walk in the park for the HOA to end up owning the lots for little money. That said, it could be worth it to spend a few hundred dollars to have an attorney look at the situation and advise you.

Hope this helps.

Melissa - I do not understand this statement.........
"This is a tough call. Remember if you do foreclose, the first bid is the amount owed to the HOA plus $1. Can you afford to pay the legal bill and then add on the purchase price?"
If the HOA is foreclosing why would they pay the purchase price? Isn't that what is owed to them (the HOA)?
Perhaps I am misunderstanding this, so I would appreciate clarification.

Thanks to all for your input. It is greatly appreciated. We are in the process of getting a Title Search done on the properties and then plan to consult our attorney.

I was answering someone else's post. It is still the same but without a house. Money can still be owed on a lot. Owning the lot for the HOA isn't going to me much cheaper. You should have read the OP and know the lots only sale around 50K not the 100K you posted. You can't name your own price for a lot or a house.

The OP has a lien of 17K on one of those lots. Meaning the first bid will be around 17K plus $1. They may be able to sell it at 40K. They are already out 17K for lien. Plus out the other 17K to purchase. How much does that now make them invested? 34K? If they foreclose and NOT buy the lot, that 17K goes back to fill the hole they are owed if someone else buys it.

My opinion, I'd rather have that hole filled (Which a court only makes you whole) than putting my HOA further into debt with a profit that will only bring more tax burden. I say foreclose on the lot but have someone in the wings besides the HOA to buy them.

You make so many factual mistakes that it is difficult to point them all out in one post.

The $17K is for both lots, per the OP. "HOA fees on these two lots in a total of more than $17,000."

We have foreclosed on 2 homes in our development and a third is in the process. The first 2 were homes seriously delinquent with dues; in one case, the house was in bank foreclosure and somehow the case was dismissed for lack of prosecution. So we foreclosed our lien and rent the house out. The homeowners had already vacated. We have recouped all the past due dues and are making a nice profit which is going towards paying down our other delinquent accounts after paying its current assessments. The other home was similarly situated with a bank foreclosure but in this case, the homeowners had vacated and allowed transients to stay at the house. As this became a safety issue, we foreclosed (its not always about the money, but its always about what is best for the residents). We are not able to rent that house because the people trashed it beyond repair before they left. The first house's rent is paying down this house's dues and incidentals. A third house is being foreclosed on because the folks who purchased it 3 years ago have never paid dues and have no intention of paying dues. This is our only leverage to collect dues. These folks get cable TV, landscaping services and irrigation for FREE, but the rest of the homeowners have to pay for these services. A 4th house was obtained because the homeowners, who knew they were going to be foreclosed on, signed the house over to the association. We are also renting this house and collecting dues. Eventually, the banks will take their houses but in the meantime, we are collecting dues.

These dues are important to collect because we must pay bills incurred,as promulgated by our governing documents (consisting of landscaping, cable TV, electric, front gates and irrigation, among other things). Before we took over these houses, bills were being paid by dipping into reserves (not good!). Our proactive stance has helped us to recover financially. We WERE out this money but are in a better situation now. Other associations are not faring so well, and are quickly depleting reserves.

If you don't want to pay for these things, do not move into an HOA run development. Its that simple.

Informative post, Allison!

Kelly

While not disagreeing, an empty lot not capable of generating revenue unless sold, is a horse of a different color then "renting" and generating revenue as Allison posted.

Each situation has the be investigated, evaluated, discussed, legal advice obtained (can vary widely state to state), financial advice gotten, etc. before one can say it is a "solid" idea.