Short sale question with a current lien.

GnomeX (Washington)
Posts: 253

Posted:

Haven't had this happen before need some advice.

We had an owner not pay his dues and informed us he was letting the bank foreclose. We knew if the mortgage holder took possession via foreclosure and then sold the property, it would wipe out our lien so we didn't file one. Property finally went up for sale but then I noticed there was never a trustee sale. The bank never took back possession.

Contacted the county assessor, they said the owner was still the owner of record. Contacted a title company and the real estate agent handling the sale to get more info. Both title co. and real estate agent would tell me nothing citing privacy concerns. The ONLY thing I could get out of them was that it was the same owner who was the seller (NOT the mortgage holder).

I promptly filed a lien against this owner.

Now that the property has a buyer, the real estate agent is informing me now that it is a short sale and the bank is trying to fight the lien.

Can the the mortgage holder do this even though they are not the seller. The current owner is the seller, not the bank.

TimB4 (Tennessee)
Posts: 21,059

Posted:

The mortgage holder can fight the lien.
They may or may not win.

You were right to file the lien. Now simply let the issue run it's course.

CarolR11 (Colorado)
Posts: 2,563

Posted:

Good work, GnomeX. Hope smartypants Steve of MS is reading this.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Short sales are not foreclosures. The parties to the sale can piss and moan but have little clout to remove the HOA lien. My understanding is that it is the real estate agent stirring things up for you.

In a short sale, the buyer lists the property for sale for less than he owes the bank. When someone makes an offer to buy, the offer is sent to the bank for their approval or rejection. This is a normal real estate sale with the added wrinkle of the bank accepting less than full payoff.

Unless you have some really strange laws in your state, a short sale is does not create a superior lien. It does just the opposite: it removes the bank's lien because the bank has agreed to a payoff.

The HOA lien is really between the buyer and seller. The bank is just a bystander with regard to the HOA lien. If the buyer is seeking his own financing, his lender will insist that the HOA lien be paid before the sale closes.

Keep in mind that it could all go south very quickly. If the mortgage remains unpaid the bank could file a foreclosure action in court. Since the home is not likely to sell at the foreclosure auction for a price that covers the bank's liens and costs, the chances of the HOA getting paid would be zero.

Keep your fingers crossed that the short sale happens and wait to get paid on the lien. Ignore all the protests, whether from real estate agent buyer, seller, lender, or title company. The law is on your side on this one.

RichardP13 (California)
Posts: 1,767

Posted:

Gnomex

If you followed that same process in filing a lien in California it would get throw out of court.

GnomeX (Washington)
Posts: 253

Posted:

Quote:

Posted By RichardP13 on 10/08/2013 6:21 PM
Gnomex

If you followed that same process in filing a lien in California it would get throw out of court.

Thank God I don't live in California :p

RichardP13 (California)
Posts: 1,767

Posted:

Gnomex

I'm curious on how a lien is filed in Washington. Could you elaborate? Does it need Board approval? Is their a warning letter sent before, or do we show up at the recorder's office with a piece of paper.

Just curious. maybe, we in California have been doing it wrong all along.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By RichardP13 on 10/08/2013 6:21 PM
Gnomex

If you followed that same process in filing a lien in California it would get throw out of court.

Could you explain what the problem is and why it would get thrown out of court?

BTW, in AZ the HOA lien does not get recorded; the HOA lien is created by statute and the underlying obligation to pay assessments on the real estate.

RichardP13 (California)
Posts: 1,767

Posted:

Larry

In California, we have a collection process. A pre-lien letter is sent 30 after the assessment become delinquent. 30 days afterwards a lien can be recorded against the property. It must be approved by a majority vote of the Board in Open Session. There needs to be a resolution to lien attached with the aprroved minutes of the meeting in which the lien was approved.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By RichardP13 on 10/08/2013 8:35 PM
Larry

In California, we have a collection process. A pre-lien letter is sent 30 after the assessment become delinquent. 30 days afterwards a lien can be recorded against the property. It must be approved by a majority vote of the Board in Open Session. There needs to be a resolution to lien attached with the aprroved minutes of the meeting in which the lien was approved.

One more good reason not to live in California.

RichardP13 (California)
Posts: 1,767

Posted:

I follow the rules in the same manner as i would ask the resident to do.

In my profession, I have seen the abuse of an association trying to steal one's home, without due process.

DaveD3 (Michigan)
Posts: 796

Posted:

Quote:

Posted By LarryB13 on 10/08/2013 7:54 PM

Posted By RichardP13 on 10/08/2013 6:21 PM
Gnomex

If you followed that same process in filing a lien in California it would get throw out of court.

Could you explain what the problem is and why it would get thrown out of court?

BTW, in AZ the HOA lien does not get recorded; the HOA lien is created by statute and the underlying obligation to pay assessments on the real estate.

Same here wrt the statutory line. The issue is that it's easy for the property to transfer ownership with the statutory lien never surfacing. By filing the lien, a formal place in line is established that will (should) be discovered during a sale.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By DaveD3 on 10/09/2013 3:45 AM

The issue is that it's easy for the property to transfer ownership with the statutory lien never surfacing. By filing the lien, a formal place in line is established that will (should) be discovered during a sale.

Dave,

My point was that state laws vary considerably regarding liens. Arizona's statutory lien is far from perfect and I would prefer that liens be recorded, where they have a higher chance of being found during a title search. (Arizona requires that the association record a notice of who to contact, usually a property manager, for lien information.)

The California process for filing a lien is overboard. A lien is a unilateral claim that one person owes another money. Liens are always subject to challenge. California prevents the HOA from even asserting its claim until the owner has been given a series of opportunities to mount a challenge and delay recording the lien. All other states seem to be comfortable with allowing the lien to be recorded and challenged afterward.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By LarryB13 on 10/09/2013 8:56 AM

Posted By DaveD3 on 10/09/2013 3:45 AM

The issue is that it's easy for the property to transfer ownership with the statutory lien never surfacing. By filing the lien, a formal place in line is established that will (should) be discovered during a sale.

Dave,

My point was that state laws vary considerably regarding liens. Arizona's statutory lien is far from perfect and I would prefer that liens be recorded, where they have a higher chance of being found during a title search. (Arizona requires that the association record a notice of who to contact, usually a property manager, for lien information.)

The California process for filing a lien is overboard. A lien is a unilateral claim that one person owes another money. Liens are always subject to challenge. California prevents the HOA from even asserting its claim until the owner has been given a series of opportunities to mount a challenge and delay recording the lien. All other states seem to be comfortable with allowing the lien to be recorded and challenged afterward.

Good information.

Thanks

SheliaH (Indiana)
Posts: 6,964

Posted:

Quote:

Posted By LarryB13 on 10/08/2013 5:47 PM
Short sales are not foreclosures. The parties to the sale can piss and moan but have little clout to remove the HOA lien. My understanding is that it is the real estate agent stirring things up for you.

In a short sale, the buyer lists the property for sale for less than he owes the bank. When someone makes an offer to buy, the offer is sent to the bank for their approval or rejection. This is a normal real estate sale with the added wrinkle of the bank accepting less than full payoff.

Unless you have some really strange laws in your state, a short sale is does not create a superior lien. It does just the opposite: it removes the bank's lien because the bank has agreed to a payoff.

The HOA lien is really between the buyer and seller. The bank is just a bystander with regard to the HOA lien. If the buyer is seeking his own financing, his lender will insist that the HOA lien be paid before the sale closes.

Keep in mind that it could all go south very quickly. If the mortgage remains unpaid the bank could file a foreclosure action in court. Since the home is not likely to sell at the foreclosure auction for a price that covers the bank's liens and costs, the chances of the HOA getting paid would be zero.

Keep your fingers crossed that the short sale happens and wait to get paid on the lien. Ignore all the protests, whether from real estate agent buyer, seller, lender, or title company. The law is on your side on this one.

One of our homeowners told us there was a time with the board (long before I moved in) would actually forgive delinquent fees in order for the short sale to go through. Needless to say, the current board, of which I'm a member, doesn't do that anymore (if they want the sale that badly, they can at least offer the board part of what's owed and you can negotiate from there). If anyone tries to get your board to agree to such foolishness, cut them off at the knees.

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

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By SheliaH on 10/09/2013 9:31 AM

Posted By LarryB13 on 10/08/2013 5:47 PM
Short sales are not foreclosures. The parties to the sale can piss and moan but have little clout to remove the HOA lien. My understanding is that it is the real estate agent stirring things up for you.

In a short sale, the buyer lists the property for sale for less than he owes the bank. When someone makes an offer to buy, the offer is sent to the bank for their approval or rejection. This is a normal real estate sale with the added wrinkle of the bank accepting less than full payoff.

Unless you have some really strange laws in your state, a short sale is does not create a superior lien. It does just the opposite: it removes the bank's lien because the bank has agreed to a payoff.

The HOA lien is really between the buyer and seller. The bank is just a bystander with regard to the HOA lien. If the buyer is seeking his own financing, his lender will insist that the HOA lien be paid before the sale closes.

Keep in mind that it could all go south very quickly. If the mortgage remains unpaid the bank could file a foreclosure action in court. Since the home is not likely to sell at the foreclosure auction for a price that covers the bank's liens and costs, the chances of the HOA getting paid would be zero.

Keep your fingers crossed that the short sale happens and wait to get paid on the lien. Ignore all the protests, whether from real estate agent buyer, seller, lender, or title company. The law is on your side on this one.

One of our homeowners told us there was a time with the board (long before I moved in) would actually forgive delinquent fees in order for the short sale to go through. Needless to say, the current board, of which I'm a member, doesn't do that anymore (if they want the sale that badly, they can at least offer the board part of what's owed and you can negotiate from there). If anyone tries to get your board to agree to such foolishness, cut them off at the knees.

Shelia

Overall I agree with you but, the big but, depending on the amount owed and the potential for it to increase it can be better to help get the sale done and new owners (hopefully on time payers) in.

DaveD3 (Michigan)
Posts: 796

Posted:

Quote:

Posted By LarryB13 on 10/09/2013 8:56 AM

Posted By DaveD3 on 10/09/2013 3:45 AM

The issue is that it's easy for the property to transfer ownership with the statutory lien never surfacing. By filing the lien, a formal place in line is established that will (should) be discovered during a sale.

Dave,

My point was that state laws vary considerably regarding liens. Arizona's statutory lien is far from perfect and I would prefer that liens be recorded, where they have a higher chance of being found during a title search. (Arizona requires that the association record a notice of who to contact, usually a property manager, for lien information.)

The California process for filing a lien is overboard. A lien is a unilateral claim that one person owes another money. Liens are always subject to challenge. California prevents the HOA from even asserting its claim until the owner has been given a series of opportunities to mount a challenge and delay recording the lien. All other states seem to be comfortable with allowing the lien to be recorded and challenged afterward.

That's far from the only problem with California, Larry

Point well taken though!

AnnH5 (Florida)
Posts: 304

Posted:

Quote:

Posted By SheliaH on 10/09/2013 9:31 AM

Posted By LarryB13 on 10/08/2013 5:47 PM
Short sales are not foreclosures. The parties to the sale can piss and moan but have little clout to remove the HOA lien. My understanding is that it is the real estate agent stirring things up for you.

In a short sale, the buyer lists the property for sale for less than he owes the bank. When someone makes an offer to buy, the offer is sent to the bank for their approval or rejection. This is a normal real estate sale with the added wrinkle of the bank accepting less than full payoff.

Unless you have some really strange laws in your state, a short sale is does not create a superior lien. It does just the opposite: it removes the bank's lien because the bank has agreed to a payoff.

The HOA lien is really between the buyer and seller. The bank is just a bystander with regard to the HOA lien. If the buyer is seeking his own financing, his lender will insist that the HOA lien be paid before the sale closes.

Keep in mind that it could all go south very quickly. If the mortgage remains unpaid the bank could file a foreclosure action in court. Since the home is not likely to sell at the foreclosure auction for a price that covers the bank's liens and costs, the chances of the HOA getting paid would be zero.

Keep your fingers crossed that the short sale happens and wait to get paid on the lien. Ignore all the protests, whether from real estate agent buyer, seller, lender, or title company. The law is on your side on this one.

One of our homeowners told us there was a time with the board (long before I moved in) would actually forgive delinquent fees in order for the short sale to go through. Needless to say, the current board, of which I'm a member, doesn't do that anymore (if they want the sale that badly, they can at least offer the board part of what's owed and you can negotiate from there). If anyone tries to get your board to agree to such foolishness, cut them off at the knees.

Forgiving a lien so that a short sale can go through is a terrible idea. If the lien is dropped and the short sale does NOT go through (which happens frequently enough), the Association is now out of the owed assessments AND the clock is reset to zero so the owner can continue to not pay and the entire collection/lien process has to begin again. This then costs the Association even more.