Threats of Foreclosure Do Work

Our Declarant is also our Property Manager. He was not very aggressive in pursuing late dues. He would write letters and try to work things out. He even filed liens but that was the extent of it.

We are in the process of transitioning the HOA over to we owners and as part of this transition, the Declarant has been working with a lawyer that specializes in HOA's. He had met with this lawyer a year or so back to discuss past dues collection but he never followed up. Well the lawyer asked him about their prior conversation and a plan they had worked out. They decided to proceed with what they had earlier discussed.

About 30 days ago the lawyer sent letters to our 4 problem owners (longest over due) informing them his firm has started the foreclosure process. Well two of the problem owners have already contacted the lawyer and have made payment arrangements.

Bottom line is once politeness and liens do not work, it is time to kick it up a notch. Do not be shy or timid. Kick it up.

You're nicer than us - after 60 days, we turned them over to the attorney.

Regarding foreclosures, they (or the threat thereof) can be very helpful, but I've also found instances where the homeowners STILL don't respond. Often that's because they're so far behind or in deep do-do with the Association and other creditors that they move out and leave the Association and nearly everyone else holding the bag. The bank, of course, ends up getting some of its money back before anyone (unless there's a tax lien) because its lien is superior to the association.

So, one person's suggestions:

Don't be afraid to drop the hammer, but do it after you've tried everything else.

To quote Melissa P1, foreclosure is mostly a stop the bleeding move. As our attorney put it, if you get your money back hurray, but mostly, you'll have to use this to get the delinquent owner out, because the sooner he/she is gone, the sooner the house can be sold to someone who will pay assessments. That means the association will likely have to write off most of the delinquent amount, so consider what your objective should be.

If a foreclosure is your only option, get things going as quickly as you can. In most cases, the homeowner can still save the house if he/she shows up on the day of the Sherriff's sale with a check, or prior to that.

On the other hand, there are homeowners who will then try the bankruptcy route because that stops all collections until the court sorts it out. If that happens to you (and it's happened to us at least three times), be prepared to send a Board member to court and make your case for lifting the stay from the house. Some judges will still give the homeowner another chance, so you need to stay on top of it.

File your lien early in the collection process - if you file yours and then the mortgage company comes along with its own foreclosure, you can suspend yours and let them do the dirty work.

Always consult an attorney about the pros and cons - foreclosure may be necessary in one account as opposed to the other.