HOA Unit Foreclosed on and sold at auction - what next?

FritzC (California)
Posts: 8

Posted:

I'm on the board of a self-managed 9-unit HOA in Southern California (Los Angeles area). We just had one of our residents foreclosed on and his home sold at auction. The new owner is a property investment company. I spoke to one of the owners of the company and he told me they plan to fix the unit up, and resell it (they're flipping it).

I would like to know if anyone else on the board of an HOA has experience with foreclosed units and/or investment companies that are looking to flip them. Is there anything we as board members should watch out for or be doing to ensure everything goes smoothly with our new temporary owners?

The investment company has already paid the dues for the month, so we're pleased that there is no issue there.

Thanks for your help!,
Fritz

NpS (Pennsylvania)
Posts: 4,216

Posted:

1. Make sure that local zoning officials are aware of situation - Always important for HOA to have good relations with those folks.

2. Make sure that flippers have copy of your architectural guidelines and know that they must get approvals from HOA (and that resale could be negatively affected if they don't).

3. Hope for a quick flip and a nice homeowner as a new resident.

Sikubali jukumu. Read all posts at your own risk.

TimB4 (Tennessee)
Posts: 21,059

Posted:

As NP pointed out, make sure that the new owners (investment company) is aware of the architectural guidelines and procedures to have changes made. Then pay attention to what changes are happening and catch them early.

That's the biggest issue we ever had when homes were flipped within our development.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Be careful if they are a "LLC". That could cause some issues if you have to file a lien. Which they are still on the hook of paying the dues. Hopefully, you have a good collections policy in place.

Our issue with a LLC (Limited Liability Corporation) was that it is owned by multiple people. Which makes it harder to collect and provides them protection. It's basically "You mean Peter did not pay Paul? Well then you need to go find Jerry..." They can "hide" behind each other making it a challenge when trying to collect.

Former HOA President

MarkM31 (Washington)
Posts: 556

Posted:

Quote:

Posted By NpS on 01/20/2015 11:19 PM
1. Make sure that local zoning officials are aware of situation - Always important for HOA to have good relations with those folks.

In my city if I went down to either the County or City Building and Land Use Department to tell them the a HOA unit was foreclosed and resold, they would say "so what".

MarkM31 (Washington)
Posts: 556

Posted:

Quote:

Posted By MelissaP1 on 01/21/2015 7:49 AM
Be careful if they are a "LLC". That could cause some issues if you have to file a lien. Which they are still on the hook of paying the dues. Hopefully, you have a good collections policy in place.

Our issue with a LLC (Limited Liability Corporation) was that it is owned by multiple people. Which makes it harder to collect and provides them protection. It's basically "You mean Peter did not pay Paul? Well then you need to go find Jerry..." They can "hide" behind each other making it a challenge when trying to collect.

That's the case with all corporations. You can never go after Peter.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By MarkM31 on 01/21/2015 8:19 AM

Posted By NpS on 01/20/2015 11:19 PM
1. Make sure that local zoning officials are aware of situation - Always important for HOA to have good relations with those folks.

In my city if I went down to either the County or City Building and Land Use Department to tell them the a HOA unit was foreclosed and resold, they would say "so what".

First person to speak with is the local zoning inspector. Permits need to be issued. Inspections need to be done. Certificates of Occupancy need to be issued. Your local zoning inspector will have his hands in all of this.

We have made it a practice to run every change we make to our architectural guidelines by our zoning inspector and to give him a heads up every time there is an unusual situation (like a flipper). In our case we have a house that has been vacant for 6 years - we talk to him about it every nine months or so. We let him know when a contractor we don't know (some call them gypsies) is doing work on a house, and we ask him if he knows anything about them. He finds that the information we feed him makes his job easier and he is willing to share what he knows.

Suggest you look for a field worker like ours rather than an desk jockey.

Sikubali jukumu. Read all posts at your own risk.

SheliaH (Indiana)
Posts: 6,964

Posted:

When I was on the board, the property investors were (and still are) a mixed bag. Some are very good at paying assessments in full and on time, fixing up the place and getting it sold to an owner occupant.

The others may have brought the house to flip it, but in the meantime, they rent it out to anyone with a pulse - and as you probably know, some renters are better than others! Eventually, they run into trouble renting the place and because it's been trashed, it would cost even more to fix it up and sell it and then they quit paying assessments. As some have said, it can be a challenge to go after corporations, especially if they're out of state.

So, I'd treat them as any other homeowner - make sure they have community rules, know your process for applying for exterior changes (if that's applicable to your community) and hope for the best.

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

FritzC (California)
Posts: 8

Posted:

Thanks for all the input everyone. I'll be reaching out to the town's building inspector and zoning departments today. The new inventment company seems like they are on top of things. They have been in real-estate for about 10 years, so I'm hoping they know what they're doing. The representative did get the dues check to us the same day I told him how much it was, so I give him credit for that, but time will tell.

Please keep the information flowing - definitely interested to hear about other experiences and suggestions on the topic.

-Fritz

MarkM31 (Washington)
Posts: 556

Posted:

Quote:

Posted By NpS on 01/21/2015 10:58 AM

Posted By MarkM31 on 01/21/2015 8:19 AM

First person to speak with is the local zoning inspector. Permits need to be issued. Inspections need to be done. Certificates of Occupancy need to be issued. Your local zoning inspector will have his hands in all of this.

In many places, zoning is done even before construction starts.

Permits and C of O's may or may not be needed. Often only the initial C of O will ever be given on a SFR or duplex.

Quote:

Posted By NpS on 01/21/2015 10:58 AM

Posted By MarkM31 on 01/21/2015 8:19 AM

We have made it a practice to run every change we make to our architectural guidelines by our zoning inspector and to give him a heads up every time there is an unusual situation (like a flipper). In our case we have a house that has been vacant for 6 years - we talk to him about it every nine months or so. We let him know when a contractor we don't know (some call them gypsies) is doing work on a house, and we ask him if he knows anything about them. He finds that the information we feed him makes his job easier and he is willing to share what he knows.

Why do you think it's your business to be the eye's and ears of your neighborhood? Somebody else owns the house, why don't you MYOB as long as the structure continues to meet the architectural guidelines?

I'd hate to have you as a neighbor

Quote:

Posted By NpS on 01/21/2015 10:58 AM

Suggest you look for a field worker like ours rather than an desk jockey.

What?

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By MarkM31 on 01/21/2015 5:27 PM

Posted By NpS on 01/21/2015 10:58 AM

Posted By MarkM31 on 01/21/2015 8:19 AM

First person to speak with is the local zoning inspector. Permits need to be issued. Inspections need to be done. Certificates of Occupancy need to be issued. Your local zoning inspector will have his hands in all of this.

In many places, zoning is done even before construction starts.

*** Thanks Mark

*** Here, zoning inspector and code inspector are one and the same. Perhaps I should have said code inspector.

Permits and C of O's may or may not be needed. Often only the initial C of O will ever be given on a SFR or duplex.

*** Perhaps, but many house being flipped involve electrical, kitchen, siding, and roof issues. Here, all require permits. COs on a flip not usually involved - but that depends on how bad the house was trashed and whether it has been vacant for some time. That info wasn't provided by OP so I responded that it was something to be aware of.

Quote:

Posted By NpS on 01/21/2015 10:58 AM

Posted By MarkM31 on 01/21/2015 8:19 AM

We have made it a practice to run every change we make to our architectural guidelines by our zoning inspector and to give him a heads up every time there is an unusual situation (like a flipper). In our case we have a house that has been vacant for 6 years - we talk to him about it every nine months or so. We let him know when a contractor we don't know (some call them gypsies) is doing work on a house, and we ask him if he knows anything about them. He finds that the information we feed him makes his job easier and he is willing to share what he knows.

Why do you think it's your business to be the eye's and ears of your neighborhood? Somebody else owns the house, why don't you MYOB as long as the structure continues to meet the architectural guidelines?

*** About 8 years ago a fly-by-night guy bought an established roofing company and did about half the roofs in our community. The township inspector, thinking that the company was still owned by a respectable contractor, didn't inspect while work was in progress. Work was shoddy. Ever since then, inspector works closely with us.

*** We are townhouses. Many times, work done by a contractor on one house can affect a next door neighbor's house. Whether we like it or not, we get dragged into disputes because someone says that our guidelines are or aren't being followed.

*** In many ways our architectural guidelines mirror the township code. Inspector knows what he's looking at better than we do, so we rely on him.

I'd hate to have you as a neighbor

*** Not a problem, No plans to move to WA. Are you coming this way?

Quote:

Posted By NpS on 01/21/2015 10:58 AM

Suggest you look for a field worker like ours rather than an desk jockey.

What?

*** Government bureaucrats can be non-responsive (which is the concern that the OP raised). Guys who are out in the field are often very helpful.

Sikubali jukumu. Read all posts at your own risk.

MarkM31 (Washington)
Posts: 556

Posted:

Posted By NpS on 01/21/2015 6:13 PM
<

*** In many ways our architectural guidelines mirror the township code. Inspector knows what he's looking at better than we do, so we rely on him.

Architectural guidelines should cover colors, heights and finishes. Building code should cover adherence to the ICBO or what ever is in force. The two should basically have nothing in common

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By MarkM31 on 01/21/2015 7:17 PM

Posted By NpS on 01/21/2015 6:13 PM
<
*** In many ways our architectural guidelines mirror the township code. Inspector knows what he's looking at better than we do, so we rely on him.

Architectural guidelines should cover colors, heights and finishes. Building code should cover adherence to the ICBO or what ever is in force. The two should basically have nothing in common

Not the way it's been done around here (probably because our HOA predates the first publication of the IBC in 1997) - but I can see the benefits of what you are saying.

Do you know if the code addresses shared walls? shared roofs? shared stoops? shared driveways? Etc. Or would those be addressed in the architectural guidelines under your approach?

Sikubali jukumu. Read all posts at your own risk.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Corrected:

Quote:

Posted By MarkM31 on 01/21/2015 7:17 PM

Posted By NpS on 01/21/2015 6:13 PM
<
*** In many ways our architectural guidelines mirror the township code. Inspector knows what he's looking at better than we do, so we rely on him.

Architectural guidelines should cover colors, heights and finishes. Building code should cover adherence to the ICBO or what ever is in force. The two should basically have nothing in common

Not the way it's been done around here (probably because our HOA predates the first publication of the IBC in 1997) - but I can see the benefits of what you are saying.

Do you know if the code addresses shared walls? shared roofs? shared stoops? shared driveways? Etc. Or would those be addressed in the architectural guidelines under your approach?

Sikubali jukumu. Read all posts at your own risk.

NpS (Pennsylvania)
Posts: 4,216

Posted:

And again:

Quote:

Posted By MarkM31 on 01/21/2015 7:17 PM

Posted By NpS on 01/21/2015 6:13 PM
<

*** In many ways our architectural guidelines mirror the township code. Inspector knows what he's looking at better than we do, so we rely on him.

Architectural guidelines should cover colors, heights and finishes. Building code should cover adherence to the ICBO or what ever is in force. The two should basically have nothing in common

Not the way it's been done around here (probably because our HOA predates the first publication of the IBC in 1997) - but I can see the benefits of what you are saying.

Do you know if the code addresses shared walls? shared roofs? shared stoops? shared driveways? Etc. Or would those be addressed in the architectural guidelines under your approach?

Sikubali jukumu. Read all posts at your own risk.

NpS (Pennsylvania)
Posts: 4,216

Posted:

I give up - I'm sure you can figure it out.

Sikubali jukumu. Read all posts at your own risk.

MarkM31 (Washington)
Posts: 556

Posted:

Building codes cover stairs, party, partition and demising walls and roofs. How can a AC deal with how stairs are made, the fire rating of a demising wall etc?

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By MarkM31 on 01/21/2015 7:53 PM
Building codes cover stairs, party, partition and demising walls and roofs. How can a AC deal with how stairs are made, the fire rating of a demising wall etc?

We have nothing on stair manufacture or fire rating.

We do have fairly extensive guidelines on what's acceptable practice when there's a shared roof - and HO-A wants his replaced but HO-B doesn't want hers replaced.

Same when there's a shared wall, stoop, driveway, etc. Sometimes our guidelines allow independent replacement. Sometimes they must act together. But we spell it all out for HO-A's contractor so there's no confusion.

Sikubali jukumu. Read all posts at your own risk.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Another situation we have is with decks. Original construction does not satisfy current code, but is grandfathered unless there is a 30% or more replacement or certain types of construction defects.

Some HOs might think we are interfering when we lay this information out for them, but others appreciate that we are looking out for their investment.

Another example - When certain work is being done, we recommend kickouts at the roof line if we don't see it in their request for approval. Wasn't a code requirement when we started recommending it - Not sure about now.

Sikubali jukumu. Read all posts at your own risk.