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Costs Of Foreclosed Home

Started by JimD17 • 4 replies • 1869 views

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JimD17 (South Carolina)
Posts: 15
Posted:
Our HOA has a home in foreclosure. This foreclosure has been in process for approximately two years. The bank does not have title as yet but homeowner has abandoned home. My question is what recourse does our HOA have to recoup some of the operating expenses such as repairs, insurance and etc. The bank's mortgage balance far exceeds the value of the house.

It only seem fair to me that since we are unable to collect HOA fees the bank should share in the expenses of carrying the home even though they do not have title as yet. If there was no HOA I would think the bank would be paying expenses in order to protect their investment. CCRs require that HOA pays insurance, exterior maintenance etc.
MelissaP1 (Alabama)
Posts: 13,836
Posted:
Do NOT proceed with your own foreclosure process. The bank will get paid first and foremost whether your HOA files foreclosure. It is best your HOA files a lien immediately for any unpaid dues owed to them plus late fees, interest, and legal costs associated with filing a lien. Your HOA most likely won't see any of the money until the foreclosure process is over. That is still IF there is money left over from the sale. Eventually the bank may be on the line for the dues, but they usually don't pay up till the end.

Your HOA does NOT want to touch this house rather than the minimal requirements of exterior maintenance such as yard cutting. Sorry but your HOA does NOT own this home nor do they want to. Some people here have been able to rent out such homes but that is extremely risky. It can put the HOA at risk for a lawsuit because they do NOT own the property to rent out. Which means rent collected could be at risk for being sued for.

If the HOA was to own the home, they would be responsible for HOA dues, maintenance, repairs, insurance, the mortgage, and all costs associated with owning a home. Not cheap and most likely best to sell the property instead of collecting rent. Which means the HOA paying out to fix the house up to sell and reality expenses to sell. Most likely NOT for a profit.

The honest best situation is: Place a lien and do not touch the home. Sorry but foreclosures are a tricky business best left alone. Just make sure to provide lawncare if required and whatever exterior maintenance may be needed. May want to make sure the water meter is shut off to prevent damages in the winter. That is about all you can do is sit and wait.
Former HOA President
DouglasK1 (Florida)
Posts: 2,046
Posted:
Until the foreclosure sale, the owners still own the property, and they are the ones responsible. Anyone else (bank included) could potentially be trespassing if they were to enter the property (there might be language in either your docs or the bank's mortgage that make provisions for allowing access in certain cases).

While the bank does have a mortgage interest in the property, I don't see how they have any responsibility for maintenance or to the HOA. Depending on state laws, you might eventually be able to recoup some or all of the past due dues from the new owner once the property is sold. There are some South Carolina posters here that will might be able to help with state specific info.

Does the association have a lawyer? If so, have you consulted with the lawyer to see what your options are?

One option is HOA foreclosure, but you'd have to move quickly to beat the bank if it was even possible. Here are a couple threads on the topic.
http://www.hoatalk.com/Forum/tabid/55/forumid/1/tpage/1/view/Topic/postid/158264/Default.aspx
http://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/117167/view/topic/Default.aspx
Escaped former treasurer and director of a self managed association.
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Jim

Typically the mortgage holder(s) are "Super Liens" as in they are the first to be paid. All others liens are paid/prioritized in order of their filing date. Some states are changing this in a variety of ways to try and protect HOA's but in SC the Super Liens still prevail.

Any lien holder can file a foreclosure and hope for the best. Some associations do such and hope the Super Lien does nothing so they (the HOA) can rent the place out, collect the rent, then wait for the Superior Lien holders to do something. This depends on state laws and is a very, very risky strategy. Some super lien holders are starting to sue the HOA's for any monies collected thus it becomes a more risky strategy.

My advice to your HOA (and my own) is file liens and hope for the best but when push comes to shove learn to deal/budget with the non-dues payers.

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