HOA Foreclosure, what happens next?

If the unit has no mortgage, it's more possible that the unit will sell.

If it does sell, it's also possible that the Association will not see a penny of the proceeds (as taxes and other higher liens will get the money first).

If it doesn't sell, the Association owns it but not with a clear title (as any higher lien still has precedence).

It depends what it sells for.
If there is enough money, then the taxes will be paid.
If there isn't enough money, then the taxes won't be paid.

Also, if there isn't enough money to go around, the lenders can still come after the owner with court orders to pay what is owed (garnish wages, seize accounts, etc.)

Keep in mind that I am not an attorney and I don't live in FL. What I'm providing is based on my experiences being on a Board that took foreclosure action on a property in VA. Consultation with an attorney (or legal aid) in your area would likely provide better answers.

Here is some more info:

What happens to my mortgages if the HOA forecloses on its lien? from NOLO

Florida Foreclosure Laws and Procedures from NOLO

The Timeline for Foreclosure in Florida from an attorney blog

Florida HOA and COA Foreclosures from NOLO

Is a New Owner Responsible for Condo or HOA Liens After Buying a Foreclosure in Miami or Broward County? From an Attorney's site

Just make sure the HOA does NOT end up owning the property. The first bid goes to the HOA $1 over what the HOA is owed (Foreclosing for). Which is a bit confusing. You want to encourage someone to outbid. The highest bidder who then wins gets the home but responsible for all repairs, mortgage (if there was one), and all future HOA dues. There is a period of "Redemption" which can last up to 1 year is SOME states. Meaning the previous owner can get the home back by paying what was owed plus any expenses the new owner invested in that year's time. So even the "new owner" may not be able to touch the property to do repairs for up to a year. Their hands are tied.

You also have the issue with this being a HUD foreclosure as well. The process to me has been the bank forecloses and then HUD if the new owner doesn't pay off the taxes. Once that tax bill is paid, then the new owner can avoid the Tax auction. Something that may throw a wrench in the process of the new owner who may bulk. Starting the process all over again.

The money collected at the foreclosure sale most likely will go to the Bank. This is why I advise if the bank is already foreclosing then the HOA should never foreclose. Just keep the lien. The bank will always get paid first and foremost (unless super-lien involved which puts HOA/Bank SAME level). A HOA foreclosure basically pays for the bank foreclosure. If the owner did not owe anything to the bank the good news is the HOA can recoup some money. Legal expenses/fees may be subtracted. The bad news is the money just stops the bleeding. It's NOT going to make a profit. The HOA is only owed as much as it was owed.

Now in Florida there is an exception. Which I would consult an attorney about. New owners may indeed have to pay the HOA back dues from previous owner. It's the only state I know that allows this. It's a bit complicated and do not know if it applies to foreclosure situations. I am not a Florida expert in their laws.

Overall the HOA does NOT repeat does NOT want to own this property!!! Can NOT impress this enough. The HOA would then act as the "new owner". Which you already see puts them on the hook for paying the owed taxes, repairs, legal expenses, and HOA dues. Still have to wait the redemption period to be able to rent/sale. If the HOA made a profit, then it owes taxes on said profit from the sale. So this is why HOA's should stay out of the home buying/renting business.

If the amount paid is higher then all the liens combined, the excess funds are given to the owner.

Thank you that actually clarifies it.
My concern is that we end up with something we do not want. If the taxes are not part of the sale price at foreclosure auction then the numbers make it difficult to sell. At least to someone who has done their research.
I forget the exact numbers but the HOA are owed around $20000, and the property in reasonable condition is worth around $30000
However the back tax is around $5000
The unit is in poor shape and it will cost more than the $5000 to make it better.

So it could even end up the owner getting money back if it did sell for say $25000 as that is over what the HOA needs and the new buyer with a $5000 tax bill.

I am sorry, but none of you understand how this process works.

Again Richard points out how wrong everyone else is... Do we expect anything different at this point? I did a foreclosure. Saw the whole process. Stood on the steps. Think I may actually know a bit about how foreclosures work atleast in my town before I go off and call others wrong.

Foreclosures STOP the bleeding. NOTHING ELSE or your digging your HOA a hole...

Because you don't believe it, then everyone else is wrong? It is possible the house does not have a mortgage on it. Why would the HOA be on the hook for an unpaid tax bill? The HOA does NOT own that property! The Tax bill is in the owner's name. The HOA is foreclosing on their lien but NOT purchasing the property. It would go to the Tax man anyways after that if someone doesn't bid on it.

It is best to get advice from a lawyer as Florida is a bit squirrely. They are one of the few states that may have the new owner responsible for old dues. Most states that's not the situation. Although the foreclosure is paying the old dues owed. A bit of confusion that needs cleared up for those more familiar with how Florida law works.

I can believe the house has no mortgage. A reason why I've always said never pay cash for a house. This is the EXACT situation that can happen if you do. Someone pays cash for a house then there is no mortgage. However, they still owe the HOA dues and they still owe the Tax man. The house isn't safe against foreclosure because one paid cash.

Did that ever enter your mind Richard? A paid for cash house? This is why I would never hire your company to handle my finances...

Wow... Can't argue with stupid but going to give it a try...

Florida DOES have a law on the books (We discussed this to length in another post) that new owners can be responsible for the previous owner's dues IF owed. Florida also has a law that the Tenant/Renter can pay the back dues from preventing a foreclosure. I do NOT make the rules. I just read them.

NOTE: I do NOT agree with this law but it is the state of Florida. The OP is from Florida. Must go with what is known to be a law in that state.

Again... The HOA foreclosure amount IS the back dues owed by the current owner. The new owner once they win the bid for the Foreclosure is essentially paying off the debt of the current owner. It should clean slate the property. However, it could be during the process unpaid dues occur. New owner may be on the hook of that time period. I can't speak for every HOA and how they handle their books. Not going to rule it out though.

Overall the HOA foreclosure is an opportunity for the HOA to clean slate and move on with a new owner. I still encourage the HOA to pursue the process. It's NOT the right process for every situation. This situation it seems right. Although won't give any false hope either.

Good question JohnC. It sounds like they got advice from one them there lawyers that say "We will do whatever you tell us to do" without discussing other options. Which doesn't sound like there were known other options.

They are in it now. It wasn't the best optimal solution for them once the property was in any kind of other foreclosure. I would have kept the lien and not foreclosed. However, them foreclosing was an option they took in hopes to recover money. It's a bit of a gamble. One I can't argue with.

We have a policy of 6 months behind we lien, and 1 year we CONSIDER foreclosure. We weigh the factors if we pursue due to multiple circumstances. (Military duty status, bank/tax foreclosure, or other factors). Once we decide to pursue foreclosure we have to realize the ramifications. Which is not a guarantee to get the money and right of redemption period. The positives is that we got rid of a property owner who doesn't pay and sends a message to others we are serious about collecting.

Foreclosures are never easy and usually a bloody mess. The end result is the bleeding stops.

Gwen, is your HOA properly a FS 720 HOA? If your covenants don't provide the association with the power to lien then I would question whether it's really an FS 720 Homeowners Association at all.

Because home prices have appreciated the last two years or so, the days of HOA's foreclosing on property is pretty much over. As long as the HOA has a lien on the property and it doesn't go into bank foreclosure, the HOA should be in a position to recoup their monies. I am suspicious of a property with no mortgage having a tax lien and HOA lien. It happens, but rare.

IF, the HOA foreclosed and had a Trustee Sale, what price do you put on the property. If the purchaser does a cash sale, they may not use escrow, NOR will they purchase title insurance, which could still leave the tax lien. Any excess proceeds goes to the owner.

My former HOA has over $300K in delinquencies and is involved in a $20M lawsuit. In 2011, when the real estate market still was in the toilet, I put together a plan to wipe out the dollar amount of the delinquencies over a two year period. We had 4 properties that had delinquencies totaling $60K and were way upside down on their mortgage, meaning no bank was going to foreclose. The plan was to foreclose on the four properties, hire a property management company, at a 6% commission, specializing in rentals, and evict the owners once the proper time periods had passed. Each unit could be rented for $2500 per month. Over two years we would have income of $260K, with commission expense of $15,600 and HOA dues of $13,440. There had to be special leases drawn up because the tenants were renting foreclosed property and could be asked to leave on a moment's notice.

I was able to do this with a former client on a smaller scale in 2012, wiping out $100K in delinquencies. banks were doing it, why couldn't a HOA do it in the right circumstances.

Gwen

Are you saying you live in what might be called a mobile home park? Are all the units mobile?

Thanks

The HOA does NOT want to own this property if at all possible. Basically you ALL become the homeowner of this property. That means you have to pay to purchase, pay taxes, insurance, repairs, HOA dues, and any expenses of renting/selling. Plus the right of redemption exists up to a year in some states. Meaning you can't really touch the property for a year because the original owner can purchase it all back.

So unless your HOA can afford all these expenses plus maybe have to take out a loan to cover the expenses, it's best to advertise to someone to buy it ASAP. It is a PUBLIC auction so anyone is open to bid on the home if they want. You can all drop the "conflict of interest" line if a board member buys it. What does that really matter as long as they take up the HOA dues payments?

Melissa,

Before you speak, PLEASE do some research.

When an HOA forecloses on a property, they take title, NOT ownership. A Note is ownership, which the bank holds. Title is what the HOA has. In the RIGHT circumstances, an HOA can benefit from renting property they have foreclosed upon, BUT they need to know what they are doing. Unfortunately, most don't and in those cases, don't even think about.

In California, right of redemption is 90 days, not a year. The HOA only has to pay HOA dues and management fees, nothing more, no property taxes, insurance, etc.

"Conflict of Interest" if a Board member buys it? Damn right its a conflict. It would equal insider trading unless you gave the entire membership the same opportunity.

Again, in the RIGHT circumstance, this has worked.

There is a saying Melissa, IF you can't stand the heat, stay out of the kitchen. You're clueless, and you were a Board president, unbelievable!

Is is so easy, even a caveman could do it.

So prove my "Suing your HOA is suing yourself and your neighbors" wrong... Since you like to talk in circles already.

Plus who hires a management company to handle this rental stuff? No one said the HOA to hire those services out when renting out property...

Oh and if it's just the HOA owning the title till the mortgage forecloses... Uhm then most likely the bank is owed ALL the money the HOA collected on the property while they rented it out. The bank would owe the HOA all the HOA dues while they owned it to as well.

Richard sometimes you need to listen to yourself...and maybe stuff it in a box....

The problem Melissa, is I can prove it.

I know you will find this hard to believe, but there are companies that all they do is manage rental properties, NOTHING more.

Wow a seminar told you this? Much better resource than reality huh? Give it a rest Richard and STOP picking apart someone else's FREE advice. I trust whoever reads my posts to have a brain. They have the ability to THINK. I am not here to force feed anyone the one and only answer. I am here to give FREE advice and hope makes them have another point of view/idea to deal with their OWN situation as an INDIVIDUAL.

No HOA is alike so no one solution will work. The best one can do is give ideas, experience, opinion, or information to help guide someone to their own self discovery...

In the overall scheme of things, I believe the Melissa has a point that all HOA's are different and, in general, are not equipped to handle rental of foreclosure units. Mine is a good example in that there is NO bank involved in the foreclosure and NO HOA assessment lien. And the rental incomes are only realistic during the snowbird season of 3-4 months and it would not be beneficial to hire a property manager to handle a rental for couple thousand bucks of rental income.

Also, if HOA is paying the dues while holding title, it reduces the membership budget by one assessment and the remaining parcels must pay the missing assessment for the time it takes to sell probably as an "As is" sale. Or, as Melissa might say "Assessing HOA in a foreclosure (and taking title) is assessing yourself!" For my HOA, it would be a non-starter.

The reality is that many condos and foreclosure homes require a great deal of rehab to be habitable, much less rentable. This can only be discovered after a title is issued. The HOA who takes title is taking a chance that the home is habitable and rentable, that it can find a competent property rental agent that will want to handle the property, and the owners want to finance an undertaking with unknown costs and questionable success. Perhaps such a scheme is most relevant to an extreme case of mass foreclosures and the critical need to capture "some" money as Richard did so successfully. It was a clever solution for HIS HOA.

Where I entirely agree with Richard is the advisability to Melissa to do more research before offering free "factual" advice. People come on here seeking information and direction that they rely on as generally true and lawful. Opinion offerers typically include citations to back up advice if it is statutory. They will disclaim advice that is bordering on legal. It has been my experience, after reading many, many posts here, that Melissa signs her posts as a Past President and the confused, troubled new visitor is apt to put more credibility in her replies than is warranted.

I have found this advice to be generally unsupported with facts other than experience and un-nuanced, as evidenced by the constant cry of "Suing your HOA is suing yourself!" However financially true that might be, it is a superficial reply and ignores the reality that there may be good reasons for a Complainant to suffer the contribution they are making to the HOA kitty for HOA to defend itself! (In my own experience, it was a drop in the bucket compared with my own legal fees and not a consideration. It certainly would NOT have been helpful or realistic input had I sought some advice and direction with my issue.)

The repetitive protestation that "the HOA is YOU", again, is true but fails to recognize that people who come on here seeking advice and direction are obviously at odds with a hostile or intransigent Board and it certainly does not feel like they are reading from the same Playbook. Insistence that the reader has reasonable input into the board, or has not already attempted to clarify with the board in some way, is not helpful.

This not a Bash Melissa-Fest. I know Melissa has good, solid experiences to share with readers. I simply wish Melissa would take more time and care with advice-giving and hold the tired platitudes.

AGAIN I repeat these things "Suing your HOA is suing yourself and your neighbors" as a CONSEQUENCE to your actions when you want to sue your HOA. I have NEVER EVER said one does NOT have a "Just Cause" in pursuing a lawsuit. I myself have engaged in a possible lawsuit against my own HOA. (Shocker huh?). I state this over and over again because it is TRUE. It is up to you to decide if your willing to accept this CONSEQUENCE or not. Just factor it into your decision whether you like it or not.

I was just using the "Suing HOA" as an example of my repetitive statements...

Let's get back on subject of Foreclosure fallout. My overall point is that it is a misconception that HOA foreclose/lien for making money opportunity. I hear that all the time. The reality is that it's NOT a money maker but a money making BACK situation. It's filling up a hole of money owed.

I don't want to give advice to someone that there is money making opportunity and eyeing a prize at the end. The reality is that MOST HOA's are NOT equipped to handle owning a foreclosed property they foreclosed on. Many are NOT managed by Management companies. Most people don't need to hire a MC to handle rental property. Ultimately, the property is owned by ALL the members. You now have a group decision issues involved. If your HOA can't even manage or afford it's own bills, owning rental property is not a good idea.

It's good for someone to ask what the consequences are for a situation and not always the opportunities of one. Foreclosures are really tough to go through. Never put the goal as "We can make money off of this..." The goal is and should be "We can get our money back and hope for the best from the new owner". Otherwise we further the misconception that HOA's are money grabbing jerks instead of people just trying to get their money back from people not paying their fair share...