Foreclosing on an unit

Does anyone have any experience on foreclosing on a unit in New Jersey? I was wondering how much it cost in legal fees and how long it took. I have a unit that owes us over $50,000 and does not have any hope of paying us.

First off, don't need a Real Estate attorney to do the foreclosure. 2nd the HOA NEVER EVER wants to own this property. (Bad idea). The cost for us was just $800 in Attorney fees for filing and notifications. So it's not a lot of money to foreclose. Expenses vary of course. The basic process isn't that expensive as it's just a matter of filing, notifications, and bidding on the courthouse square. Notices include running an ad in a local paper (Public resource) and certified mail.

Now your HOA can't just randomly foreclose. There are some steps to take prior. You may not be able to foreclose if Active Duty. You can't foreclose for unpaid fines. It's to be for unpaid dues. Have you placed a lien on the property? Should have a lien on the property. (Do not sue for back dues). Make sure the bank is NOT foreclosing or the Feds for unpaid taxes. The HOA would be doing their work for them. The Bank gets paid first and foremost even when the HOA does the foreclosure. So if the owner owes money on the house, the money goes to that debt first.

It took us just 3 months to run the ads in the paper. It's like the same process of getting a divorce if can't find the other party. Must be given a PUBLIC notice. Which is usually run in the classified ads in the Legal section of the newspaper. Which I would HIGHLY recommend checking out if they are not already listed for other things. (I found one property already part of bank foreclosure there). Make sure your HOA delivers mail to the HOA address. If the owner lives somewhere else, send to that address to. Remember the HOA address is the official address of ownership. Keep unopen copies of certified mail if it is returned.

Keep in mind a foreclosure is just a "stop the bleeding" step. It is NOT a profit making one. The HOA's purpose is to rid itself of a member who is not paying their fair share. Your filling in a hole by foreclosing. The first bid does go to the HOA for $1 more than what is owed. If the HOA was to pick up the house, then they have to pay the money owed plus $1. If the house has money owed, the HOA has to pick up the mortgage. The HOA would have to pay it's HOA dues. The property repairs would be the HOA's responsibility. So the expenses of utilities, realtor, insurance, and other expenses of owning a home apply. Selling the home the profit could be taxed. There is also 1 year of redemption in some states that follow a foreclosure. Which means you can't touch the home because the original owner can buy back the home for what is owed and any improvements/repairs.

The HOA can basically be left with an empty home for up to a year in a foreclosure. If it owned the property, then it's looking at several hundreds of dollars a month paying for it. Renting it out may not be an option as still on the hook for all the ownership responsibilities. A renter isn't a HOA member so enforcing the HOA rules could be difficult.

Overall our foreclosure did end up being a good thing. It's just expect this to take over a year up to 2 years for things to settle out. There's a lot of waiting and no profit. Just know your HOA has a good chance of collecting dues again.

Thanks for the feedback. Owner has a $100,000 mortgage and the place is worth $450,000 in round numbers so we will get paid. Just hate to put someone out that can't afford to live here especially since they are in their seventies. I might see if I can get him to agree to give us the place when he can no longer live here. They don't want to sell and move someplace else because it is so nice here.

That isn't how it works... Plus why would you want that house "willed" to the HOA? Just because the house is worth $450 K doesn't mean that is the amount that is paid. Basically the value of that house will be what the foreclosure amount is. Hence why people purchase foreclosed properties. Buy low sell high.

Again the HOA does NOT want to own this house no matter what terms. It's a BAD idea!!! I can't emphasize how bad it is for a HOA to own a home. Not saying there are not situations where it may work and has been done. It's just very rare and extremely not cost effective long term.

So if your okay with this person living in the home, then just lien it. The lien will have to be paid if they decide to sell, move into a nursing home, or die. The lien is most likely your better option than foreclosure. Foreclosure is only a Stop the bleeding action after all. A lien just secures the money to be paid.

Your HOA needs to establish a lien/foreclosure policy. It can't just randomly pick "This it the time to lien/Foreclose". Our HOA I established a 6 month we lien and 1 year we CONSIDER foreclosure. (A Foreclosure STOPS as soon as money owed is paid). Each situation is different. Having such a policy in place weeded out those special cases. It may be they are not paying out of "ignorance". Which once they know they owe money may make arrangements to pay. It may be out of "Protest". So you know you have a hot head on your hands. It may be because they are on a fixed income. Which means making a payment plan. Having an established policy for EVERYONE doesn't make it "Selective enforcement" issues.

It's good to check on the timeline one has to renew a lien. It may vary each state. A lien is to have not only back dues, but interest, legal expenses, filing fees, and other related expenses. You can always negotiate things like late fees and interest costs if they are willing to pay up back dues.

Make sure the lawyer doesn't give you the line "I will do what you want me to do". They probably aren't giving you all the options. So it's best to be armed prior to going in with an understanding how liens/foreclosures work. Some lawyers also are in the Real Estate business. Not unheard of for some to be "in the know" in purchasing foreclosures. Nothing illegal about it either. It's a public sale...

Can you get FHA certification, Sam, i.e., does your condo building (sounds like, anyway) qualify? It can cost the HOA; I think we paid about $1500 for someone to handle the FHA paperwork for us (200+ units in twin high rises). And I think it took about 3 months. We did it exactly so owners could "age in place."

Since the member is in their 70's It probably would look unkind to hit them with a foreclosure. I would just keep active liens on the property. That way when the person passes away and the property is sold, you'll get reimbursed out of the sale of the unit.

Sam,

As you are probably aware, foreclosure laws vary by State.

Foreclosure typically only stops the bleeding and rarely does the association recoup everything (if anything) owed with a foreclosure. Therefore, it's best to try and resolve the issue with payment plans and dialog.

Liens will typically get you some or all of the money once the property is sold. However, if it simply changes hands via will or quick deed, and no mortgage is required, you still might have to wait. However, the amount could be claimed against an estate.

Has anyone talked to the individual in person?