Short sale - request to fogive debt

i agree with you. the most i would do is forgive the late fees. forgiving debt tells every other owner that they don't need to pay either.

Brad -
Just to be clear, our dues are assessed annually on Jan 1 and are supposed to be paid in full by Feb 1. So he owes us the current year's dues and the next assessment won't be until next Jan 1. If the sale doesn't go through, we won't be out any more than if it does.

As for taking funds from closing, my understanding is that a "short sale" is when the property is sold for less than the amount currently owed on the loan and the bank agrees to take that amount and forgive the rest. If that is the case, then there won't be any funds left over. I think that is why he is asking us to forgive the dues.

Mary -

That's what I would have thought also. I'm guessing that since the assessment is an automatic lien against the property that escrow can't close for the sale until that lien is cleared.

A little more info I just received. The owner of this property is the original builder - the house has never been occupied (it's been 2 years since completion). The person who contacted us is the agent who has been trying to sell the home for the builder. The property is going to the trustee sale on Monday (May 5). Our next Board meeting isn't until May 21. While I'm fairly active on the Internet and I've seen the info on this, the other Board members aren't, and one is out of town until the end of next week. We won't even have the opportunity to discuss this until well after the trustee sale.

I think this request pretty much gets denied by default.

AWESOME suggestion, Karen!

Let HIM deal with being "out of pocket."

Glen,

I know this is stretching this thread into a new direction; but can't help but comment on the provision in your docs. I think it's terrible! Why should the new owner be resp. for the prior owner's debt? This should be settled at escrow. The seller's debt can be deducted from his cash proceeds and paid to the HOA. Of course I know you don't have control on what the developer put into your docs!

Dues are considered to be an automatic lien in that when the title company is doing a title search during a sale, if they are doing their job properly they won't allow escrow to close until all debts against the property are cleared or the buyer agrees to accept responsibility for those debts. But that is during a sale. If the property is foreclosed on, then all debtors essentially get in line behind the bank. If the bank sells the property for more than the mortgage amount, then the other debtors can get paid from the left-over proceeds. Unfortunately the bank typically doesn't put much effort into trying to get more than the mortgage amount. So even if we had a lien recorded with the county, in a full foreclosure we would be unlikely to get anything.

As to a new owner being responsible for the prior owner's debt, it looks like we actually have that situation. We had another property in our neighborhood where the owner never paid dues. We went through the whole process, including filing a lien and going to small-claims court. He never responded to anything. I think there is even a warrant out for his arrest for failure to appear for a debtor's exam. Eventually the bank started foreclosure proceedings on the property, but before they finished the process, title was transferred to a new owner. I'm guessing that the previous owner quit-claimed the property to somebody else who got a new mortgage to pay off the old one. However, since the transfer did not go through a title search, the new owner has essentially agreed to assume all debts associated with the property, including the outstanding dues. He probably got a great deal on the property itself, but now he has taken on the additional debt that he may not have planned on.

For the short-sale that I originally posted about, our Board has decided to deny the request and go with the suggestion that the realtor can pay the dues. He is probably anxious for the sale to go through so that he can get a commission (even if it is a small one), so he can pay the dues to make sure it happens. It's only $400 for the year not counting late fees, so I'm pretty sure he'll be able to afford it.

Thanks for all the comments.

Glen,

So the new owner who inherits this debt can just tell the assn they're waiting for the "property" to give them the money to pay! LOL Don't you just love some of the things these developers put into the CCRs?