HOA Foreclosures II

HOA Foreclosures:  Is it true that my home can be foreclosed by the HOA?  Here are little known facts that can take your home way from you in a heart beat.

Please read here and be informed, before you put your home in jeopardy:

I recently received this inquiry with comments from Tricia / Woodstock / GA: “I am in a situation mentioned in your pages, whereas my HOA is doing foreclosure on my home. I am contacting an attorney, whoever you wrote this and it seems extremely well informed and I would like to pick a brain if I can. I am [now] well versed as I have spent the last week and a half doing nothing but research”

My friend, Tricia – I appreciate your inquiry and nice comments about my pages. I wish we had connected in better circumstances.

I am extremely sorry that you are facing a foreclosure by HOA – it sounds almost like “a tragic bitter joke” -- but it is real!

It is often that people write to me facing the predicament that you know find yourself in. So I decide to answer you by posting here some of the comments and ideas I have shared with other folks.

Before I go any further, I assume that the foreclosure is looming upon you because of fees and/or special assessment payment issues…  AND I do not belive that there can a foreclosure without a monetary value attached to the property.

HOA Foreclosures For Very Small Amounts!

Most folks who buy condominium, townhomes or even HOA single family homes oblivious to the fact that the HOA has deep [“extreme” if you would allow me a “cliché”] power over your property AND HOA foreclosures loom large over you head! You are only a couple of payments away from being in jeopardy.

I am not a lawyer but I read substantially on the subject – including in other states beyond the borders of my home state of Georgia – and they all come to very similar position favoring the HOA…

I have not heard or found anything where an HOA had lost a court case. On the contrary I hear and read that court consistently side with the HOAs, furthermore, homeowner are ordered to pay court costs and lawyers representing the HOA.

Another sad note is that some HOA foreclosures may happen for as little as $800 – where is the common sense of that, I cannot find

HOA Predicaments If Fees Are Not Collected

Pretend for a minute that you are back in college living in a house with five roommates.

If one of the roommates failed to pay his/her share one month, it I possible to image that everyone else would have to scrape their resources and pay for the roommate in default …

Coming the second month everybody would be wary that the roommate who defaulted on the previous month will come through with his/her share ..if not, except for the most fortunate ones it would spell finance trouble …The ones that can afford it, will not be happy: Would you be happy to pay for a roommate who would enjoy the place and at the end of the month say ‘sorry, I do not have the money to pay’?

Now think of a direr situation – two roommates default! Wouldn’t everyone else be in serious jeopardy and/or further unhappy with the situation?

So mathematically while we are talking 20% to to 40% default… It will be trouble sooner than later.

In the complex that I now live, there are 402 units – each unit has to pay an average of $600/ month in HOA fees + utilities that we pay through a “master bill”

Twenty per cent would an equivalent of $ 48,000
Forty pert cent would be an equivalent of $ 96,000… in one month!

Multiplied by a couple [or three months] it does add to really money, doesn’t it?

Make no mistake: HOA would have to file bankruptcy …and no guaranty that utilities would be kept on ;-(

So – it makes sense to me to think that the courts favor the HOA because – in so doing – the courts will be protecting the common good = the majority that pays on time. (There is my humble opinion about it.)

HOA And FHA Approved Complexes

When a condo [building or townhome] complex is approved by FHA (Federal Housing Authority) it gives an extra layer of protection to lenders who finance owner occupied buyers buying in such developments.

It is a huge advantage to a lot of buyers that will be able to qualify to purchase a place with 3.5 % down payment… Otherwise buyer would have come up with 10% or [more likely] 20 % down which is called a “conventional loan.”

Please take a look on these figures:

• List price $75,000 – 20% down = $15,000
  
• List price $75,000 – 10% down = $ 7,500
  
• List price $75,000 – 3.5% down = $ 2,625

It can be the difference between buying a place now or having to rent for another year …and that unit would be unsold a while longer …and the seller – perhaps teetering on foreclosure…

Now comes “the big news for everybody:” If HOA does not pay its bill, it too can be foreclosed – specially, but NOT limited to if it owes water bills! Water bill can generate a lien on the complex.

If a certain percentage of units/homes are in default with HOA it is possible that FHA might withdraw its “seal of approval” and complex will be “conventional” loan only – as indicated above making it more difficult for potential buyer to attain lone.

On the other hand, folks that already own property on the complex will see the value of their properties drop a few notches down.

Now you may see why the treat of HOA foreclosures come in play.

HOA Foreclosures and Hiring a Lawyer

Tricia, you mentioned that you are “hiring a lawyer” – here’s a word of caution for you: Make sure that person is a “Real Estate” lawyer – s/he will have much more knowledge of this thorny issue that needs to be managed so very tactfully.

A “litigation” lawyer on your side does not increase your chances of a single iota – in this instance to avoid a HOA foreclosure. I am sorry to say.

I have written elsewhere in this site that HOAs are almost always likely to win!

So proceed with care here!

MY Humble Opinion: Negotiate With HOA Yourself

I think that – based on all I have seen and read – alone or with a lawyer –HOA will win! 

I am absolutely sorry to say it!

And while we are at it, let me point: You most likely will also have to pay HOA’s attorneys fees plus any other fees / expenses they might occur and/or will allege to have occurred!

I know your head is now spinning more than a tennis ball hit by Rafael Nadal who allegedly put more spin on a ball than anybody else who ever hit a tennis ball in history…

But it is that bad – nearly 100% HOA foreclosures will prevail in the court of law.

In the recent years a dear friend of mine was in areas [late] with her HOA in the tune of over $5,000.00. I will not go into details here, but she was in poor health which for most HOAs it is not an acceptable reason…

However, I spoke – very humbly - with the management company and brought up the reasons she was late [in default] then I asked for “forgiveness”… Manager said he could not decide himself, however he was going to present the case to the board…

The board accepted to put her case on the agenda and we went both to talk with them.

Mind you that many - or most - boards will not give you this chance…

But there we went – she could not speak for herself because of her health condition, so I stepped to plate and “pitch and ran” for her…

I asked if they would please forgive the past debt and in return, she would do her utmost to keep her payments current from there on…

Well, they did not accept my plea, however, they forgave over $2,000 and agreed to accept a $3,000 payment – in 10 x $300! Which was more what I had in the back of my head they might accept AND my friend could afford it! Of course she had to continue to pay the new fees every month – and so she did... HOA foreclosure avoided!

It was a win-win situation - now she has long finished paying and continues to be current on her HOA fees since.

Again, some HOA will not be open even to accept installments and demand full payment all at once. However I still think that it is worth the try AND furthermore – it is my humble opinion that hiring a lawyer – in this case – you will be “throwing good money after bad”

If I were you’d be saving that money to put towards whatever agreement you will come up with the HOA.

I will be absolutely interrested in hearing from you of what happened on the end ...I am quite sure that 1,000s of reader who visit my pages every month will too.

My best wishes of an outcome favorable to you!

I had previously written another page about "HOA Foreclosure" which is also contains very valuable information

An HOA can make your staying in their community an enjoyable experience …or it can make you to repent of ever having a thought of purchasing that home.

So the more you educate yourself about your future home owners association the better you can hedge yourself against future headaches – here are additional “pages of knowledge” that might prove valuable down the road:

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JC Fagundes, Head Broker
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