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Permalink Reply by Marty Hackworth on November 30, 2010 at 8:54am

I have a friend and client who recently decided to walk away from his home in Livermore, Ca and let it foreclose against my advise. A couple months later he was served a subpoena to appear in small claims for the unpaid HOA dues. According to my friends real estate attorney, A foreclosure in California will not wipe away the past HOA dues and according to him they can come after you in small claims even after a foreclosure.

How long has the condo been listed? Is it a pre-approved or HAFA short sale with an approved sales price? If not, the only thing you can do is lower the price and continue to lower it until you receive an offer. Make sure your agent includes the HOA payoff figures in the HUD sent to the lender once an offer is received to make sure they get settled with your short sale.

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Permalink Reply by Tina Smith on November 30, 2010 at 11:45am

It's been listed for a few months, and planning on lowering price for a second time. It's not pre-approved as a HAFA short sale, it's a second home. Looks like I am better off just paying the HOA until it sells or forecloses. $250. a month is not pleasant but I would prefer not having my wages garnished, or get brought into small claims court and have a judgement against me. Any thoughts? I only have one loan on the property, no heloc.

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Permalink Reply by Marty Hackworth on November 30, 2010 at 12:06pm

Hi Tina, I would get a lot more aggressive with the pricing. If your property is listed on the MLS and Realtor.com, it is getting exposure. Prospective buyers are seeing the property and making a decision not to write on it. At that point, the only tool in your bag is the price. My suggestion would be to lower it on a bi-monthly basis until you get an offer to submit to the bank. Keep in mind there is a lot of mis-guided info going around on short sales and a lot of mis-guided agents telling their clients to stay away so you may have to be a little lower than market value to drum up some interest. I obviously do not know the details of your situation or hardship, but on a short sale with 1 loan in California, it doesn't sound like there is any reason to let it foreclose.

As far as the HOA goes, have you spoke with them? Call them and let them know you are selling the home and intend to have an arrears settled with the sale.

Marty

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Permalink Reply by Tina Smith on November 30, 2010 at 12:58pm

Yep, lowering the price again. Extremely hard hit San Diego area. The HOA knows that it is for sale, and that any past due would be included in the settlement through escrow. The HOA said that after 3 months in arrears they file a small claims against the owner.

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Permalink Reply by Steve Early on December 2, 2010 at 1:51am

Hi Tina:

What you have to think about is; If you rack up a big bill with the HOA it is possible that the investor will not pay all of it or they may not pay any of it. It will depend on the offer and how much they can net. Overall, my impression is that investors are shying away from taking on all of a seller's HOA back payments.

If this happens you have to ask yourself whether or not you can come up with the lump sum you owe so you can close if the HOA decides to slap a lien on your condo. If the HOA bill gets up to $2,000 could you come up with that much to close? If that is going to be really painful or impossible, you might want to try to pay as much as you can on the HOA bill as you go along. It could be painful but not as painful as having a short sale offer that would work but can't close because you can't come up with the cash to pay off the HOA.

I'm not qualified to talk about California law, but you might also want to get some advice there on what an HOA can do to collect if you don't pay. I know in some states, HOAs can initiate foreclosure proceedings.

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Permalink Reply by Tina Smith on December 2, 2010 at 8:01am

Thank you Steve. I've decided to go ahead and pay, and be behind just one month. It's $260. a month, so I should be greatful it's not $500. a month. It looks like the seller is responsible for HOA dues until it eithers sells, or goes back to the bank. I'm not planning on filing BK, so in my case, I'll just pay the dues, and hope that it sells soon.

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