Replies to This Discussion

Permalink Reply by Kevin - Greenville, SC on November 16, 2011 at 2:43pm

Good blog here - http://wildelawfirm.com/blog/home-owner-associations-and-short-sales/

Permalink Reply by joe beauchamp on November 16, 2011 at 7:02pm

Because HOA's are quirky, I looked at your blog pointer.  Common law has primary agreement superior to lesser agreements and the blog has the 2nd allowed to destroy the relationship of the 1st.  In foreclosure, the 2nd must satisfy and conform to the agreement of the 1st, therefore the HOA would have to fully pay off the 1st if it foreclosed (which is how it works here).  The blog has it so that anyone who comes along later can hold the 1st for ransom so effectively change the contract of the first after the fact.

So, if you find/know that this blog is correct, please say so because it doesn't seem logical to me (possibly there is some strange law that gives HOA's super powers? - something to study, then..).

I've just found HOA's quirky because they are run by home owners with no particular understanding of business or law so can impose any weird logic when it comes to their lawsuits - regardless of what makes sense - no consistent logic.

Permalink Reply by Esther M. Camarotte on November 16, 2011 at 11:55pm

Disagree about who runs those HOA's many are professionally run by management companies and they throw this to their attorney.  Which is the reason many take this ridiculous stand on negotiations.  What I don't understand is why they don't negotiate because if the seller is foreclosed on and then files bankruptcy - well they get nothing.  My opinion is that something is always better than nothing :).

Permalink Reply by Esther M. Camarotte on November 16, 2011 at 2:43pm

Have your sellers consult an attorney they may want to consider bankruptcy.

Permalink Reply by Dean E Eshelman, CPA, CDPE, IRES on November 16, 2011 at 2:51pm

Do we know which states are "Super Lien" states and which are not. I am in Missouri and thought it was a "Super Lien" state.

Permalink Reply by Kevin - Greenville, SC on November 16, 2011 at 6:16pm

Not sure how authoritative this is - http://www.scribd.com/doc/72983041/Community-Association-Lien-Priority

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on November 16, 2011 at 3:22pm

Christine -

 

Unfortunately, there's not much you can do about it.  Although, I'll tell you about one of my (Buyer) transactions with a $15,000 past due HOA Bill.  BofA was the 1st @ $800,000 and Chase had an unrecorded HELOC of $150,000.  In the offer we asked for 3% toward Buyer Closing Costs specifically to be used to pay the past due HOA fees.  It was enough to cover the HOA (who, by the way would not negotiate) and also covered some actual Buyer closing costs.  BofA approved it and we eventually closed.  Our problem was the unrecorded 2nd.  The Brokerage owned Title company tried to close the transaction without satisfying the 2nd which would have left my buyer high and dry with a $150,000 problem.  3 months later we eventually got the 2nd to take a "settlement" offer which came from the comissions (not my favorite thing to do but I had the buyer's current house in escrow and the buyer offered to make up the difference).

 

So, my advice to you is either; 1) have any buyers ask for closing costs and they can use it to cover the HOA; or 2) direct the sellers to a BK attorney as others have already said.

 

Another note, here in the CA Desert, HOAs are foreclosing like crazy.  If the HOA is past due by a certain amount over a certain time, they foreclose, kick out the occupant (owner) and rent the property for income - or start collecting the rent from a current tenant if one is there.  We don't know what will eventually be the outcome but there are MANY properties where this has happened already so it will be interesting to see how it plays out.

 

Best of luck,

 

Thom Colby

Broker

Newport Beach and Palm Desert CA

Permalink Reply by Kevin - Greenville, SC on November 16, 2011 at 5:25pm

Thom,  A unrecorded HELOC in your state is still valid and enforceable?

 

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on November 16, 2011 at 6:01pm

When all the parties know about it.... it is.  The seller had been paying on it for several years before defaulting, the Listing Agent disclosed it in the Listing, I addressed it in the offer and all the Title Companies I spoke with wouldn't close without it beint satisfied.

Permalink Reply by Brenda Houghton on November 16, 2011 at 3:45pm

The way I handle large HOA (or other) lien payoffs is to renegotiate the contract with the buyer.  For example, if they've offered $200k on the property and there is a $15,000 HOA lien, I see if the buyers will make their offer $185k, and pay for the lien at closing.  Of course, this only works if the buyer has enough cash in the deal.  Otherwise, these might not be the buyers for the property, but at least you know how to structure the deal for the next buyers.  I've never seen an HOA willing to negotiate here in Texas, either.  They will get their money anyway they know how.  I've seen them get their money from the REO asset company on foreclosed properties.

 

Permalink Reply by Becky Martin on November 17, 2011 at 1:58pm

I have actually had some very good luck dealing with HOA's who settle for less than owed to allow for the "paying" buyer .  I have run into lenders who refuse to pay anything towards HOA's and others who will pay out the nose LOL so as you know, every deal is unique in the short sale world!

Permalink Reply by Christine Donovan on November 17, 2011 at 8:50pm

Isn't that the absolute truth of it?