I bought this home from an HOA foreclosure auction. The house is worth $650,000 (conservatively). The previous homeowner took out a mortgage for $275,000. Since I bought it from an HOA foreclosure auction, I know the mortgage is a surviving lien on the property. My question is, do I have the right to payoff that mortgage? Also, do I have the right to get more information about the mortgage (like the balance, payments, etc.)? Thanks :D
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
15y
What state are you in? Is the HOA lien senior to the existing mortgage or not? Are their any other liens?
Assuming your HOA lien is junior to the mortgage, you have not only the right but also the obligation to pay off that loan. If you don't, they can foreclose and take your property.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
15y
Its perfectly right. An HOA in a junior position knows they have little recourse if the senior lien forecloses. They file a foreclosure hoping that maybe the first mortgage forecloses, takes possession and gives them a target to go after for some money. Better yet, someone who doesn't understand what they're buying actually bids at the auction and pays them off.
This one sounds better because there appears to be some equity. Trouble is, without a title search, who knows if there are other liens. If it really had that much equity, the owner could have easily sold it at a fire sale price and avoided the foreclosure. Almost certainly more going on here.
I am in Florida. The Mortgage is in first position. No their are not any other liens on the property. I am looking for a new attorney because I asked this question to my current attorney and he wasnt sure... My plan was to list the property at a discounted price (maybe $575,000), and then pay off the mortgage straight out of closing. Do you think this is a good idea? The bank has to release the information about the loan, right?
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
15y
I know somebody (another BP member, as well as being in local REIA that I belong to) who, as one of his business activities, purchases second position non-performing notes. I once posed the question to him of how he deals with the first position lender. He avoids paying them off! He waits until the first starts the foreclosure process, and then he is contacted by somebody from the first lender.
But of course, he does NOT want the houses. Seems you WANT the house here, so you might have to take a different approach.
Certainly, the former owners will no longer continue to pay on that first mortgage, so it is only a matter of time until the first pursues foreclosure. You just might be able to line up a buyer before the really bad stuff catches up with you, and then your method does make sense - the buyer's funds will go first toward paying off the most senior lien positions, then junior lien positions, and then you would get paid.. My bet is that the first hasn't been paid in a while, so the first will be foreclosing - just a matter of when / how soon.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
15y
Because the ownership has changed as a result of that HOA auction, the first can proceed immediately to foreclosure, whether payments are being made or not. But I too would guess the payments aren't being made and this is just the additional incentive to start moving as quickly as possible.
When you find that new attorney, discuss the timeline. They may have to restart the process with you as the new owner. If you can find a buyer quick enough, maybe you can get through the sale before they can complete the foreclosure.
Alternatively, you could look at doing a refinance and pay off this first. That's more expensive, but avoids them coming after you.
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
15y
Originally posted by Jon Holdman:
Because the ownership has changed as a result of that HOA auction, the first can proceed immediately to foreclosure, whether payments are being made or not. ....
True, but the banks are going to be much slower to notice something like that. Now a missed payment - that's money out of their pocket and they'll take immediate notice to that.
I actually contacted the bank and they said that they would give me 3 months to sell the property. The also told me that the pay off is $228,000. They would tell me what the payments were or if the mortgage is in default. I also listed the property ($595,000). So hopefully I make at at least $350,000. Not bad for one deal...
Real Estate Investor · Baltimore, MD · Member since 2008 · 1k+ posts · 268 votes
15y
Originally posted by Joshua Walters:
I actually contacted the bank and they said that they would give me 3 months to sell the property. The also told me that the pay off is $228,000. They would tell me what the payments were or if the mortgage is in default. I also listed the property ($595,000). So hopefully I make at at least $350,000. Not bad for one deal...
If I understand correctly, homeowner stopped paying HOA fees and got foreclosed on over that? Check other liens, might happen that there are other (than first mortgage) liens on the property.
PLEASE keep us updated, sounds like an awesome deal.
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
15y
Goofy stuff happens to some people. I have a property that I bought at sheriff sale that was foreclosed for unpaid taxes (waiting out redemption period now); those people could have easily sold it to pay off the taxes, and have some cash left over - but they didn't ...
Specialist · Cleveland, OH · Member since 2011 · 1k+ posts · 852 votes
15y
I am not familiar with Florida law. I have always known HOA Liens to be ahead of 1st mortgages. I would love to know more details of this deal because something does not sound right. Please someone explain it to me in detail, I like to think I know my way around the block a bit, but this one is unclear to me.
Thanks :oops:
Real Estate Investor · Baltimore, MD · Member since 2008 · 1k+ posts · 268 votes
15y
Originally posted by RobTheHouseGuy1:
I am not familiar with Florida law. I have always known HOA Liens to be ahead of 1st mortgages. I would love to know more details of this deal because something does not sound right. Please someone explain it to me in detail, I like to think I know my way around the block a bit, but this one is unclear to me.
Thanks :oops:
HOA forecloses on the house for not paying the dues and foreclosure is subject to existing liens. It means if you pay $500 (outstanding HOA dues) at the auction for the house that is worth $100k and has an $80k mortgage, you gotta pay this $80k lien off in order to own the property. It's not wiped off as if it would in case you were foreclosing on tax lien.
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
15y
Actually, it will vary from state to state as to whether an HOA lien has senior priority or not.
And as for tax liens, in PA a tax lien foreclosure does not necessarily wipe out the mortgages on a property, so you can't assume that the type of lien being foreclosed will determine some other type of lien getting wiped out.
This is all stuff that each state handles differently, so you need to understand the rules as they exist in the state where the property lies.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
15y
Here in CO HOA liens can be both senior and junior. A certain amount, a few grand, IIRC, is senior to any mortgages and the rest is junior. If there was both a senior and junior amount, a foreclosure on the first would result in the winner being responsible for the senior amount and the junior amount would have redemption rights.
I am not familiar with Florida law. I have always known HOA Liens to be ahead of 1st mortgages. I would love to know more details of this deal because something does not sound right. Please someone explain it to me in detail, I like to think I know my way around the block a bit, but this one is unclear to me.
Thanks :oops:
In florida, all HOA liens are junior to any mortgage. So when I got the house, the mortgage lien survived the sale. I only paid $1,200 for a $17,000 HOA lien all because the plaintiff's (HOA) representative didn't submit a bid at the auction and everybody else just ignored it because it was an HOA auction and figured the property was upside down. I found out the owner moved to England and is in his late 80's so I guess he's not all that interest in saving it any more.
Just got an offer on the house. I HATE when people low ball. The guy wanted $395,000. He so lucky he wasnt in front of me or I would have cursed him out so bad. Still cant believe he would offer $200,000 less than asking price ($595,000) on a house that is appraised for $672,000. I was so mad that I countered him back at $790,000 (2 times what he offered). Lets hope he gets the message...
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
15y
I have seen liens get slapped onto a property AFTER it has been sold at sheriff sale. IRS does this. Municipal liens (unpaid taxes, sewer, trash, water, natural gas in Phila) can all become the new owner's obligation to pay. Mechanics lien rules are state specific ...
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
15y
Originally posted by Steve Babiak:
I have seen liens get slapped onto a property AFTER it has been sold at sheriff sale. IRS does this. Municipal liens (unpaid taxes, sewer, trash, water, natural gas in Phila) can all become the new owner's obligation to pay. Mechanics lien rules are state specific ...
Exactly. When we repossessed a house last year on a fix-and-flip loan gone bad, we bought an extra rider on the title insurance to protect against such liens. We were concerned the rehabber hadn't paid all of his contractors, and had no ability to find out for-sure there were no outstanding liens.
The Title company found out about the unrecorded lien by looking at unverified documents in the official records. The buyer countered back at 550,000. But I not going to sell it for more than $100,000 less what its worth.
Residential Real Estate Agent · Chandler, AZ · Member since 2009 · 1k+ posts · 928 votes
15y
Don't confuse appraised value with sale price. Just because a property appraised for a value at X amount does not mean you sell it for that amount in under 90 days. The appraisal may have taken into account properties that took 8-9 months to sell. Sounds like you need the property sold much quicker unless you have the funds to payoff the first. Your property is at a price point where buyers are picky because there is a lot of inventory out there. I'm not telling you to sell, I would actually counter again, but think of the consequences.