Purchasing an HOA Foreclosure

19 Replies

Hey guys, first time poster here!

I am somewhat new to REI, but completely new to HOA Foreclosures..
Just wanted your ideas, opinions, and to confirm my thoughts and beliefs on this subject.

I am in Florida, and am wanting to get more involved in the REI market down here. What I want to clear up and am interested in learning more about is buying HOA foreclosures at auctions.

For example, I have in front of me a beautiful, newer house where the HOA has a lien on it and it is in foreclosure, with an auction price starting at about $6500.. which is the HOA fees, attorney fees, etc that is owed. If I pay and I win, I get title to the property, correct? - at least until the bank forecloses on the property (which could be 6 months, one year, 2, 3, 5 yrs, whatever). The home is valued at about $220,000, annual taxes are $6000.

Now.. while I have this title, I must continue to pay HOA fees due, BUT I can live in this home and/or rent it out, correct? Again, until bank forecloses.

Do i also have to pay the property taxes? Will my credit be affected once the bank forecloses? I don't think so because I am not the borrower, I just have the title and a lien on the property because of HOA dues.

Last question.. once the bank forecloses, is it true they reimburse or agree to purchase the title back from me?

Please clarify these thoughts or shed some light, opinions, etc.
Your input is greatly appreciated and oif anything I just want to learn more about the subject.

Thanks everyone!

@Patrick Patel , this strategy is so unethical and it wouldn't surprise me if it were ultimately found to be illegal in some way. (has anyone actually read all the documentation for these loans to see if something addresses this?)
There is no free ride. You may hear of people who are successfully doing it, but there have been lots of instances where people think they found a great scam to pull and then found out later it was really illegal or they somehow get burned when the jig is up. Just takes a while for the banks to get around to going after you.

When you buy the HOA lien, you are accepting legal responsibility for all the senior mortgage loans on that property. You are expected to pay them. If you purchase the junior lien with the intent to never pay the senior loan, I think it is very shady at the very least. I'd certainly never brag that I was doing it on a public board. It proves prior intent.

And yes, you have to pay the property taxes too because you own the property. In fact, it may shock you that you are supposed to pay all your obligations, not find gray loopholes to squirrel your way out of them.
What the heck is this country coming to?

Originally posted by Eric Michaels:
Patrick Patel, this strategy is so unethical and it wouldn't surprise me if it were ultimately found to be illegal in some way. ... I think it is very shady at the very least. I'd certainly never brag that I was doing it on a public board. It proves prior intent.

What the heck is this country coming to?


There have been a number of similar posts like this one recently. My suspicion is somebody in FL is peddling training or courseware on doing this exact thing - can't be sure since I'm not from there, but most of the posters asking about this seem to be from FL.

What in the World would be unethical or illegal about this strategy? You will be the Titled owner and you will be responsible for the HOA and the Taxes on the property as the owner. The senior liens however are simply senior. If you do not pay them they will exercise their right to foreclosure. You did not sign the loan documents and you buy the property "Subject To" these liens. To suggest that it would be unethical to purchase the HOA without intent on satisfying the senior liens is simply old school thinking. No doubt if the borrower is not paying the HOA they will not paying the first mortgage and in this market of severely underwater homes that is their bond to break. As a buyer of the HOA it would be unlikely that the lender would release information to you that would allow you to do anything other than payoff the loan in full. If the home is underwater you would be crazy to do that. So To answer your question.. YES You will get title to the property! YES You will lose that ownership if you do not satisfy the senior mortgages which may take some time unless the bank acknowledges your ownership and works with you to negotiate the mortgage down and allow you to make a reasonable investment. You may rent the property, Live in the property Ect.. The Unethical thing that you could not do that may be considered illegal is if you in some way destroy or devalue the property since it is an asset to a senior lien holder and they may suffer as a direct result if you do any damage. Otherwise they foreclose on you or they foreclose on the borrower! Whats the difference? Borrowers have to pay their HOA I am not from Florida either but I believe most states allow the HOA to foreclose for non payment of dues most states give HOA's special foreclosure laws that are stronger than a simple lien in order to give the bank 1st priority otherwise an HOA is a document recorded prior to the first and would hold priority if they didn't sign it or legislate that position away. However the bank will not repurchase title from you after they foreclose. There would be no reason to they would wipe your interest out. They may however purchase ownership from you after you buy it and prior to foreclosing. That would make for cleaner title to the bank. There are auction sites like trionx.com that sell HOA properties. More & more HOA's are going the foreclosure route to enforce their assessments. That is why you are seeing more of this topic and more going to sale.

Hello All.

Recently bought at a auction the title to property in our own HOA area. Thought I'd share with you step by step how we move thru the process and such, since there seems to be alot of folks asking if anyone has done this, or just researched it. As a side note, were not "pro's" by any means and this is our first one.. so you'll see the mistakes or success as we make it.

@Jason R.

Was it a HOA foreclosure?

Do you know where along in the bank foreclosure process the house is, if at all?

Check for a tax deed upcoming sale too.

Yes, HOA Foreclosure

Property Taxes are up to date.

No foreclosure process that we can find, still waiting on full title search to finish. Was supposed to be in 2012 per records, but bank canceled and dismissed.

There are some states where an HOA lien is a "Super Lien" status, meaning it takes priority over any mortgage/note. It is public policy in those states that an HOA has an obligation to maintain the property for the good of the community. My state an HOA lien does not take priority.

But, buying an HOA lien is just like buying a 2nd mortgage lien/note. You still have the obligation to make payments on the first

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HOA Lien purchases is a game that can be quite lucrative assuming: 1) property is in judicial state (states where lender must file lawsuit to acquire property title) 2) purchaser is well versed in foreclosure law 3) purchaser researches hoa cc&r 4) think of arbitrage not capital gains when assessing risk

Jason r.  

So tell us step-by-step please what's the situation with your property did you end up OK with that or no

So wanted to update everyone. After much, MUCH MUCH research within a 24 hour span.. we decided to NOT pay the winning bid at the county and be out our initial deposit.

This amount was MUCH LESS than what we would have had to pay on the winning bid, plus repairs to make the property rent-able.

We did end up talking with the property owner, and quite honestly we should have done that upfront. 

No need to mess with HOA foreclosures when the owner of the property would be willing to deal directly with you. In our case we decided that it was easy enough to pay the HOA directly for the amount owed and then do a short sale to take clear title. However, we ran into one monkey wrench, the owner already in foreclosure by his main lender and that lender wouldn't do a short sale. Now we are waiting on the main lender to foreclose, we will bid on THAT auction and will have a clear title. In the mean time, if the HOA does try to re-foreclose on it, our legal adviser said that basically we once we get the main title we are still in a 1st position and can have the HOA's tenant (if they are even able to place once in there even) easily thrown out.

My take away, skip this HOA foreclosure auctions. There is a thread on here, about them were and some more on google, took a little digging to find, but in short these things are NOT EVEN CLOSE to a good deal.

Just wanted to bump this. Since that deal, we've been able to do 1 more. We've set a rather aggressive goal for 10 houses in 2017, now that we have a bit of a system in place to find, locate, research, buy, renovate and then rent. Though always a work in progress.

@Jason R.

Just a reminder, looking at your second to last post. HOA debts will survive a mtg auction, and become yours.

Hi Wyane. Yep.  We take that into account now when considering a property.

@Wayne Brooks Do the outstanding hoa dues suppress values at auction for first mortgage foreclosures? The Florida safe harbor seems to be a giveaway to the banks, since a regular purchaser must cover all outstanding dues, but the bank can claim the safe harbor benefit. However, it does seem like it would bloat bank reo portfolios with hoa properties.

@Hal Thompson No, it doesn't cool off the mtg Foreclosures at all. Actually, the hoa supported the safe harbor, since the banks were so slow to foreclose, and didn't want to foreclose and inherit a $20k debt.........the HOA's were not collecting any dues on those homes, so they wanted them foreclosed so they could could get new, paying owners in there.

@Wayne Brooks Right, but the safe harbor doesn't do anything to speed up foreclosures. It allows the bank to sit on its laurels as long as it wants, and then only pay a de minimis amount when it does eventually decide to foreclose. It also penalizes third party buyers by forcing them to pay all hoa back dues, thus making the sale at auction less likely. The only explanation for the apparent hoa foreclosure madness in Florida is the incredibly slow foreclosure process that basically guarantees you can hold on to the unit for years before the bank comes along.

@Hal Thompson Yeh, the HOA's got more aggressive since there's a pool of investors buying them.....looking to make money off rents, while trying to delay the eventual bank Foreclosures.

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