HOA Foreclosed

4 Replies

Have you heard of an HOA foreclosing on a property? (the property has Bank Liens)

This is Utah... NON Judicial foreclosure. The "Notice of Sale" says the HOA is foreclosing based on the CC&R's... I have a hard time believing this is possible but some Trustee did it.

The craziness is this is 3 years ago and the HOA has not done anything with the property. None of my title guys will insure it because of the underlying liens.

Thoughts on this one? 

Hi Justin,

Yes, an HOA can by all means foreclose on a homeowner. In some cases, such as condos or resort type areas, HOA dues can be insane. I was just looking at a condo in Palm Springs and the HOA dues are $1,065 per month, and that doesn't include golf! :) So if the person stops paying the HOA dues for a year they've just saved themselves $12,000. Many times the HOA will file the NOD as a way to "encourage" the homeowner to pay up.

Do you know how much they are behind in dues? Is it a reasonable amount that you could pay to get caught up and still make a good profit?

Best of luck.


What instrument gives the HOA the "right" to foreclose? The CC&R?

The "seller" is $5k+ behind from year 1... it is now 4 years later. The HOA has owned the home for the last 3 years. No payments have been made on the home for the last 4 years. The lender has filed and canceled 4 NOD on "the seller"... but the HOA owns the property.

I do Short Sales and this is a junker house we want to negotiate and buy but the "owner" is the HOA not the "seller" who contacted us.

My bigger questions is: What instrument gives the HOA the "right" to foreclose?

Yes, the CC&R's (along with state law) are what give the legal right to the HOA to levy and foreclose liens on the property that is subject to the CC&R.

State law will vary on if, when and how the foreclosure must be carried out.  

Essentially, the HOA lien is superior to all liens in second position or later but not first.  This includes the rights and interests of the property owner subject to the right of redemption.  

It sounds like in this case, the property owner was foreclosed and the HOA lien did not get sold at auction so title is now vested in the name of the HOA.  You will want to look up the state law for HOA Lien redemption post foreclosure.  If that time has not passed, then redemption can be done and you can deal through the property owner.  If the redemption period has expired, then you will need to deal with the HOA since they are the vested property owner in title and the "property owner" is merely a tenant, he just has possession.  

There is a fair amount of threads on these matters if you use the search function.

State statutes allow an HOA to foreclose. It is Very common, and I find it hard to believe this is new to you. If you want to try a short sale, the HOA will have to cooperate and agree to a negotiated pay off, in addition to the previous owner cooperating.

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