HOA foreclosures

17 Replies

I'm a real estate investor in NC. I recently purchased a property through an HOA foreclosure. There is still a bank mortgage on the property. I'm not the borrower and so the bank won't work with me on taking over the loan. As the original owners let the property go into default and foreclosure will I be given the opportunity to purchase the home before the public. I am the deed owner but I don't know what rights that gives me in regards to NC foreclosure law. Any help is appreciated.

You don't need to purchase the home, you already own it as a result of winning the foreclosure.  But, you need to pay off the first in full.   They have zero incentive to work with you.  You have possession and ownership of the property for now, but the first can foreclose and you will lose it.  If you can pay off the existing loans, you eliminate their ability to foreclose.

These HOA foreclosure purchases are often bad deals that result in a full loss of the money you've paid. That will happen if the balance of the outstanding mortgages and other liens exceeds the value of the property.

Jon Holdman, Flying Phoenix LLC

Maybe 

Kristine Marie Poe might tell her story of dealing with lenders for mortgages that were in place ...

Thanks for the feedback. There is plenty of equity in the home vs the primary loan and a secondary lein on the property so I'm in good shape there. 

You'll need to check and understand NC law as it relates to HOA lien priority. You'll want to make sure it's not a super lien situation. You'll also want to make sure the borrowers have no redemption rights before you make any payments to the senior lenders. Especially true if there is equity.

As Jon said, you already own the property so you will not be given an opportunity to buy the property before anyone else.  However, you are allowed to pay off the mortgages in full before foreclosure. This is easier said than done.  You should check your state code to confirm how and when a buyer at foreclosure sale can obtain a full payoff amount and make the payment.  You may need the assistance of an attorney.  For sure there is something in your state code allowing you, as the successor-in-interest and new owner, to make the payoff.  But it's not as easy as calling the lender and asking.  They cannot communicate with you as you are not the borrower.

Alternatively, you could attempt to get an authorization to release information from the borrowers that would allow you to communicate with the lender.

@Steve Babiak  In spite of my best (and persistent!) efforts to use CA Civil Code to force lenders to give me lawfully required loan statements and payoff amounts as a successer-in-interest, I've yet to succeed.  I've always gone back to the borrower and gotten authorizations that allowed me to communicate with the lender.  Sometimes giving the borrowers additional money for their cooperation.

I have a similar situation in Pinellas County, FL. I bought the HOA foreclosure but missed the mortgage that is due. BB&T are about to foreclose on the property (been in process for over 2 years) and it does not make sense to pay off the $91k mortgage, on a house valued at barely $100k (I paid $12,200 for the HOA). My question - once the bank forecloses on the property, don't they then put it back up for auction to try and recoup some of their money? And, if so, can I bid on it at that time and try to outbid the bank? Unless they stick to wanting the whole $91k I'm thinking if they'll let it go for a 1/3 of that, that woul dbe worth it. Any thoughts or stories from experience are most welcome. I'ma newbie and I've gotten myself into this spot and am hoping to not lose my cash. Thanks!

Gina

Wow, Gina, we are from the same location and I am searching for properties to buy from time to time. I see people buy HOA liens at foreclosure auctions and was always wondering why do they do that? Mortgages on those properties usually ridiculously high, which means the first loan holder will wipe you out in a blink of eye when he gets to foreclose on the property. After auction sale you will get your $ back only if senior lenders got their payoff and it will be still something left for you. I feel bad not just for you but for all those folks who buy those liens, obviously they don't know what they are doing or I have no clue what business is this. I believe those auctions should be reliable for providing comprehensive information on dangers of those type of sales, or they are simply in the business of ruining innocent people's life.

Originally posted by @Gina Shields :

I have a similar situation in Pinellas County, FL. I bought the HOA foreclosure but missed the mortgage that is due. BB&T are about to foreclose on the property (been in process for over 2 years) and it does not make sense to pay off the $91k mortgage, on a house valued at barely $100k (I paid $12,200 for the HOA). My question - once the bank forecloses on the property, don't they then put it back up for auction to try and recoup some of their money? And, if so, can I bid on it at that time and try to outbid the bank? Unless they stick to wanting the whole $91k I'm thinking if they'll let it go for a 1/3 of that, that woul dbe worth it. Any thoughts or stories from experience are most welcome. I'ma newbie and I've gotten myself into this spot and am hoping to not lose my cash. Thanks!

Gina

Gina:  If the lender forecloses on their lien, they may or may not get the property back at foreclosure sale.  They may decide to drop the minimum bid, thereby creating some equity and possibly get some interest by third-party cash buyers at the sale. If they do get the property back, they don't offer again at foreclosure auction.  They may or may not decide to use an auction service to re-sell it, but typically they would list the property with an agent.

Be mindful that the Protecting in Tenants in Foreclosure Act has expired and was not renewed.  Which means your tenants would be subject to whatever notice and termination of their tenancy is lawful in FL.  @Wayne Brooks  What is the required notice to tenants after foreclosure?

I'm confused why missing one payment caused a foreclosure notice?  Why don't you pay the past due amount and fees and reinstate the loan?  Do you need help contacting/communicating with the lender? Post some more details here and maybe we can help.

@Gina Shields I think you may mean you weren't aware of the big first when you bought the property at an HOA foreclosure auction. Not that you missed a payment.

When the lender forecloses they may set the opening bid at what they're owed.  That's probably about $10K more than the loan balance with fees and legal costs.  Nobody will bid, they will get it and you're wiped out.  Or, they may set the bid lower, get bids and someone wins.  I do see this happen in maybe 10-20% of auctions here.  What I see is they set the opening bid at about the current market value.  Then you may be able to bid and really get the property.  But if you don't win you're still wiped out because its unlikely anyone's going to bid enough to pay off the first fully and leave some money for the owner (you in this case.)

If they bank does end up with the property they will typically list it on the MLS at about its current value.

These HOA auctions are a very dangerous game. I think the HOAs are really looking for a someone who doesn't realize what they're getting if they bid and win.

Jon Holdman, Flying Phoenix LLC

Originally posted by @Jon Holdman :

@Gina Shields I think you may mean you weren't aware of the big first when you bought the property at an HOA foreclosure auction. Not that you missed a payment.

Maybe it was me who missed that! I just assumed missed payment meant late payment. Not that the OP bought without knowing there was a giant first in front of the HOA lien. Of course that's probably what happened. That's a pretty common post on BP. :)

Originally posted by @Lubasha White :

Wow, Gina, we are from the same location and I am searching for properties to buy from time to time. I see people buy HOA liens at foreclosure auctions and was always wondering why do they do that? Mortgages on those properties usually ridiculously high, which means the first loan holder will wipe you out in a blink of eye when he gets to foreclose on the property. After auction sale you will get your $ back only if senior lenders got their payoff and it will be still something left for you. I feel bad not just for you but for all those folks who buy those liens, obviously they don't know what they are doing or I have no clue what business is this. I believe those auctions should be reliable for providing comprehensive information on dangers of those type of sales, or they are simply in the business of ruining innocent people's life.

There is an existing BP thread that covers HOA foreclosures, and why investors in FL acquire them even with mortgages still in place. The short answer is that they intend to rent the place out and collect rent until the lender forecloses, with the hopes that they collect more rent than what they had to pay. More detailed answers in that thread, so look it up.

Yes, what I meant was that I missed catching the whole mortgage outstanding when I did my (obviously sub-par) research. I appreciate everyone's thoughts and suggestions but I think I've exhausted all my options. The bank will not even talk with me since I am not the original owner that are the ones getting foreclosed on. The house is vacant so there is no tenant concerns. I bought this house for my elder parents so I could bring them down to Pinellas from Citrus County so I can take care of them. I did read the other thread that was mentioned and I had no intent to rent it out until it foreclosed. I am very new at this but persistent. I continue to learn so much from everyone on here! Thanks!

Gina

Originally posted by @Gina Shields :

Yes, what I meant was that I missed catching the whole mortgage outstanding when I did my (obviously sub-par) research. I appreciate everyone's thoughts and suggestions but I think I've exhausted all my options. The bank will not even talk with me since I am not the original owner that are the ones getting foreclosed on. The house is vacant so there is no tenant concerns. I bought this house for my elder parents so I could bring them down to Pinellas from Citrus County so I can take care of them. I did read the other thread that was mentioned and I had no intent to rent it out until it foreclosed. I am very new at this but persistent. I continue to learn so much from everyone on here! Thanks!

Gina

Not entirely sure you've exhausted all the options. Do you have any idea of the whereabouts of the borrowers? Any idea (ballpark) what the reinstatement amount is? If the loan(s) were brought current, would the monthly payments plus HOA fees be a manageable housing cost for your purposes?

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@K. Marie Poe

Of the older couple involved in the foreclosure, the husband died in 2012 and the wife is in a nursing home, had to be taken out of the house. I do not know where she is. Her daughter supposedly is her guardian but there are neighbors who have told me that she was stealing from them anyways so I'm not sure contacting her would be a good thing. When you say "reinstatement amount", I'm not sure what that is. Is that the amount that is past due on the note? I did get a copy of a statement from BB&T dated 2/1/14 showing a total payment amount due of $35,137.17 . But if I were to pay that, I'm still on the hook for the whole mortgage of $91K right? I'm confused. I really don't want to lose my $12k, can't afford it and I'm willing to look at any options to work this out. Thank you for your input!

If the daughter was stealing from her Mom I bet she's just they kind of scum bag that would assist you finding and dealing with Mom for a finders fee.  Thieves are greedy and don't care where the $ comes from.  Find her and she will lead you to dear old Mom.

I hate thieves......

Originally posted by @Gina Shields :

@K. Marie Poe

Of the older couple involved in the foreclosure, the husband died in 2012 and the wife is in a nursing home, had to be taken out of the house. I do not know where she is. Her daughter supposedly is her guardian but there are neighbors who have told me that she was stealing from them anyways so I'm not sure contacting her would be a good thing. When you say "reinstatement amount", I'm not sure what that is. Is that the amount that is past due on the note? I did get a copy of a statement from BB&T dated 2/1/14 showing a total payment amount due of $35,137.17 . But if I were to pay that, I'm still on the hook for the whole mortgage of $91K right? I'm confused. I really don't want to lose my $12k, can't afford it and I'm willing to look at any options to work this out. Thank you for your input!

In order to reinstate the loan, you have to pay all the past due amounts and fees.  So at that point you'd be in at $47K, plus have a large over encumbering loan.  No sense at throwing good money at bad.  Given what you've posted and your level of experience, I would let the condo go to foreclosure and accept the $12K loss.

That being said, if it were me, I'd find the borrower or relative with a POA, get a release and at least attempt to talk to the lender. I'd attempt a discounted payoff on the note(s). That kind of thing isn't easy and it is filled with road blocks and bureaucracy and can be a huge time sink. Not for the faint of heart or for most beginners.

To be honest, it's hard for me to understand how we keep seeing these types of HOA foreclosure posts on BP, usually from FL. A $12K starting bid is almost always your first clue. There aren't a lot of $12K housing purchase options in decent areas, even at foreclosure sale. I'm guessing you had no competition at the sale? That should have been your second clue.

I suggest staying away from foreclosures until you understand how they work better.  Find an agent to help you purchase something for your parents.