I just attended our monthly HOA meeting, where I found out that the HOA is about to foreclose on a house. The house is vacant, and the bank has not started foreclosure yet.
If I can reach the owner, is there any possible way to take ownership here? Perhaps a quit claim deed where I pay the past due HOA fees? Or is it too late since its obvious the bank foreclosure will be happening soon?
First question....Is there any equity?
No equity, house is 3 years old.
Honestly, then why would you want it? Unless you think it will appreciate big time (always a gamble but hey, we all have our methods.)
So this starts to get into higher level investing and strategies. But you could buy the HOA (junior foreclosing position) at auction, this will then give you equitable title to the property. There is still a senior lien that is not being paid and will eventually foreclose but given that you now have title you can take possession, turn on utilities, and rent the property out. Then it begins to play the gamble of how many months does it take for the bank to foreclose on the asset and how many months of rent can you collect in the mean time.
So I would check if a NOD (notice of default) has been filed on the senior loans, and or if there has been a NTS (notice of trustee sale). If a sale date has been established then its not really worth it, if no NOD and no NTS then you typically could get 6+ months of rent.
Also I would be very upfront with the renters and let them know the situation and many times offer them under market rent rates. Plus if the senior loan goes to sale they can benefit from a cash for keys deal if the bank takes it back or if an investor buys it.
I don't recommend this as a newbie and you have to be ok just taking title knowing your investment will be wiped out by a senior position. Other strategy would be try and negotiate with the first position if they will take a lower payoff amount, (highly unlike)
@Jake - I'm not sure i'd consider that "Higher Level" strategy. You are skimming rent for the period between acquisition and foreclosure. That's not very high level. You are a short term opportunist. I'm not saying there's anything wrong with it, but I still wouldn't call it a high level strategy. You are creating the recipe for disaster with this.
You engage a tenant to rent with the disclosure that it's going to be in foreclosure and mitigate that with a lower market rent, and the possibility (not probability) of cash for keys from the lender when they foreclose? So, any "decent" renter wouldn't put themselves into this situation. They would not be considered a legitimate tenant in the eyes of the lender as the lease (Assuming you have one) is between the tenant and you, not the borrower so, the tenant would not be protected with any of the "Protecting tenants at Foreclosure" rules. Their lease would be nullified and they will be evicted if they don't leave after sale.
As you admit, the other "strategy" is also unlikely considering there is NO incentive for the senior lien holder to negotiate a short payoff on a loan you do not have.
At the end of the day, you are the only one that benefits with a potential of six months rent. Again, I'm not saying that's unethical or immoral but, let's call it what it is and not give it any more credence than it deserves.
Finally, i'd be very careful about conveying to a prospective tenant that they could get cash for keys as an added bonus/incentive to enter into a lease with you because, if they don't, you subject yourself to being sued by the tenant.
Quitclaim deed would only release that individuals interest to the property. I'm assuming there is still a mortgage or primary lien on the property. That is a priority lien that cannot be removed through a quitclaim deed.
Is Texas a super lien state? Meaning when HOA forecloses, it wipes out the lienholder in the first position unless it's a Freddie or Fannie
More on super liens here:
Get the Ultimate Beginner's Guide
Sign up today to receive the popular eBook for free!