Architect · Santa Monica, CA · Member since 2012 · 73 posts · 24 votes
Hello BP,
Are there any investors out there who have had success buying HOA liens at weekly sheriff's sales? I follow public notices in my home state of Michigan to track foreclosures in areas I invest in and sometimes I see HOA's foreclosing for under $10K. I assume that 99% of the time there are senior lien holders like 1st or 2nd mortgages ahead of the HOA, but I also wonder if any investors use this as a strategy....buying a cheap lien to then take out the seniors if there is equity in the property? Said differently, if you buy a $3000 lien can you pay off the other lien holders so that you're in first position or is that essentially paying off someone's mortgage to get back your $3000? And if that's the case...what benefit is there to buying an HOA lien if any?
Flipper/Rehabber · Huntington Beach, CA · Member since 2015 · 21 posts · 19 votes
10y
Hi @Marc M., let me first say that I have no experience with HOA liens. However, I do recall a thread a read where it was discussed. The strategy discussed was to fix up the unit and rent it out to a tenant (with full disclosure that the home would be foreclosed on) at a fair market price. If all went well, your investment would be recouped within a few months and the rest would be profit. Seems like this risky strategy worked best when the banks were overwhelmed with foreclosures and it took a long time for the homes to become REO.
Las Vegas, NV · Member since 2014 · 284 posts · 123 votes
9y
@Marc M. This is certainly a strategy that people use. Purchasing the property at HOA foreclosure auction makes you the legal title holder, and you then have a legal right to satisfy the senior lien. However, you have to be careful of the senior lien holder asking for unpaid principle+interest+penalty fees; sometimes this can be far higher than the face value of the outstanding principal balance. Generally, it is better to try to come to an accommodation with the senior lien holder before purchasing at auction, but that can sometimes be a challenge depending on the nature of the loan and the identity of the lien holder.