Purchased a HOA foreclosue, now what?
FL · Member since 2010 · 19 posts · 1 vote
We are in FL. Without knowledge purchased a HOA foreclosue with a 1st lien. The 1st lien is in pre-foreclosure. The homeowner's were in the process of negoiating a loan mod so the foreclosue is on hold. I dont think the bank knows about the HOA foreclosue. The homeowner has left the property. How do we negoiate with the bank to rid the 1st lein? It is a Fannie Mae backed loan with BofA. Is it possible to make an offer to buy the note from Fannie or BofA? Any tips, ideas, etc?
Thank you.
I would strongly recommend you do two things.
One is to have a title company run a title search on this property to find out exactly where you stand. You really should have done that before the auction, which I think you now realize.
The other is that you should hire a lawyer knowledgeable in FL foreclosure law. At the very least, do an initial consultation (sometimes free) and see if anyone is interested in taking your case.
There's a real possibility what you bought is worthless. If you have really won an auction (more below) for a second position lien, then you have possession of the property. However, you are also now on the hook for any superior liens. You'll need to pay those off to get a clear title, and if they're more than the property is worth then that wouldn't be worthwhile. If they're less, then you still have to come up with the money to pay them off.
If you're in a superior position, then the junior liens will be wiped out by the foreclosure.
You say "I dont think the bank knows about the HOA foreclosue." That's really bad, but might just save your bacon. When a foreclosure occurs, ALL relevant parties must receive notification. If the BofA wasn't properly notified, then the foreclosure you won may be void. If that's the case, the whole HOA foreclosure should be unwound.
This is why you really MUST get a lawyer involved so you can find out what's really going on.
Here in CO, HOA liens are funny things. A portion of the lien, up to some amount, is very high in the food chain, even before any first mortgages. If the lien exceeds that threshold (a few grand, IIRC) then the rest of the amount is in a very junior position.
Certainly an entity like BofA that holds a (presumably) relatively large mortgage (relative to the size of the HOA lien) on a relatively valuable property is not going to just roll over and let you have to property. Lawyer up.
Thanks Mike. That is what I was thinking. No, we are not willing to pay over the market for it.
Steve is correct and thanks for the link :-).
Tiffiany, What do you mean BofA could be in trouble if the previous homeowners were in a loan mod? I dont understand.
Tammy,
Now that you are posting on BP again, do you have any updates on this topic?
Yes, I can provide you with a update. We were able to speak with and continure to communicate someone very high up with BofA. They have been very gracious with us, but they value the house just to high for us. Our comps say the house is valued at around $179,000.00, BofA values it at $235,000.00. BofA is not in a hurry to do anything and told us they will not untill Fanny Mae says so.
We have to move soon we've paid back assesments and part of of the current. So this is why we are looking and hope to get something before we depleat all of our funds.
Thanks for asking.
Just a thought, what BofA said to us is our offer had to be based on the $235,000. This wouldn't be a short sell. So, could we put this house on the market for say $260,000? Then sell would go quickly. Then if it sells (or when) would it be possible to keep the overage??
You own it, so you can pretty much do as you wish. If you sell it, the liens that survived the foreclosure will have to be satisfied or released to give the buyer clear title. The easiest way to get the lien satisfied is to pay it off in full, in which case the lien holder is obligated to provide a satisfaction document that you would get recorded. In a discounted pay off situation (AKA short sale), the lien is not fully satisfied, but the negotiations with the lien holder bring about a payment to the lien holder sufficient for that lien holder to release the lien; a release document is what you'll then get and that can be recorded.
Once all liens are paid off (in full or as agreed), you get to keep the net proceeds of a sale (and pay income taxes on your net proceeds), if there are any.
*cringe*...
Yes tammy, if you have an agreed on price you would be able to put it on the market for more and keep the overage. How much did you guys spend on the lien (not that it matters i guess) but more important how much longer till the foreclosure ends. I've got friends who actually buy these things (not in the orlanda area though) and they rent the houses out till it forecloses. Then the tenant does a cash for keys type deal and they stick the tenant in another house.
You might also try to sell the judgement back to the HOA who can collect their fees when the bank takes it back. They only did the foreclosure because they wanted control of the house. Usually to maintain a pool or something like that.
If nothing else, tell the bank you want them to pay you the amount you paid for the HOA lien, if they refuse let them know that it would make sense to recover the cost by selling off pieces of the house. it also would be quicker for them to take a deed from you than finish the foreclosure.
If you want more info call me, i buy on the court house steps and i'm sadly well versed in the mess you just started to play in.
By the way, for some good advice, if for some reason the owners do a mod and/or the foreclosure gets tossed out, you get to live there even longer :)
Hi Tammy...and folks.
Obviously, this is my first post so hello to you guys. This is a great website. I'm in Houston and accidently found it googling LU/Del. (don't worry....no comments here). I love the feedback I'm seeing. And hopefully I can contribute something useful.
Tammy, I do LOTS AND LOTS of short sale listings and handle the worst kind: Probate listings by the probate court for people without a will that is also a short sale. It's a pretty sticky web they weave. Particularly when there are five heirs that show up and one out of five doesn't want to sign a court-ordered sale at the closing table.
With you NOT being on the note yet owning the property, I'm in unfamiliar territory, however if you can turn it into a "short sale" situation you've got some negotiating power. I'm assuming you're talking to somebody in the loss-mitigation department. If not, you need to make that happen. Because if you're talking to somebody in the collections side, you will go nowhere. One thing they did do was "unzip their fly" by mentioning what the BPO came in at (or appraisal possibly...doubt it though). Typically, BofA and most banks try to shoot for a net number on the HUD1 of 82%-88% of the BPO. Since you don't have a realtor in the middle taking down 6% AND you are willing to live there and pay other costs, that would be the simplest negotiation on the estimated HUD1. And that's your friend. Understand that it will cost the bank WAY more to foreclose and hold onto the property..and they know that. They also know darn well they probably won't go what's called "outside the 65" at the auction....not in Florida. Remember it's truely a negotiating process and you really have to be a squeeky wheel and not take no for an answer. If you have your financing and ducks in a row, offer them $180K and show the funds. This gets them excited (sorta). Let them counter. You might get the property at $192K. The only codicil is that you want to supply an estimated HUD1 filled out correctly via a title company stating that sort of thing.
But possibly the best way to go is a negotiating company. I know there are short sale negotiating companies in Florida with attorneys on board that specialize in exactly that. And they are FREC approved. A conversation with one of those guys might be valuable. I promise you most regular real estate attorneys NO NOT know the EXACT process. Google "Short Sale Negotiator Florida" and such.
I dunno...just a thought. Then again my advice and $.99 will probably get you a cup of coffee.
Umm, this is interesting. Thanks Guys. Aaron my husband and I would like to pick your brain concerning this, please PM me with your number.
But first let me explain this little further. If you read in my previous postings the owners of this house are long gone and are not corresponding with BofA at all. They have left a trail of non payments. So then are gone. It was an act of God that my husband was able to get with the people we are talking with at BofA and I must say they have been very gracious. In most cases like this I am told that the bank will not speak with them because they are not on the note. But these folks have. What he said to us is that yes, it would be our best bet to purchase the house from them or at Foreclosure. It will not be a “short sale†because the persons on the note are not involved (this is what BofA said). However, they are saying that they value the house at $235,000.00 and this is what the tax assessor website values the house. So our offer must be somewhere around that figure. When we spoke to our contact with BofA he said we needed to show proof that the house is valued at $179,000.00 so that they could show Fannie Mae. Our contact with BofA said they are in no rush to foreclose on the house until Fannie Mae says go ahead and foreclose.
In response to your question Aaron, we have spent too much in my opinion not to be able to keep this house, but that is a lesson learned. My husband did this without my knowledge and research in the matter. Anyway he bought the note (subject to) for $5000 (subdivision dues), we have put about another $2000 in it for minor repairs, rekeying and current HOA dues. There is another $4000 in back neighborhood dues that is due (this is what we are trying to get away before paying).
I would like to stay in the house but we do not have that kind of cash. If there is a way we can work it I’d like to stay, I mean with all we put in it why not? However, at this point my husband would love just to get back what he has put into it and to get away for the pending $4000 due to the neighborhood HOA.
So any advise and help will be helpful and we would so grateful; So Aaron PM me your phone number.
Thanks so much Guys! This site has been a wealth of information and the contacts are awesome!!!
Tammy, don't rely on the tax assessor value for the home. Get an appraiser (or two) to come out and give you a value for the home. If the appraisers give a value that is higher than the $235k, then don't mention that and be glad to get the house for only $235k. If they value it lower, then take those appraiser reports to BofA.
...
I suggest that it is time to challenge the property tax assessed value! Something that you CAN do as the owner.
And of course BP has some good links to assist in doing just that:
http://www.biggerpockets.com/forums/48-general-real-estate-investing/topics/34592-tax-reduction-on-home-by-simply-writing-a-letter
http://www.biggerpockets.com/forums/48/topics/35271-here-is-the-tax-letter-
Hi, we are in same situation. Did not do our homework and purchased HOA lien for 11k. Just wondering if I can sell it and not to be responsible for coming HOA fees ? Everything I read says that it was in fact idiotic things to do
Can you sell it? Probably not. You normally have to convey clear title when you sell a property, and you can't do that. If the other liens total more than the value of the property, you can write this down as an expensive lesson in the school of hard knocks.
Thank you Jon. I mean sell the title I have in my hands now and means nothing :-) not the property
You actually own the property at the moment, if you bought it at a foreclosure sale. The "title you have now" is the property. Unfortuantely, your ownership is clouded by senior liens. Those senior liens can now foreclose and take the title away from you.
Whether or not theres any value to your ownership depends on the senior liens and the value of the property. If the only lien is a mortgage with a balance of $100K, and the property is worth $200K, you now have equity of $100K (or, $89K considering you paid $11K.) OTOH, its more likely there are multiple senior liens that total (for example), $200K and that the property's worth only $100K. In that case, you've just been screwed by the HOA. Which was exactly what they were hoping for.
If you want a real answer you need to do two things. For one, find out wat its worth. Real estate agents can help you with this. Just looking for active listings (realtor.com) for similar properties can give you an idea. Second, you need to figure out what other liens are on the property. A title company can do this. You might be able to get a simple report for free that would give you and idea if you really want to do a full search. Those simple reports are called "O&E's" for "owners and encumberances" here in CO. Not sure what the might be called in FL. A full search might cost you a few hundred, and could then be used to buy title insurance if there really is some value.
You should have done both of these steps before you bid at the auction. But live and learn.
Outstanding loan is 157k, property value is 90k. The question is, how can I get rid of it ?
You will be rid of it once the bank goes through their foreclosure ...
Yeah, you don't have to get rid of anything. You have nothing. You own the property, but its deep underwater.
Have you already handed over the money for the auction? Any way to unwind that transaction?
You might try contacting the loan company and seeing if they would cut you some deal. If you could convince them to accept, say $50K (and you have the ability to pay that $50K) you might have some value. As it stands, you're just had an expensive lesson.
We tried to contact a lender. Talked to 3 different people already, they have no idea what I am talking about. They gave us real estate agent to work with. Trying to find a previous owner and get him to sign shortsale.
Hi @Tammy Spearman,
Learning about liens, and your unfortunate case has been an eye opening example.
What ended up happening with the property?
Thanks,
Drew