court house auction question

8 Replies

I'm looking to purchase a home coming up at the court house auction. It has already been sold once as a HOA foreclosure and is now owned by a LLC. Now the first position lender is foreclosing. I know for the most part the new owner who purchased the HOA foreclosure would be wiped out. Would the current LLC owner have any right to challenge me if I were to win?

My concern is that I have been told if the HOA docs have certain language that it could wipe out the first position mortgage. I have an acquaintance who buys HOA foreclosure with this certain verbage so I am scared to purchase anything where the HOA has already forclosed. In Tampa this makes up a bunch of the foreclosures auctions I search. Any insight would be greatly appreciated.

Since the HOA already foreclosed, their lien no longer exists and the 1st foreclosure action will wipe out anything else besides taxes, IRS, county/city fines or levies, etc. The HOA would have foreclosed, "subject to the 1st"

Your acquaintance must be referring to HOA's in Nevada where they are superior.

@Chris Copenhaver @Chad U.

Just to muddy the waters.....from my memory, most hoa's Original ccr's had language long ago that they were superior to 1st mtg.s. This was somewhat supported by FL statutes at the time. But in order for a buyer to get a 1st mtg, all these ccr's were amended so the HOA is subordinate to 1st mtgs, otherwise banks wouldn't have lent on them.

It would be easy to read the original ccr's and Believe that an HOA foreclosure wipes out a 1st mtg....this is not the case.

Further, IF a foreclosing entity is indeed in first mtg, they Must name and serve any junior liens in order to wipe them out. If you look at any HOA foreclosures you will note that they Never name any of the mtg holders, since they know they couldn't wipe out any first mtg.s anyway.

Short answer, if the HOA foreclosed and now the mtg holder is foreclosing, you will indeed get proper title.

However, my understanding is after an HOA foreclosure while the Lien gets wiped out, the underlying debt, prior to the HOA foreclosure, still remains and will become the liability of the mtg foreclosure auction buyer, the same as if the HOA never foreclosed.

Originally posted by @Wayne Brooks :

@Chris Copenhaver @Chad Urbshott

Just to muddy the waters.....from my memory, most hoa's Original ccr's had language long ago that they were superior to 1st mtg.s. This was somewhat supported by FL statutes at the time. But in order for a buyer to get a 1st mtg, all these ccr's were amended so the HOA is subordinate to 1st mtgs, otherwise banks wouldn't have lent on them.

It would be easy to read the original ccr's and Believe that an HOA foreclosure wipes out a 1st mtg....this is not the case.

Further, IF a foreclosing entity is indeed in first mtg, they Must name and serve any junior liens in order to wipe them out. If you look at any HOA foreclosures you will note that they Never name any of the mtg holders, since they know they couldn't wipe out any first mtg.s anyway.

Short answer, if the HOA foreclosed and now the mtg holder is foreclosing, you will indeed get proper title.

However, my understanding is after an HOA foreclosure while the Lien gets wiped out, the underlying debt, prior to the HOA foreclosure, still remains and will become the liability of the mtg foreclosure auction buyer, the same as if the HOA never foreclosed.

So Wayne are you saying that even though the HOA foreclosed, and sold at auction to a 3rd party, then any amount above the sale price up to their FJ is still responsibility of the 1st lien foreclosure buyer? What if the 1st lien lender takes back it back at the auction instead of a 3rd party? If it's not a lien any longer, then how could the HOA enforce this? My understanding is that they could only file a judgement against the prior owner for any oustanding amount not recouped? This is why a lot of former HOA borrowers file for BK, so they couldn't come after them any longer.

@Chad U. As I assume you know, any outstanding HOA debt, whether a lien has been filed or not, becomes the responsibility of a third party buyer at a mtg foreclosure auction.

Also, my understanding as per my attorney, even if you buying at an HOA foreclosure auction where they set the minimum bid lower than the judgment, the buyer is still responsible for the difference....HOA debts stay with property regardless.

As to HOA debts/liens when the bank buys it back at their own foreclosure auction.....the bank is protected by the Safe Harbor statute passed in 2008 I believe.....they owe only 1% of the original mtg or 12 mo.s of dues, whichever is less, and the HOA has to accept it as full payment.

Originally posted by @Wayne Brooks :

@Chad Urbshott As I assume you know, any outstanding HOA debt, whether a lien has been filed or not, becomes the responsibility of a third party buyer at a mtg foreclosure auction.

Also, my understanding as per my attorney, even if you buying at an HOA foreclosure auction where they set the minimum bid lower than the judgment, the buyer is still responsible for the difference....HOA debts stay with property regardless.

As to HOA debts/liens when the bank buys it back at their own foreclosure auction.....the bank is protected by the Safe Harbor statute passed in 2008 I believe.....they owe only 1% of the original mtg or 12 mo.s of dues, whichever is less, and the HOA has to accept it as full payment.

Yes I am intimately familiar with Safe Harbor but my question is what happens after the HOA forecloses. What happens to the remaining debt if the 1st lienholder (or 3rd party bidder) takes back the property in the subsequent foreclosure? Is it still subject to the Safe Harbor laws in this case.

@Chad U. My understanding is that yes, the unpaid debt, even after the HOA foreclosure, is still treated the same in a mtg foreclosure as if there were no HOA foreclosure. Dues accruing During the hoa's ownership wouldn't be due though.