Wanted to reach out and understand if this is legal or not for an HOA to do.
Found a short sale property, put it under contract and later (months later) found out that there were almost $20k worth of over due HOA dues. The HOA was putting this onto me, THE BUYER, to pay! I didn’t sign paperwork stating that was my responsibility...The seller did. Shouldn’t they go after the sellers?
Can they hold the property sale up for this??? Cause they certainly did. Now the property is foreclosured on and listed for $45k more! I don’t know how foreclosure works with past due dues, who pays them, are they waived?
if the HOA purposely dragged their feet to ensure the property got into foreclosure and so that they get paid that’s not right and I’m going to do something about it.
Not a lawyer and detail is lacking here, my guess is that they put a lien on the property itself which doesn't go away, the person who you should be mad at is the title company, if they gave you clear title and you later came to find out there is a lien.
I am a lawyer and I take these cases frequently! This happens all the time when the title work is not done properly. The title might read that you're taking subject to outstanding or existing HOA dues. This is super common in short sale properties, but more often it happens in purchases from bank-owned, because the bank will not warrant that the HOA dues are paid in full.
My academic approach here would be to call the title company and make a claim that the title company cleared HOA dues. See if the title company will indemnify the dues. If they won't indemnify the dues, you could try to make a three party declaratory action between yourself, the seller and the HOA to allocate the debt to the Seller.
I'm not sure from your post if you bought it, so that advice considered that you bought it. If the sale fell through, perhaps it's just time to consider yourself lucky, because you're no longer purchasing a property that is encumbered by $45,000.00 more debt than you thought it was.
Just be sure, in the future, if you're purchasing from auction.com to make sure that you hunt down that HOA for a paid assessment letter before you sign the ALTA. I can't tell you how many thousands of dollars I've saved my clients THIS YEAR from just being relentless on tracking down HOAs.
They hoa didn’t put it on you the buyer to pay, they put it on the property. Before it can be sold they have to paid, obviously. Think about how long they’ve been waiting? When you looked up the Hoa fees were they a couple hundred a month? As in they haven’t been paid in the last 8 years? This could just as easily have been 8 years of water bills or electric bills if the seller was declaring a medical need and they couldn’t be shutoff. those bills would still be paid at closing, they don’t care by who
ps. In Nevada the Hoa would have foreclosed and took the property much sooner.
Pps. Also Nevada specific, there’s a checkbox that says seller or buyer to pay outstanding balances, transfer and capital contribution charges. BUT, every short sale I’ve bought here the bank counters with “we don’t care what the contract says, we don’t pay any Hoa balances, we give you 7 days to inspect the property, the seller shall not receive any proceeds, this is an arms length transaction, etc...sign here. That happens almost immediately but certainly months before any closing.
It's too late now, but that should have been an easy title insurance claim. Always get owner's title insurance.
"But I'm a wholesaler!"
Don't care. Always get title insurance. Adjust business practices and/or what one calls one's self accordingly.
This might be California specific, but I had one not long ago where it wasn't even something funky like OP had, this was just a few family members that quitclaimed a free/clear property to one family member, who later wanted to refinance. I checked with a bunch of different places after this came up at the 11th hour (of course), and none would issue title insurance on the refi without tracking down all these family members and getting them to sign off on it (miracle of miracles, ALL of these random family members were STILL on good terms with ALL the rest, so it wasn't TOO big of an issue). They all said the quitclaim was an "uninsured transaction," and within the last year or two someone won a title insurance law suit or something (I was in "here's ALL the paperwork, can you get it done, yes or no?" mode and not paying attention to details), causing title insurance carriers to be skittish of that.
Always. Get. Title. Insurance.
(& if you think that quitclaim "uninsured transaction" thing above, implying that you should get title insurance to quitclaim, seems like some mafia "insurance protection money" kind of thing going on, honestly I'm not going to disagree with you and would LOVE for an escrow and title insurance rep in California to read this and reach out to me with a better option moving forward now that this is apparently a thing. Absent that... Great. Then where we end up is: Always. Pay. The. Mafia.)
I did not buy the property. To clarify the dues were $17k. The $45k is how much more the new realtor is trying to sell the property for now that the foreclosure has gone through. Not sure where the HOA fees and past due dues fall, but maybe part of the $45k is trying to recoup those costs. So yes it was a great deal as you can see since they didn't do anything to the property and trying to get the $30k more for it. (Will they get that much in the state it's in...maybe? / maybe not) but still a great deal. Should I of ate the cost of paying the hoa? Thinking maybe at this point but it's just didn't feel right to do that.
Also I believe in the state of PA, once a property is foreclosed on, any HOA dues will be wiped down to a max of 6 months. So jokes on the HOA if that's the fact!
So in short I don't have any recourse to go after the HOA for dragging their feet and basically making this 8 month long short sale endeavor fall through? I don't see anything in the by laws stating that the buyer is responsible. And to be clear the bank put this into foreclosure not the HOA, so if hey needed their money they should of triggered the foreclosure and put a lien on the property. They didn't do either.
I am an Illinois real estate attorney and I have to assume that although you were under Contract to purchase, you did not close because at some point, your were informed (or you learned on your own) that there was a $ 20K HOA lien on the property.
First, for the record, it seems to me that the Seller had an obligation to tell you that there were $ 20K in HOA liens.
Regardless, you stated: "The HOA was putting this onto me, THE BUYER, to pay!"
How do you know this? Was it stated in the HOA Paid Assessment Letter that was issued? Was it told to you verbally by the Seller, title company or the Attorney/Agent handling the Short Sale?
In a short sale, the Seller's lender is asked to lower the mortgage lien payoff so that the Seller can sell the property without having to bring cash to close and not allow Seller to net any proceeds from the sale.
In a Short Sale, the Seller is telling their Lender AND YOU that they have no money and will bring no money to the Short Sale Closing.
During the transaction, I the Attorney/Agent/Title Company handling the Short Sale informs the Seller's lender about all the fees that must be paid at closing, thereby asking Seller' lender to lower the short sale payoff amount to accommodate the payment of these fees.
The Short Sale lender is asked to approve the Attorney/Agent fees, Realtor Commission fees, tax proration credit, title fees and THEN since Seller as no money in a short sale, the Short Sale lender is asked to further reduce their payoff amount by $ 20K to accommodate the payment of past due HOA fees.
I'm betting the Short Sale lender had refused to pay this $ 20K fee and IF you want(ed) to continue with the purchase, you'd have to pay it at closing.
I doubt very much that you will find a document/letter issued by the HOA that states that the Buyer must pay the $ 20K, unless they (the HOA) were told that Seller and Seller's lender would not pay the $ 20K, in which case the HOA's might have been, "If Seller and Seller's lender won't pay the $ 20K, then the $ 20K will remain a lien on the property unless the buyer agrees to pay it."
Before you enter into another Condo Short Sale, you could/should ask up front for the current amount of unpaid HOA dues/fines on the short sale property and determine whether or not you can afford to pay it as a buyer.
@Dave Saveri This is Very common with short sales. In your case, incompetence all around.
The first thing a listing agent should do in a short sale is verify all the junior liens, and make a plan to deal with them.
The first thing a buyer agent in a short sale should do is the same.
It is very common for hoa's to Not accept the $5k or do the shorted lender will offer them....therefore the additional money required to satisfy the HOA, after negotiation, has to come from somewhere....which will be the buyer. So....the buyer needs to assess how much extra they will need to contribute to the HOA, so they can adjust their contract price accordingly. Once you get an approval from the lender, it is fruitless to try negotiate it lower due to this.
When I used to list short sales in this situation I always advertised the property, and had it in the purchase contract, that the buyer would pay up to $X extra, above and beyond the purchase price, for whatever junior lien was involved.
The HOA has no liability here, and no obligation to take less than they are owed.....even though it is usually smarter.
Part of the submittal to the lender, along with the contract and the seller’s hardship package, is prelim HUD1/closing statement showing the bank’s proposed payment to junior liens.
This was a case of the blind leading the blind....pure and simple.