HOA foreclosure auction

11 Replies

Hello BP, 

I'm new to RE Investing and ready to hit my very first deal at the HOA auction, but I have not been able to find a clear answer for the post process after acquired the property deed thru HOA auctions. I know HOA in Texas is not a super lien so whoever wins the bid will be more than likely subjected to senior liens which possibly be either IRS or Mortgage lien. So, let's say you won the bid and you got the deed. But while waiting for 180 days redemption period, if the Bank forecloses that property, your lien would be automatically wiped out and you would lose your investment because in that case you are minor lien.

So my question is that how we could prevent it from happening. What should we (as successful bidders) do after acquired the property, could we call the Bank and let them know that we got the deed? Has anyone done it before or is familiar with this type investments?

Thanks in advanced.

We had (have) this exact same thing in Las Vegas. A couple years ago the state made changes and put in some new rules attempting to stop people from doing exactly what you are thinking of. It was really the lenders who pushed for the changes because hoa liens in Nevada used to be super liens and a silly little (actually awesome little) $5,000 hoa bill could basically wipe out pretty much everything else.

This is major risky. Totally possible, but just like you said, you get foreclosed and you lose it all. Not knowing the financial health (or sickness) of any first positions on the title really is flying blind.

I'm not familiar with how things run at your auction, every state/county has their own way of doing things, however There may be a title co that hangs out at the steps and will hand out a mini-title report showing positions of everything coming up that day. Go check it out and maybe you can get better visibility on the lien. It's unlikely that you will get full visibility from a free title report. Trustee subscription services are expensive. In Vegas it is $1000 / year, but if that's your game it's worth every penny.

I've got a pretty tough stomach and deal with stress really quite well- but man, the hoa lien game is one that would give me an ulcer, especially without the super lien status.

Originally posted by @Blair Poelman :

We had (have) this exact same thing in Las Vegas. A couple years ago the state made changes and put in some new rules attempting to stop people from doing exactly what you are thinking of. It was really the lenders who pushed for the changes because hoa liens in Nevada used to be super liens and a silly little (actually awesome little) $5,000 hoa bill could basically wipe out pretty much everything else.

This is major risky. Totally possible, but just like you said, you get foreclosed and you lose it all. Not knowing the financial health (or sickness) of any first positions on the title really is flying blind.

I'm not familiar with how things run at your auction, every state/county has their own way of doing things, however There may be a title co that hangs out at the steps and will hand out a mini-title report showing positions of everything coming up that day. Go check it out and maybe you can get better visibility on the lien. It's unlikely that you will get full visibility from a free title report. Trustee subscription services are expensive. In Vegas it is $1000 / year, but if that's your game it's worth every penny.

I've got a pretty tough stomach and deal with stress really quite well- but man, the hoa lien game is one that would give me an ulcer, especially without the super lien status.

@ Blair Poelman: 

Thanks for your input, that actually leads me to other questions, How reliable are these Title searches? Will they be able to give you a 100% accurate information about the lien statuses of a property? If not, is there another method that we can take? Can we buy a Title Insurance at the time we got the deed? 

@Jason Vo You will need a real good real estate attorney if you plan on taking on HOA forclosures. There is a lot of red tape and you can lose all your money with one letter from the bank. There has been many laws passed depending on the area you plan on buying so seek legal help.

@Jason Vo   a full title searches generates a report that gives an insurance company the information needed to make a decision wether or not to insure a title - so they are reliable, however I wouldn't go as far to say ever PR is always 100% accurate.  I've seen 1 mistake on a title report just this week - but to clarify that... it was a mistake by a title company that filed a mortgage with the wrong info.  So the report was technically accurate, but the actual filed instrument was inaccurate.  

Accidents happen, and mistakes are made.  If you don't know how to read the report and what everything means, know how to question certain aspects, as well as how to get answers to those questions there's a good chance you will miss something all together, or at a minimum you will misinterpret something that could lead to a very simple yet highly cost mistake.

Foreclosure situations will sometimes have a lot of title activity right around the auction date - so a report could be totally correct at the time it's issued - but say for example in the 45 minutes between the time you pick up the report from the printer to the time you bid and win, that person filed a bankruptcy.  What do you do then?  You hire an attorney and get ready for your recent purchase to start costing you a lot more.

The rewards may be great, but my point is what you're doing has risk. A lot of risk - because you really don't control anything and you really don't own anything. It might work for you, and 6 years ago i would totally be 100% in on this, but I couldn't in good conscience tell anybody that you've got a good chance of having a BS-free successful experience buying HOA liens right now. Too much brain damage for me.

Originally posted by @Louis Davis :

@Jason Vo You will need a real good real estate attorney if you plan on taking on HOA forclosures. There is a lot of red tape and you can lose all your money with one letter from the bank. There has been many laws passed depending on the area you plan on buying so seek legal help.

@ Louis Davis, thank you. I'm in contacting with some of them at the moment. Do you know any good one that are familiar with Texas Real Estate law?

Originally posted by @Wayne Brooks :

You having the deed doesn’t change anything. Either you pay off the mtg or you get foreclosed out.

@Wayne Brooks, thanks for your input. My question is that what rights do we have a a investor in possession of the deed? What we could do and what not? 

@Jason Vo Unfortunately I don't. I only deal in Las Vegas now so all of my connections are here. But all you have to do is google real estate attorneys in your area and make phone calls. Best way to create business is to pick up the phone. Good luck! 

Originally posted by @Blair Poelman :

@Jason Vo  a full title searches generates a report that gives an insurance company the information needed to make a decision wether or not to insure a title - so they are reliable, however I wouldn't go as far to say ever PR is always 100% accurate.  I've seen 1 mistake on a title report just this week - but to clarify that... it was a mistake by a title company that filed a mortgage with the wrong info.  So the report was technically accurate, but the actual filed instrument was inaccurate.  

Accidents happen, and mistakes are made.  If you don't know how to read the report and what everything means, know how to question certain aspects, as well as how to get answers to those questions there's a good chance you will miss something all together, or at a minimum you will misinterpret something that could lead to a very simple yet highly cost mistake.

Foreclosure situations will sometimes have a lot of title activity right around the auction date - so a report could be totally correct at the time it's issued - but say for example in the 45 minutes between the time you pick up the report from the printer to the time you bid and win, that person filed a bankruptcy.  What do you do then?  You hire an attorney and get ready for your recent purchase to start costing you a lot more.

The rewards may be great, but my point is what you're doing has risk. A lot of risk - because you really don't control anything and you really don't own anything. It might work for you, and 6 years ago i would totally be 100% in on this, but I couldn't in good conscience tell anybody that you've got a good chance of having a BS-free successful experience buying HOA liens right now. Too much brain damage for me.

I know couple of them working at the Title Company that I can use, I also found some other places that just specifically offer title searches for only foreclosure/auction properties. I'm just curious if there would be any difference between the 2. Another way that I have heard is to go to the county clerk for title search. 

@Jason Vo I've only gone through the process in Vegas which, as previously mentioned, is quite different than TX. If the bank tried to foreclose on us, we would have an attorney block it and were 100% successful with that, but this is because at that time there was a valid argument that we had a legit interest in the property. You wouldn't have that same argument but you could likely get an attorney to submit some sort of reason to argue your interest so that you could delay the foreclosure long enough past that 180 day mark. It sounds like you're asking around for attorneys so hopefully you can find one pretty quick that can help you out