Texas HOA foreclosure risks?

[Joehn B.]

Hi, wanted to better understand the risks of buying a HOA foreclosure in TEXAS. The property I am looking at has equity and only a purchase money loan (1st mortgage).

I understand the basics, Wining the bid, gets me the deed subject to the existing loan.  Owner has 180 days to redeem and my purchase price would be paid back if he does so.

I see two key risks I am worried about:

1) Owner stops paying the mortgage and bank initiates foreclosure. I would have no way to stop the Bank foreclosure during the HOA redemption period and could get wiped out. Would a bank delay foreclosure during the redemption window?

I understand a bank won't likely start a foreclosure until payments are over 180 days late, but what if the owner is already 180 days late and foreclosure notice is about to be posted?

2) Bank notices sale and invokes DOS, giving previous owner 30 days to PIF. Again a scenario where I get wiped out unless I explain to them the owner still has a redemption interest and to delay DOS for 6 months?

The only way I see mitigating these risks is getting the previous owner to waive redemption for $$, not a guarantee ahead of the auction.

I did find a case here on BP where the HOA buyer got wiped out a month into the redemption period by the bank foreclosure! Auch

How would one mitigate these risks?  

[Bruce Lynn]

You are right.  Maybe you can get the bank to work with you, but maybe you can't.  There are risks to that.  They might tell you they can't release any info to you without SS number or some kind of authorization or detailed info.

Who knows how fast a lender forecloses.  I've seen some take 4-5 years, saw one recently that had been posted every month for about 10 years.  I have a feeling there is more to the story on that one.  Next lender will foreclose in 45 days.  You just never know.  

Not really many of these around from my experience. Probably best option is if you need a place to live and the place is vacant. You move in and camp out until you get evicted. So maybe you pay $2000 for the HOA deed and then pay HOA monthly and you get to live rent free saving $1000-$1500/month rent for 6-12 months or however long it takes for foreclosure from the lender. Maybe they give you cash for keys to move out? You could also potentially rent it to someone cheap month to month with same option. Collect 6-8-12 months or more of rent. However these are probably not move in ready, so you might have to do renovations and you don't recover that.

HOA liens are risky and you likely get wiped out at some point.

I'd say mitigate your risk by NOT buying condo foreclosures, but neighborhood HOA foreclosures where the HOA dues are more like 400-$600/year, so maybe you pick these up for $1500 and live in a $300,000-$400,000 house for a year rent free. Maybe if you get lucky you can flip it to an investor and title co is able to get mortgage and payoff info without details from the real owner or you can bribe that owner to give you their details for $1000 and sign an authorization to talk to mortgage company.

[Joehn B.]

Thanks Bruce, one of these days we should have lunch :) I'm in Coppell too. 

I just found the perfect adverse possession home, dead owner, no heirs, no bank but was too late and owed way to much in taxes and interest to bring current without a title. 

I'll keep on searching for my fun deals.

[Bruce Lynn]

Adverse possession is risky if you're thinking a house.  There's probably more people get thrown in jail in Texas and now other places too vs people that actually get a free home.
There are people without heirs, but that is pretty rare.  Almost have to be the child of people with no brothers or sisters who are also children with no brothers or sisters, or the family has to have super bad luck.  If they can't go down, then the attorneys go up and sideways if needed.   Seems like no one cares about the house, until you complete repairs or move in or move someone else moves in, then all the ants(aunts) come out with big fangs and stingers.

[Chris Seveney]

Quote from @Joehn B.:

Hi, wanted to better understand the risks of buying a HOA foreclosure in TEXAS. The property I am looking at has equity and only a purchase money loan (1st mortgage).

I understand the basics, Wining the bid, gets me the deed subject to the existing loan.  Owner has 180 days to redeem and my purchase price would be paid back if he does so.

I see two key risks I am worried about:

1) Owner stops paying the mortgage and bank initiates foreclosure. I would have no way to stop the Bank foreclosure during the HOA redemption period and could get wiped out. Would a bank delay foreclosure during the redemption window?

I understand a bank won't likely start a foreclosure until payments are over 180 days late, but what if the owner is already 180 days late and foreclosure notice is about to be posted?

2) Bank notices sale and invokes DOS, giving previous owner 30 days to PIF. Again a scenario where I get wiped out unless I explain to them the owner still has a redemption interest and to delay DOS for 6 months?

The only way I see mitigating these risks is getting the previous owner to waive redemption for $$, not a guarantee ahead of the auction.

I did find a case here on BP where the HOA buyer got wiped out a month into the redemption period by the bank foreclosure! Auch

How would one mitigate these risks?  

The other option is to reinstate the first mortgage, but you do not want to do that if the borrower can reinstate the HOA. Technically a foreclosure can start 120 days, and in texas its a non judicial state so foreclosure timelines are pretty quick.

What is your end strategy with this property? Lets say you get it at HOA auction, then what are you going to do with the first? You going to try and sell the property? Try and refinance?