Letting my HOA do a foreclosure if I don't want the property?

19 Replies

I bought a condo back in 2009 for $100k even (20% down conventional) as an investment and I stopped paying HOA dues about 2 years ago. Not sure why, to be honest - I guess it sort of slipped.

Anyway, they initiated a foreclosure and want $15k to stop (owed maintenance, late fees, attorney fees, etc). I'm tempted to let them continue the foreclosure rather than pay it because I don't particularly want the property and I've tried to sell it unsuccessfully in the past. It's worth just about the same as I paid for it, so after fees, commissions, etc, I'll basically walk away with $20k if I sell it.

I assume if they do the foreclosure, they'll either simply place a lien (since the bank is first priority) or take the property subject to the mortgage (and I guess pay the mortgage?).

My credit is decent (700+) currently and I believe a foreclosure will impact it by about 100 points (based on what I read on the interwebs). I believe a foreclosure will stay on my credit for 7 years, but I believe the impact is greatest in the first 2 years.

So am I crazy for just letting the HOA proceed or is it worth it to simply pay it down?

Just to be clear, you are asking if you should (a) walk away with $20,000 or (b) take a multi-year 100 point hit to your credit and potentially be sued personally for any outstanding debts that aren’t extinguished by the foreclosure auction (depending on the rules in your jurisdiction)?

That’s a tough choice, so I’d go with (c), send me more info and let me have the property for free.

Good luck!

Originally posted by @Callum Ross :

Just to be clear, you are asking if you should (a) walk away with $20,000 or (b) take a multi-year 100 point hit to your credit and potentially be sued personally for any outstanding debts that aren’t extinguished by the foreclosure auction (depending on the rules in your jurisdiction)?

That’s a tough choice, so I’d go with (c), send me more info and let me have the property for free.

Good luck!

Originally posted by @Shamoon Siddiqui:
Originally posted by @Callum Ross:

Just to be clear, you are asking if you should (a) walk away with $20,000 or (b) take a multi-year 100 point hit to your credit and potentially be sued personally for any outstanding debts that aren’t extinguished by the foreclosure auction (depending on the rules in your jurisdiction)?

That’s a tough choice, so I’d go with (c), send me more info and let me have the property for free.

Good luck!

 I don't think I can get the $20k reasonably. It'll take a few months to sell. And I'll still have to pay the $15k, so BEST case I walk away with $5k.

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You mentioned breaking even and also walking away with $20,000. You stated you could not sell it. Have you attempted a short sale to settle your debt? I'm assuming your credit has or will be dinged because of the HOA delinquency. It will continue to worsen with future delinquent payments, a foreclosure or any sort of settlement. HOA's are often the ones who play hardball, who will foreclosure, and want to pursue. Makes sense to me if you don't want the property to attempt to settle all debt and stop the financial bleeding.

And what happens if the banks position is wiped out by the HOA foreclosure and the bank sues you for the amount you owe them? Im guessing if you dont have the $15k to pay the HOA, you dont have the $80k to pay the bank.

Originally posted by @Brett Goldsmith :

You mentioned breaking even and also walking away with $20,000. You stated you could not sell it. Have you attempted a short sale to settle your debt? I'm assuming your credit has or will be dinged because of the HOA delinquency. It will continue to worsen with future delinquent payments, a foreclosure or any sort of settlement. HOA's are often the ones who play hardball, who will foreclosure, and want to pursue. Makes sense to me if you don't want the property to attempt to settle all debt and stop the financial bleeding.

 I'm not late on bank payments, so a short sale isn't really possible I think.

@Shamoon Siddiqui At times depending on investor guidelines and borrower showing imminent default a short sale may still be possible while a borrower is current. 

If the HOA forecloses, your 1st MTG will still be on the home ( I'm assuming your HOA lien isn't going to wipe out the first mortgage ). Do you plan on continuing to pay your first mortgage if the HOA or another party takes ownership of your home via being the winning foreclosure auction bidder?

sounds like you are in a tough spot...have you considered giving the hoa the property? if they take the property and rent it out to cover the mortgage, you wont get foreclosed on, and they can keep the $20k equity in exchange for the fees...depending on the association it may be worth discussing.

I would hire a real estate agent this week and get the property listed for sale ASAP. Once it sells you can then pay off the HOA and walk away from the property without having a foreclosure on your record. Since you can break even or perhaps walk away with a few thousand dollars it does not make sense to trash your credit to avoid selling it.

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