HOA SCramble to Make Ends Meet BUt Are They Missing an Opportunity?

First thing to add to the list of things you ought to know before you buy is (a) whether the home is part of an Homeowners Association or Condominium or Cooperative association and second whether there are major repairs that are needed or under way because that may mean really big assessments. Once you have purchased the property, YOU are the person responsible  for payment of monthly and special assessments not the former owner and not the title company that issued you a title policy.

Even if you have a contract with the previous owner, unless the association agrees in writing that won’t enforce the special or delinquent assessments against you, they can still foreclose on the property just like a mortgagee can foreclose.

But here is where it  gets interesting. Most of the “good” decisions for borrowers came about as a result of two institutions fighting it out rather than David vs Goliath. They are considered to be on more even footing legally and practically by the person sitting on the bench wearing those black robes.

As I have already stated in numerous TV and radio interviews, the associations stand in a unique position to help correct the housing crisis.

If the Associations foreclose against the homeowner AND they name the originating lender and any assignee as junior lienholders or unsecured lienholders, there is a much better chance that the Judge is going to take a much closer look at the paperwork. Where that has occurred the I am receiving reports the association was successful. That raises the interesting prospect of allowing the homeowner to redeem on the association foreclosure and then have the house free and clear of the pretender lenders.

This same logic applies to  homes foreclosed by pretenders and then  abandoned or at least ill-maintained. The association should foreclose against the “former” homeowner and name the pretender as junior or unsecured. This might just revive a blighted neighborhood.

The fact remains that the Association does have its paperwork in order and the pretender lender never did.

Do Your Homework Before Buying into HOA Communities

by Chad Elliott, www.sheltertampa.com/homeowners-associations-foreclosures

Homeowners Associations Under Siege By Foreclosures

Do your homework on the Homeowners Association before Buying.

About one in six Americans currently live in a community run by a condo or homeowners association.  With the recent increase in foreclosures, some homeowners associations are running out of cash.  HOA’s are like miniature governments that depend on revenue to finance upkeep of common areas, community pools, tennis courts and private roads.

Before a property goes into foreclosure, many owners stop paying their monthly HOA dues. In fact, HOA fees are generally among the first bills struggling homeowners quit paying.   If they can’t afford their mortgage, then they aren’t going to pay their HOA fees.  Adding to the problem, some banks aren’t paying HOA fees on properties they have foreclosed on and now own.   As a result, association fees rise and the property may be less desirable to buyers.

In the current climate of foreclosures, it’s even more important for potential buyers to read the bylaws; as the bylaws will explain what services are provided and if there is a cap on the annual fees.   Some of the bylaws even include information on how they’ll handle foreclosures and payments of fees.  It’s also important to know how the board is managed.   Boards are typically managed two different ways; by the homeowners themselves, or by an outside company that has been hired by the homeowners association.  In the uncharted waters of foreclosures, a professional management company may be the best bet for a home owners and potential buyers.

When looking at the balance sheet of a homeowners association, a buyer should look at their reserves. Buyers want to make sure there is enough cash on hand to take care of maintenance and other services.  If there is no reserve fund, the association may have to impose special assessments when major projects become necessary.   If HOA’s don’t have reserves, they may be forced to close community amenities like parks, pools and community centers, because they can no longer afford to build and maintain them.

It’s also important for buyers to remember that Associations aren’t corporations.   They operate year to year. They collect in dues what they believe they need to pay for amenities and services that residents expect.  Even though many homeowner associations have the power to foreclosure if dues are in arrears, few have the money or means to do it.

Buyers need to do their due diligence; as it will help them avoid surprises after they move in.   Realtors who specialize in being a Buyer’s agent or who have the Accredited Buyers Representative designation can help guide a buyer to get the documentation they need; as well as they can find out how many foreclosures are in the area.

Tags: assessments, Condo, coop, DUES, foreclosure, HOA, MAINTENANCE
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