I get questions about HOA dues all the time as it relates to short sales and foreclosures. If you have a short sale in Walnut Creek, or a Pleasant Hill short sale (or surrounding Contra Costa areas) …. many wonder “do I have to pay my HOA dues” if I’m going to short sale? What about foreclosure? If you’re walking away from your mortgage or your house will foreclose due to an unsuccessful short sale, what happens to the HOA dues? Well, let me tell you.
- HOA dues are NOT wiped out (for you) in a foreclosure.
- HOA dues are very often NOT paid by a short sale lender.
- HOAs CAN foreclose on your property.
- HOAs CAN file a lien and require all back dues to be paid before a short sale will close.
One important piece of advice I give to ALL my short sale sellers located within an HOA is to keep those payments current. That is because in California, HOA dues are a personal debt, and WILL follow you as a collection after foreclosure. Many times sellers have to ask buyers and even the agents to contribute to the pay-off of HOA dues in a short sale. It is just best to keep them current. Always check with a real estate attorney for any specific legal advice related to unpaid HOA dues or collections.
Some banks will allow a month or two to be paid, some don’t allow ANY. Why is this you ask? This is because your bank’s primary lien is SUPERIOR to the HOA liens, and they can wipe it out in foreclosure, so why pay thousands in a short sale? They’d rather (in many cases) just foreclose and wipe out those HOA liens altogether. Now just because the senior lien can wipe them out, doesn’t mean they disappear. They are now your own personal debt and you will be pursued. Most HOAs are very aggressive in their collection actions.
I have had success with closing deals without the dues being paid , but buyer has to agree, and seller has to understand the dues are STILL due. But in California they do not follow the property, so talk with your escrow officer, as you can sometimes close “subject to” the dues not being paid.
If your HOA forecloses on you, there is a redemption period (90 days) in which you can still short sell the property or reverse the foreclosure in exchange for full payment. But best not to let it get that far. Best not to let it get to a lien at all, as with a lien you will also owe mailing fees, late fees, legal fees, collection fees and a myriad of other junk fees HOA companies and their collection divisions charge.
Call me today for Walnut Creek short sale, Contra Costa short sale, or Pleasant Hill short sale information!
From Foreclosure Radar today:
Can a Homeowners Association (HOA) foreclose and if so can they kick me out?
An HOA can foreclose for past due amounts. If the property goes back to the HOA at trustee sale they would have the legal right to evict the occupants and sell or rent the property. HOA liens are typically junior to any Deeds of Trust so the HOA would be responsible for the payoff of any senior liens or loans or they could risk losing their ownership when if the senior Deed of Trust later foreclosed. Note that in California the homeowner does have a 90 day period during which they can redeem their ownership by paying the outstanding dues.
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the HOA got a final judgment on my condo in florida, either i pay 10,000 or they will short sale. What happens to the debt i still owe the bank if they short sale my property? Bank of america has a lis pendens again on the property too. I dont live in it, i had to abandon it because i couldnt get to an agreement with the bank and i had no other choice.
thank you in advance.
Hi Claudia, the best thing is to consult with a real estate attorney in your area. I am unfamiliar with Florida laws on the HOA dues, especially in the case of a judgement or lien. Good luck to you.
I have the exact situation. My buyer was about to sign when they found a surprise hoa due attached to their doc pertaining past due hoa for $6k. My buyer still signed and so did the seller. However, the bank will not pay the amount due from hoa. Can we still close this deal? Who needs to pay for this hoa? Im from california so hopefully you can help me.
Heather, I’ve had buyers be able to close on the sale without HOA fees being paid. All parties must sign acknowledgement and the seller must know the HOA will likely continue to pursue them. On the other hand, I’ve worked successfully many times with HOA’s and getting a pay-off that’s able to be paid by seller, or to help them come to terms on a payment plan. It’s not a debt that will just go away for most.