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Subject: forclosures
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Author Messages
JayF1
(Washington)

Posts:52


02/10/2018 1:01 AM  
hi everyone. We have to homeowners that are way behind. We went through the whole legal process (4 phases) and we are pretty the end where our only option is foreclosure. The lien and collection agency yielded no results. The homeowners are not in foreclosure. So here is my question.

My legal consult stated proceeding the foreclosure might yield the same negative results. Matter of fact, it would cost a lot of attorney fees to process and there is a gamble we are not going to get any of that in return. What is other HOAS doing in similar situations?
JayF1
(Washington)

Posts:52


02/10/2018 1:03 AM  
correction, homeowners are not in chapter 13 bankruptcy.
JayF1
(Washington)

Posts:52


02/10/2018 1:03 AM  
correction, homeowners are not in chapter 13 bankruptcy.
TimB4
(Virginia)

Posts:15889


02/10/2018 4:29 AM  
Jay,

We foreclose to stop the bleeding.

If there is a mortgage, they will likely gain any proceeds from a foreclosure action. Hence, the Association will likely not recoup any major funds. However, the new owner will likely start paying assessments from purchase date forward (hence, stopping the bleeding).



MelissaP1
(Alabama)

Posts:7535


02/10/2018 6:01 AM  
Tim is 100% correct. It just stops the bleeding. It also puts the house up for possible auction which the HOA does NOT want to own. So your decision now is to have more patience and keep the lien on the home or stop the bleeding. Liens should keep going till they sell the home. Which at that point the HOA should collect back it's legal money and back dues. A foreclosure is going to take some more money and time. Plus depending what state you live in, there is a right of redemption that can go up to a year. Meaning your HOA may not collect any money as the bank is paid first and the home may stay empty for a year.

So if it were me, I would continue the lien process for an extended period of time with frequent monthly notices sent to the owner on the lien status/money owed. Make sure to mention the next step will be foreclosure. Give it a year and then revisit the foreclosure idea again. By that time they either feel your "harassing them", pay up, or put the home up for sale.

I've done a foreclosure and don't recommend it for every situation. Our case the owner was ripping off their tenant and was threatening arson to our HOA. A homeowner that isn't in bank foreclosure has better chance in catching up in dues than those in protest or broke.

Former HOA President
TimB4
(Virginia)

Posts:15889


02/10/2018 6:42 AM  
Jay,

If you obtained a court judgement, you can petition the court to seize bank accounts, have IRS refunds directed to you, garnish wages, etc. This is an option without foreclosing.
BenA2
(Texas)

Posts:525


02/10/2018 9:08 AM  
Posted By TimB4 on 02/10/2018 4:29 AM
Jay,

We foreclose to stop the bleeding.

If there is a mortgage, they will likely gain any proceeds from a foreclosure action. Hence, the Association will likely not recoup any major funds. However, the new owner will likely start paying assessments from purchase date forward (hence, stopping the bleeding).






Why would the new owner not be required to pay past assessments? They are attached to the property so subsequent owners inherit what is owed.
RichardP13
(California)

Posts:2902


02/10/2018 9:28 AM  
It is why buyers purchase title insurance, to insure that the property is free and clear of any outstanding debt.
MelissaP1
(Alabama)

Posts:7535


02/10/2018 10:06 AM  
Florida is only state that I know of that new owners pick up the debt of the previous. Which I would again verify. Otherwise, new owners do not pick up the previous debt.

Former HOA President
BenA2
(Texas)

Posts:525


02/10/2018 11:07 AM  
Posted By MelissaP1 on 02/10/2018 10:06 AM
Florida is only state that I know of that new owners pick up the debt of the previous. Which I would again verify. Otherwise, new owners do not pick up the previous debt.



Assessments and liens are both attached to the property so the debt stays with the property, regardless of who owns it. The same is true for liens.

States may have different laws but this is true in most states under common real estate laws.
BenA2
(Texas)

Posts:525


02/10/2018 11:09 AM  
This is true. If the title company finds the debt it is paid by the buyer or seller at closing. If the title company misses it, the title insurance covers it. The debt still remains with the property until paid.
RichardP13
(California)

Posts:2902


02/10/2018 11:25 AM  
Posted By BenA2 on 02/10/2018 11:09 AM
This is true. If the title company finds the debt it is paid by the buyer or seller at closing. If the title company misses it, the title insurance covers it. The debt still remains with the property until paid.



Sorry, it doesn't.
KerryL1
(California)

Posts:5535


02/10/2018 12:05 PM  
At least it doesn't in Calif.
BenA2
(Texas)

Posts:525


02/10/2018 12:08 PM  
Posted By RichardP13 on 02/10/2018 11:25 AM
Posted By BenA2 on 02/10/2018 11:09 AM
This is true. If the title company finds the debt it is paid by the buyer or seller at closing. If the title company misses it, the title insurance covers it. The debt still remains with the property until paid.



Sorry, it doesn't.



Such an articulate argument is hard to debate.

No one should take my opinion or yours, even though anyone who has taken a basic real estate course should know this. When it counts, ask an attorney.
JohnC46
(South Carolina)

Posts:7635


02/10/2018 1:11 PM  
I hear some of my fellow HOA owners screaming for foreclosure when someone falls behind in their dues. In my experiences (now on my 7th HOA) there are few situations where it made economic sense for the HOA to do a foreclosure. In some cases, the foreclosure could cost the HOA more then the dues owed. It is something one has to take a hard look at before considering.
MelissaP1
(Alabama)

Posts:7535


02/10/2018 1:25 PM  
Ben. Hate to ruin your fantasy but even I have to admit Richard is right on this one. The new owners do not pick up the debt of the previous owner. That wouldn't make any sense if they did. Who would buy a home with a pre-debt load?

Former HOA President
BenA2
(Texas)

Posts:525


02/10/2018 1:57 PM  
Posted By MelissaP1 on 02/10/2018 1:25 PM
Ben. Hate to ruin your fantasy but even I have to admit Richard is right on this one. The new owners do not pick up the debt of the previous owner. That wouldn't make any sense if they did. Who would buy a home with a pre-debt load?



No one would buy a home with an existing debt, which is the main reason people go through a title company and mortgage companies require sales go through a title company, to ensure that all debts connected to the property are paid. If the lien did not remain with the property, why would the mortgage company or new owner care if it is paid or not? It would be the old owner's problem.

The new owners do not technically "pick up the debt of the previous owner" because the debt is attached to the property not the person. That is why a lien has to specifically name the property to which it is attached and it is filed with the property records.

BenA2
(Texas)

Posts:525


02/10/2018 3:13 PM  
We all have opinions but the law stands regardless. Here are two sources but it is always best to consult an attorney in your state to be sure:

Can the Property Be Transferred without Removing the Liens?
A lien doesn't have to be removed before the property is transferred. The lien simply remains on the property and the new owner of the specific property becomes responsible for it. However, if the buyer demands to receive the property with a clear title, the debtor would have to first pay off all claims on the property before transferring it.

https://www.legalmatch.com/law-library/article/real-estate-lien-lawyers.html?intakeredesigned=1


Transferring Property Without Removing Liens
The law does not require that liens be removed before title to property can be sold or transferred. But the lien will need to be cleared up if the buyer needs financing or wants clear title. If property is transferred without the lien being paid off, it remains on the property. Thus, in transfers between relatives, the new owner may be willing to take title to property that already has liens encumbering it.

https://www.lawyers.com/legal-info/real-estate/residential-real-estate/real-estate-liens.html
JayF1
(Washington)

Posts:52


02/10/2018 3:22 PM  
thanks, everyone.

I agree, there must be a way to stop the bleeding. So far, not pursuing legal action helps. We did do judgement but that was the final decision to hold back since we are way too far in legal fees. It would be much cheaper to put multiple liens to his house if that was possible then to take the next step, foreclosure.

I'll have checked the HOA WA laws and probably the real estate laws to confirm the debt staying with the house. That would be great if it were, then we would have to worry about moving forward to foreclosure. Eventually, the house would be sold and we will get most of our legal cost back. It is tough dealing with these situations.
RichardP13
(California)

Posts:2902


02/10/2018 4:21 PM  
Ben

Title Insurance is required by the lender in order to secure a mortgage. It protects the buyer, but more importantly, a lender will not lend without clear title.

There is a hierarchy of what liens get paid on real property and a HOA lien is waaay down the list. Even if they just recorded a lien, the first lien mortgage company WILL ALWAYS be in first position. That is due to a document in the loan file that will always place the first mortgage (most to lose) in the first position, even when a new lien is recorded after them. If the sale doesn't produce a profit, then many liens may not get paid. If they do not, they are a write off to the entities that placed the liens in the first place.

FYI, taxing agencies, property taxes are a recorders best client. Every property in the U.S. has liens recorded every time when due and taken off when paid. Twice a year, every year.

The markets are in a better place that a few years ago, depending on the region of the property. There are exceptions.

I underwrote loans for Countrywide Financial until 2008.

The link has a sample of a title report: http://www.firstam.com/assets/title/ca/san-luis-obispo/educational-materials/sample-preliminary-report.pdf
BenA2
(Texas)

Posts:525


02/10/2018 4:55 PM  
This makes another good argument for not jumping into a foreclosure too quickly as the HOA still may not get any money, which the OP alluded to. I'm not sure why it was directed to me, nothing I wrote contradicts this.
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