patrick.net

The properties are not worth very much at this time. The 2 bedroom unit and 1 bedroom unit was worth 125K and 100K 5years ago, are now between 14K and 41K. Many like me who thought they got a good deal still lost money(paid 50K for my 1 bedroom).

ptiemann says

I have seen a condo get foreclosed on because of non-payment of HOA dues. The condo was free and clear, worth $200k, price at auction was $8000. A couple of investors bid it up to $85k, then one of them got it. Of the $85k, the HOA got the $8k owed them, and the remainder went to the family of the deceased owner.

Woah, the mortgage just got wiped out? Was there a mortgage?

Patrick, I think he said it was free and clear (and that the owner had died).

You'd think the descendants would want to at least sell the place themselves and pay off the HOA rather than get zero value out of it.

Whats confusing is you said bank owned and said the heirs also own it?

Help!! None of this has to do with my original post!!

HOA's are of the devil.

ptiemann says

I ran a query for it.. address was

2925 FLORENCE AVE 46, SAN JOSE 95127

Auction happened 12/15/2010.

Notice of Sale was for $8,883

Starting bid was higher due to late fees and further missed payments.. $14,073

Investors bidding on it.. highest bid was $82,300

So, my previous post was slightly wrong with the numbers.

The investor kept the property as a rental. Not bad. $82k price, probably rented for $1600. (It's a 2-BR, 2-BA unit)

http://www.redfin.com/CA/San-Jose/2925-Florence-Ave-95127/unit-46/home/39770875

Looks like Section 8 housing.

Rocksolid64 says

Help!! None of this has to do with my original post!!

HOA fees are tied to homeowner. That's why they call it HomeOwner Association fees. Property tax is tied to the property. I cannot give you inputs on the management company that oversees your HOA. Basically, the HOA can come after you for unpaid dues and late fees. If they are broke like you say, I'm not sure if they have the money or resources to come after you. It is my understanding that HOA has the power to garnish your wages if they obtain a judgment against you.

Feel free to post any additional questions.

E-man says

HOA fees are tied to homeowner.

I think you need to check your docs. I don't think the question is about the HOA but is if the property is Deed Restricted. Typically, the deed gives power to the HOA to place a lien on the property for unpaid fees. Once they've done this they can foreclose, typically subordinate only to the primary mortgage, but this may vary by state. I don't know NV law (nor am I a lawyer).

At an HOA lien foreclosure, a second mortgage holder may buy the property so it can end up bank-owned but not be free and clear. Here in FL, if the primary mortgage holder is foreclosing and they sue the HOA at the same time, the amount they have to pay the HOA is limited. I don't recall if this applies to other buyers, but I'm thinking they would have to pay off all back fees. Official government stuff (property taxes, water) are always superior, and the IRS is super-superior and can post place a superior lien.

I think HOAs all over the country are in trouble because of this, especially condos. But I also think HOAs whose power comes from Deed Restrictions and who have an elected board should be considered a sub-governmental unit like townships. There are also voluntary HOAs that are essentially toothless, but these are more unusual.

Rocksolid64 says

The properties are not worth very much at this time. The 2 bedroom unit and 1 bedroom unit was worth 125K and 100K 5years ago, are now between 14K and 41K. Many like me who thought they got a good deal still lost money(paid 50K for my 1 bedroom).

Sounds like the Southwest and especially South Florida.

jvolstad says

HOA's are of the devil.

It's a sucker game. It's like unions to me its just a legal shake down.

I know HOA's well and they are nothing to laugh at ever. One in San Jose cost me A $20,000 legal fee. I do not see a foreclosure for you. I n that foreclosure scenario they would have to take over the first mortgage on your condo that is probably underwater. Do expect a lawsuit and garnishment of any wages that you have.

Here is another interesting fact about my townhome: I own it free and clear from a mortgage. I used unsecured debt to buy it. Its a long story, but I was able to transfer the debt to a 0% rate credit card(along with many trust deeds that I had also used credit to help buy). These Trust Deeds that I bought went belly up and I had to declare bankruptcy. Because of homestead law, the townhome(which I live in) survived bankruptcy. I could rent it out, but then I could not find a cheaper place to live. For how long, who knows?

Rocksolid64 says

Here is another interesting fact about my townhome: I own it free and clear from a mortgage. I used unsecured debt to buy it. Its a long story, but I was able to transfer the debt to a 0% rate credit card(along with many trust deeds that I had also used credit to help buy). These Trust Deeds that I bought went belly up and I had to declare bankruptcy. Because of homestead law, the townhome(which I live in) survived bankruptcy. I could rent it out, but then I could not find a cheaper place to live. For how long, who knows?

Ok. That changes the situation. Since the townhouse is free & clear instead of being underwater, you'd better keep paying the HOA or they can foreclose on your place and you'd be out in the street. I was under the impression that you're underwater and had stopped making mortgage payment.

cc0 says

Typically, the deed gives power to the HOA to place a lien on the property for unpaid fees. Once they've done this they can foreclose, typically subordinate only to the primary mortgage, but this may vary by state.

True. I cannot argue with this.

cc0 says

At an HOA lien foreclosure, a second mortgage holder may buy the property so it can end up bank-owned but not be free and clear. Here in FL, if the primary mortgage holder is foreclosing and they sue the HOA at the same time, the amount they have to pay the HOA is limited. I don't recall if this applies to other buyers, but I'm thinking they would have to pay off all back fees.

You're probably correct about FL. I have a question for you. Why would the bank sue the HOA? If the amount bank has to pay the HOA is limited, what's that amount?

cc0 says

Official government stuff (property taxes, water) are always superior,

I guess you can be 1/2 right or a 100% right in this case.

cc0 says

and the IRS is super-superior and can post place a superior lien.

You told you this, or is that just your understanding?

Replying to E-man:
Perhaps they could foreclose, but read my original post. There are many others that live here in worse situation than me. There are units just sitting here empty. If they take possession of units, how then there will be money like payment of taxes that the HOA now will be liable for, with no guarantee of recovery.

Rocksolid64 says

My thoughts is that my HOA is bankrupt and cannot afford to pursue those who cannot or will not make their payments.

Isn't that what collection agencies are for?

HOA can foreclose a property that is not paying their dues and sell it. Talk with the board members. You guys should get together and work this out.

E-man says

Why would the bank sue the HOA? If the amount bank has to pay the HOA is limited, what's that amount?

The foreclosing entity's limit only applies if the HOA is sued. If the primary fails to sue the HOA, they are liable for the entire lien amount. Otherwise, I think the limit is the lesser of 2% or 12 months (this changed at the beginning of the year, maybe it went from 12 months to 6 ... I forget).

E-man says

You told you this, or is that just your understanding?

That the IRS holds a superior claim? Perhaps I phrased it wrongly, but they have until 120 days after the foreclosure sale to place a lien on the property. If the lien is not paid off, the IRS takes the property.

http://www.irs.gov/irm/part5/irm_05-012-005.html

"5.12.5.1 (07-01-2001)
Redemption Overview

2. In accordance with Title 28 U.S.C. § 2410(c), the Internal Revenue Service has the right to redeem real property which is sold in a judicial sale where the United States position is junior to the foreclosure party."

Rocksolid64 says

Perhaps the [HOA] could foreclose, but [...] If they take possession of units, how then there will be money like payment of taxes that the HOA now will be liable for, with no guarantee of recovery.

It's in the interest of the HOA to foreclose. If someone owes, say, $15k in back fees, one of two things will happen: (a) they end up owning the property outright, or (b) some investor will buy it at the auction and the HOA gets its cash.

In the first case, the HOA can then go and list the place for $40k, get a dozen buyers (I assume the property is worth at least that much), and make the money back plus profit. This scenario would benefit you as well, because (a) the HOA has extra cash it doesn't need to try to get from you, and (b) there's now someone in the house paying HOA fees again.

Oh, and if the HOA doesn't pay property taxes and can't sell the property, then the city will foreclose and the HOA is off the hook. Aside from a few legal costs, this is a minimal expenditure for considerable potential gain. And chances are, some investor will take the property through a tax lien auction / tax deed sale and you're right back to collecting HOA fees again.

All sounds fine and good but--- I have a 1 bedroom that *might* be worth 20k in this market. And, I state again, many others live in my complex with worse situations than mine. The HOA has yet to move in on those poor souls. I can only work with reality.

I have a question. If LV sucks so bad for work opportunities, why do you stay? Sure you own this condo or 20k or whatever. Depends on what your skills are, but other states have plenty of work. Move! You're losing opportunity by sitting while the world passes by. Try Wyoming or Montana. Those places are booming.

Can you commute to one of the places in NV where prostitution is legal and whore yourself out?

Rocksolid64 says

All sounds fine and good but--- I have a 1 bedroom that *might* be worth 20k in this market. And, I state again, many others live in my complex with worse situations than mine. The HOA has yet to move in on those poor souls. I can only work with reality.

Others are underwater and have nothing to lose. You do. HOA can pull up your record and know your property is free & clear. What would you do if you're in the HOA's shoes? Would you go after someone that has nothing to lose, or jump all over the guy that has more to lose and add all kinds of late fees and penalty to it? Say your HOA is $350/month. You will have to squat 5 years without paying your HOA to break even. What's the likelihood of the HOA not foreclosing your condo in the next 5 years.

It's your condo. It's your call. You live with the consequences.

Good luck.

cc0,

I meant to say "who" told you this. Not sure why it came out the way it did. Other than the redemption right, IRS lien is not super superior like what others think.

This is me, living on the edge. Moving away may be my only option. Most professionals around here are flakes and don't want to touch my situation. I don't know where I'm going to go or what I am going to do. Hey
zzyzzx, I used to be a Casino Dealer. Same difference!!

Rocksolid,

That is an unfortunate situation and I am afraid the above is correct, you'll have to pay your HOA in the end anyway via your equity.

However, an HOA works for the homeowner and you should get in the Board to control your destiny about fees and other matters. The Board leads the HOA, not the other way around. If that will not work, you'll need to get in touch with the Board member, not the HOA.

Your example clearly teaches us that: "cash or FU" or "debt is slavery" sentiment is flawed and financially idiotic. Every business in America lets the bank take as much risk as possible to secure the best rate possible.

SFace says

Your example clearly teaches us that: "cash or FU" or "debt is slavery" sentiment is flawed and financially idiotic. Every business in America lets the bank take as much risk as possible to secure the best rate possible.

Worth repeating. :)

Rock, getting on the HOA board is a great suggestion by SFace. Look into it. Take control of the situation instead of let the situation controls you. Hope it will work out for you one way or another.

Best of luck.

E-man says

IRS lien is not super superior like what others think.

If I understand, while an IRS lien is junior, they can still forcibly buy the property after the foreclosure sale, but at the same price (plus costs). So there's still risk of losing the property, but not of losing money or being foreclosed on. If I was mistaken about a lien being assessable after the sale, that would be reassuring.

http://www.irstaxattorney.com/liens/part5-liens/Release_of_Right_of_Redemption.html

Rocksolid: +1 the suggestions to get involved with the HOA board. At a minimum, you should be able to get a copy of the auditor's report or at least a current financial statement. Then you can figure out if you need to create a late-night infomercial to get the other units sold.

My dues have to be paid up to join the board :( That is one of the by laws.

What if you buy a Townhouse and there are 8 units and 3 stop paying their HOA. Do the remaining have to make up that amount.

When they do their annual budget in January, they will decide to raise the special assessment(this will be on top of the normal monthly assessment). They will deem this is what everyone will now have to pay every month, just to stay solvent. As an after thought, this has a negative loop effect. New prospective buyers are now further repulsed when they find out how much more they must pay a month while holding the property.

Rocksolid64 says

this has a negative loop effect

What are your regular monthly/yearly dues? And what's the special assessment amount?

I don't know the legality of this, but I would expect the tack to be that the HOA only assesses the regular dues to the new owners -- I don't think the MLS lists special assessments. When the budget is figured for the new year the new owners would then get any new special assessment. In theory, any special assessment would be covered by the existing property owners.

NY Condos says

Do the remaining have to make up that amount.

Sure. Imagine a building with 100 units. You have common costs - pest control, elevator maintenance, electricity in the hallways and for your neon signage, doorman, pool, etc. Assume these costs run $10,000/mo. With 100 units full, that's $100/mo/unit. These costs aren't eliminated just because 99 people walk away.

Since moving here in 2004, I have seen the monthly assessment go up from 99.00 to 107.00 a month. Then the adding of special assessments made it go up to 125.00, 150.00, 162.50 and 187.00, doing this every couple of years. And it has never gone down.

E-man says

Rock, getting on the HOA board is a great suggestion by SFace. Look into it. Take control of the situation instead of let the situation controls you. Hope it will work out for you one way or another.

Great advice. My father bought a condo with a crappy HOA board (kept raising fees due to mismanagement). He joined, took control of the budget, and was eventually elected president. The condo owners were tired of the bs.

They went from being in the red, to now having a balance of over $80k - which they are using for preventative maintenance.

Also, there were a bunch of deadbeats not paying dues - well, they got a new attorney and notices started going out to the non-paying members. After threatening to have the local Sheriff come in and auction the personal possessions - all the late HOA due started rolling in. EVERY SINGLE PERSON paid up.

My advice, join the board, take control of the situation, and get a decent attorney who will work with your group's situation.

Get it under control, and your property values may actually go up.

NY Condos says

What if you buy a Townhouse and there are 8 units and 3 stop paying their HOA. Do the remaining have to make up that amount.

If that's what the board decides (they could also cut expenses by doing things like turning off the hot tub, spend the reserves they were saving for the next roof until they foreclose, etc.).

Rocksolid64 says

I used to be a Casino Dealer.

Did people stop gambling, or something? All I know is that Maryland Live is practically wall to wall people, and Atlantic City seems crowded to me even on a Monday morning off season.