The Good, The Bad and The HOA Foreclosures

3…2…1…Auction Closed. “You’re the highest bidder at $19,100”. In disbelief, I bought what I thought at the time a “foreclosure” dream deal. I called my wife right after the auction ending. “We just bought a house for less than $20,000!”

It was a 3 bed / 2 bath / 2 car garage in a prestigious gated golfing community. The estimated value was approximately $200,000. We thought we snagged a decent deal free and clear!


This was a $19,100 lesson that graduate school didn’t teach me. Here, I’m going to give it to you for free! I researched forums, news journals and articles online, state statutes and even consulted three real estate attorneys without clear guidance on what I really got myself into. Long story short, I spoke with a paralegal that had a niche for these types of transactions and he advised my next steps. Continue reading…


The previous owner was up to date on there mortgage payments. This individual actually lived out of town in another city and the house was never lived in – spotless from the carpet to the unused appliances! The problem: The previous owner didn’t pay the Homeowner’s Association (HOA) monthly and quarterly dues. After racking up high balances both from the community and townhome HOA, I found myself not only a “property title” issued from the county, but the ownership that followed including the outstanding HOA fees. I bet you’re wondering, How in the world can an HOA legally foreclosure on an individual’s home and auction it off to the highest bidder? Interesting enough, you can even evict the occupant living within the home once you receive your certificate of title after the auction closes. Crazy right!? We’re not done yet!


You must be wondering right now…Well, since you have title you good to go right? Well, not exactly. While I legally possessed full rights to occupy and rent the property, the property still carried a mortgage. The property’s mortgage  was superior to the lien placed through the HOA. Come auction time, I simply paid the lien off for the owner, resulting in the county issuing a certificate of title to the property in my name.


At this point, what happens to the mortgage? Great question! I’m so glad that you’ve asked because this is my FULL DISCLOSURE to BEWARE! More than likely, you’ll not be able to obtain a payoff (mortgage balance amount) from the bank that carries the mortgage. Privacy laws, regulations and banking policies govern who obtains what information – the borrower and not you!


If you’re reading this article so far and wondering what can be done at this point, you might as well consider your options. After all, you’re the legal owner of the property now right? The best approach is to review your return on cost. Project your earnings against your operating expenses to assess the financial gains (if any) and recovery efforts.

If there’s a active mortgage on the property, do anticipate that the property will likely become foreclosed by the lender, if not already being processed depending on whether or not the mortgage is up to date. Thankfully, when I called the bank a few times and probed a few phone reps, I gathered intel that the mortgage was not delinquent.


Bottom line, rent the property out as quickly as possible to recoup your costs. You may want to consider a month to month lease. There is no telling as to when the property may get taken away and auctioned off at the courthouse by the lender! In fact, this strategy is widely used by many investors when the HOA fees aren’t as exuberant as I paid. For me, this was a real value lesson to understand and read the directions of the game before investing and playing it in live. Lastly, get a title search on EVERY property before placing any bid! Otherwise, you may find yourself in a world of frustration and out of cash that could have been spent elsewhere.




Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s