Buying an HOA lien, besides being wiped out by 1st, what else happens?


#1

Hello. I’m interested in buying an HOA lien and as I understand it, the original owner is likely to redeem and/or I am the new owner but I have to evict anyone living there and the property is subject to the 1st and any other liens that have priority…but I was wondering what would happen to me personally if the 1st is not brought current? I know I’d lose my interest, but will my credit be hurt or will the lender have any other recourse towards me besides wiping me out through foreclosure?


#2

Your credit would not be hurt. You won’t even get a “final” Deed to record for 90 days. Lenders is Ca. have no post-nonjudicial foreclosure recourse against anyone.
Besides all that, they wouldn’t have your name and SS# to report to anyone.


#3

Thanks so much for the answer Miket. Is there a duty to notify the owner or existing lien holders for that 90 days, or can you sometimes sit back like when you buy a 1st and want to wait until recording is done. Also, do you happen in CA if HOA’s usually post the opening in advance, day of, or a mix?


#4

*last sentence was suppossed to read…Also, do you happen to know if for CA HOA’s usually post opening bids on their liens in advance, day of, or a mix? Thanks in advance for any help.


#5

Hi Alan, HOA’s do not typically “discount” the opening bid which means that more than likely the opening bid will be for the full amount currently owed to the HOA plus foreclosure fees.


#6

Hi Michelle,
Okay, but do you happen to know if HOA liens usually post that opening bid amount in advance or could it be the day of too? Also do you know if there is a duty to notify the owner or existing lien holders for that 90 days, or can you sometimes sit back like when you buy a 1st lien and want to wait until recording is done before you initiate cash for keys/eviction?


#7

Hi Alan,
In the notice of trustee sale (NTS), there will be a published bid amount (full debt owed at the time the notice was published). Foreclosure Radar also show you the “published bid” $ amount. As Michelle noted, HOAs rarely (never that I know of) discount from the full debt owed. So if the pending HOA foreclosure you are tracking goes to a trustee sale, the opening bid will be “full debt” – the published bid + whatever debt amount has accrued since NTS “publication date.”

SIDEBAR: If you win the bid in an HOA foreclosure, you will likely receive a ?placeholder? document called a Certificate of Foreclosure Sale Subject to Redemption ? CFSSR. I believe the trustee instructs a title company to record the Trustee?s Deed Upon Sale ?TDUS on your behalf, but only after the 90-day redemption period has expired? Never bought an HOA FC so not sure.

I do not know if the trustee has any extra “post trustee sale” notification requirements for an HOA foreclosure? I suspect all “notification” requirements are taken care of via the postings & pub of the original NOD/NTS. Anyone know different?


#8

Hi idannyb,

Thanks for your answer and help. I now realize that I got a little mixed up between the opening and published bid and Michelle’s answer and your answer cleared that up, thanks to both of you. Also, thanks for the additional interesting information, I read something similar to that on here a while back in a thread you participated in, that does sound correct about the procedure for the CFSSR, but I see you put a ? so like you, I haven’t seen that 100% confirmed true, anyone? Seems like good info to know if I do see a rare opportunity for one of these.

I would suspect the same thing as you regarding notification requirements being taken care of, but I also wonder if the owner that wanted to redeem could make a case that the trustee was hard to contact to get my information and my contact information wasn’t readily available, any thoughts Danny or anyone else?

Also, I noticed a HOA lien coming up for sale, but it is a bank owned property. I can’t tell whether the lien was filed before the trustee sale for the property and it became bank-owned; however, I do know that it still seems like it’s going to sale soon even though it’s been bank owned for about 6 months. Is the HOA allowed to just hope someone bites on debt they’ve likely been wiped out on by a senior trustee sale or is this still a valid sale and after the redemption period, you are the new owner, not the lender?


#9

Once the bank forecloses the junior debt is wiped out to the new owner. HOA debt is almost always junior. However, many banks/lenders fail to pay HOA fees that accrue *after* they take a condo bank-owned. Hence, the HOA may have to notice and foreclosure on the new owners (the bank) to get paid. I suspect this problem is more pronounced in markets with high shadow inventory, where asset managers are moving like glaciers (slowly) to sell their inventory.


#10

Thanks Danny, I am noticing more than one of these where the sale date is coming up, doing the math it seems very unlikely the bank owned lender accrued that much in HOA fees in the short amount of time they’ve been the new owner. Is the HOA allowed to just hope someone bites on debt they’ve likely been wiped out on or is this still a valid sale and after the redemption period, you are the new owner, not the lender?
Can Sean or Michelle confirm/do you know how redemption information and buyer of the HOA lien contact information to redeem is given to the previous owner (and any post sale notification requirements by the trustee and/or buyer)? And do you all know if any overage of the HOA lien is given to the previous owner to give back to the HOA lien buyer (seems that may be hard to trust to receive) or does the trustee handle that (seems better chance of recieving)? Thanks all in advance for any help.