Buying HOA liens and 90 day right to redemption

I’m particularly interested if anyone has experience buying HOA liens at auction where the foreclosed owner exercised their right to redemption within the 90 day redemption period.

(Answer under the assumption there are no mortgages recorded against the property.)

Who reimbursed your purchase amount? Was it the trustee that took your cash at auction? Did the redeeming owner have to pay you interest? If they did have to pay interest, at what rate? How long did it take to get repaid (assume they waited until the 89th day after the auction to redeem)? Did you have to take legal action to get your money back from trustee or is it an automatic process that follows some civil code?

Let’s say the total debt balance for the HOA lien is $5k and bidding opens at $5k and a third party wins the bid at $25k. If the owner wants to exercise their right to redemption is their redemption payment $25k (winning bid) or $5k (total debt balance)?

(Assume there are no mortgages recorded against the property.)

Hi Adm, Assuming no mortgages against the property the former owner would be entitled to the overage of the winning bid. The trustee would send the $5k to the HOA and then hold the money to eventually be returned to the homeowner. If the homeowner decided to redeem the property they would need to pay the $5k that went to the HOA and either return the $20k or have the trustee released the funds to the winning bidder. In any case, the winning bidder would be made whole and their $25k would be returned.

Thanks for the info. In California, how much interest does the homeowner pay on the overbid if they redeem? 10%?

Hi Adm, There is nothing that I can see in the Civil Code on HOA redemptions that would indicate that the owner is required to pay interest on the overbid.

I have bought several HOA liens for my foreclosure buying clients they have lived in the homes, rented them and resold them for some nice profits. visit my website or call me Kevin Roberts 925-766-7713 anytime after 2pm

So, does anyone know the answer to this: If the owner redeems on day 89, do they just pay the amount in the Notice of Sale, or are they also on the hook for interest on that amount from the date of the Notice? From the date of the Sale? You would think that since the lien is a lien, that interest, costs, fees etc… keeps ticking until such time as it is paid, but I haven’t found anything that speaks to that specifically.

But not unless/until the your clients (who acquired the HOA lien at auction) payoff any recorded senior debt v the property. Even in cases where the delinquent former owner(s) fail to exercise their right to redeem (payoff the back due HOA) and re-gain ownership, the investor, who buys the HOA lien at auction, must be responsible for any senior liens in order to gain clear title necessary for resale. I am sure that there have been many cases where investors have made good $ by buying HOA liens at auction. However, these cases are the exception vs the rule, as most condo owners won’t walk away if there is a decent amount of equity remaining in the property.

What about if there is also a 2nd mortgage AS WELL as a 2nd HOA lien against the property. Does the auction winner also need to pay those before reselling/giving clear title?

In CA, you move into title in the position as of the date of the HOA lien. So anything prior is still on title and must be cleared in addition to prop tax liens. You’d take free of the past-due HOA, but then would be on the hook for the HOA going forward.

Kevin, where are you buying the HOA properties, northern Ca? How are your clients dealing with the rent skimming laws?