Buying the HOA lien at trustees sale


#1

I called my title rep and could not get a clear answer. Anyone on hear or any title reps on here can help me with this? Here’s the scenario:

Say I buy the HOA lien at sale, and there are currently 2 open loans on the property. However, even when you add up the 1st, 2nd, & HOA dues owed, there is still equity in the property (I know, rare!)

If I buy this HOA lien at sale, can I get a title company to issue an insurance policy when I turn around to flip the property? I was told by my local title rep an HOA lien is a civil matter, which could complicate things. Must I pay off the 1st & 2nd prior to flipping the home? The property is located in Southern California. In this specific case, the 2nd is current. The 1st had a NTS filed last year but when I checked with the title co. recently, the 1st had been cured as of now.

I greatly appreciate the help.
Jack


#2

Sorry - I should clarify that the 1st & 2nd were placed on the property prior to the HOA lien.


#3

Hi Jack,
Keep in mind that in CA the owner has a 90 day redemption period on a HOA foreclosures. A title company is not going to insure this property until after the redemption period has expired. Once that has happened then there should not be any problem getting title insurance provided you are prepared to pay off any senior liens or loans and pay any past due property taxes.
The definition of “flipping” the property is to resell the property which means that ALL liens and loans must be paid and you can provide clear title. (This usually means insurable title) Only a sophisticated investor should attempt to purchase a trustee sale flip without title insurance. If you are not confident in your abilities to research title it is always a good idea to purchase a title insurance policy.


#4

In addition to what is posted above–HOAs are not civil matters your rep was wrong. In California they are non-judicial liens just like bank forclosures. A great site to get a copy of the law in California is from a trustee company that specializes in HOA forclosures. They have links to the law. Their web site is www.alslien.com.


#5

Hi, my name is Simon Wu from Advantage Title. Sorry, i was out for vacation and saw the post today^^

So for your question, buying HOA lien is very dangerous. Because many people assume that as long as new buyer pay for 1st and 2nd and all,then it shall be ok. However, Title company has a general rule that they do not like to insure any property that was bought out by HOA lien Trustee sale.
I had a case where an investor bought HOA lien but many title company refused to insure. I will be honest. Even my title company didn’t want to insure the file. However, what we had to recommand the client is to do a separate transaction, where after you buy the HOA lien, you need to buy from 1st. That’s when title company want to insure the property.

I know it sounds complicated but please call me at 626 589 8822 and I will explain how it was done and more details…Thank you.

** Buying HOA Lien is very risky, so please make sure whether it is insurable before buying!!!***


#6

Hi Katherine, Thanks for sharing this website. Great information.


#7

I have a similar situation in California. The HOA lien is coming up for auction. The 1st is also scheduled for auction but a few months later. I have some detailed questions and hope you can help! If I buy the HOA lien can I immediately contact the lender for the 1st to set up taking over that loan? Do I have to wait out the 90 day redemption period and hope that the owners don’t come back to me with the amount of the HOA lien? And if they don’t do I have to wait for the 90 days to be up to tackle the 1st mortgage? What if I do have to wait and the 1st gets sold at auction?
Thank you


#8

This brings up too many scenarios to discuss here. If you get possession, at some point down the line you should be able to get title insurance. You might have to wait a year. IF you let the first go to sale, they will probably want to interplead the overbid - and - most likely, will send notice of same to the former owner - who would have no reason not to make a claim and muddy the waters.
If you advance to the first during the redemption period, you should be able to get your advance back if, in the long shot, the former owner redeems. Problem is, if there is a lot of equity, a speculator could approach the owner and buy his interest and redeem.


#9

Thank you Mike.