hoa lien


#1

another simple question, for hoa lien(around $6k), should we flipper ignore it, or negotiate, or just pay it in full amount to save the efforts and time. called the hoa collection office to review my property and the lady answering the phone said she has more than 40 cases to deal with… any advice? thanks.


#2

I would talk to your title company, have them issue a prelim and make sure they are willing to insure the property and how they would handle the issue if the HOA tried to collect at close. Keep in mind that when the time comes to close you will need to get a HOA demand and the HOA may try to attach the past due balance to your transfer. Ask you title company how they would handle that. Although the lien is wiped out we have seen HOA’s get really good at holding up sales in order to try to collect on the past due amount. I have seen agents fight this and win and I have seen borrowers roll over (on bank owned properties in particular) and agree to pay a portion just to get the escrow closed. You will want to address this sooner than later and make sure you have the support of your title company.


#3

I’ll work with my title co. thanks, Michelle.


#4

This comment is limited to my experience buying in CA. I research the CC&Rs at the county recorder for the HOA related to the property. So far, I have found specific language in the CC&Rs making any 1st DOT recorded prior to the lien is wiped out by the foreclosure of said 1st DOT. And, in each situation, there has been no problem with the HOA after I receive the Trustee’s Deed. And no porblem when the property is sold. Check out the CC&Rs and any amendments. It is my understanding that lenders have required that the HOA fees be subordinate to their DOT as a condition of lending. Failure to provide this by an HOA would make it nearly impossible to get financing for the homes in their development.


#5

Hi Richard, You are absolutely right. HOA’s are not typically preliens and past due dues would be wiped out. You sometimes have to be ready for a fight since some of these HOA’s are desperate and they have hired attorneys to try to find ways to collect on past due dues. We have seen them hold up escrow for violations like dead grass in the front yard and other violations. It is important to work with a title company that understands this issue and is willing to help you resolve it and potentially provide an owners policy without paying the demand amount if you cannot get an updated demand from the HOA removing the past due amounts. You are also correct in that a lender would never go behind a HOA pre-lien.