In a HAFA short sale, who pays delinquent HOA dues?


#1

Since California is not a super-lien state, the bank has no incentive to help pay delinquent HOA dues in order to foreclose through trustee sale. So if seller is insolvent and buyer is unwilling to pay seller’s delinquencies especially after waiting four months for bank approval of their offer (which they are sure is too high now that the market has shifted once again), how can a short sale be completed if there is a HOA lien against the property? What incentive does the HOA have to accept an offer in compromise?


#2

Hi Pamela,
In a short sale all liens and loans must be cleared and satisfied. Typically when the net sheet is prepared to show the lender what they would net if they approved the short sale it includes the payoff of all liens and loan including the HOA dues. It is rare that a HOA will accept less. It is typically the lender that will absorb the loss on HOA dues.


#3

If the Buyer wants the property bad enough, he or she should be willing to pay it. Most are. The lender cares mostly of their net, so it is possible, as in my clients case, allowed. ie…lender’s incentive to avoid foreclosure of $6,300 was used to pay for HOA in arrears in the amount of approx. $1,800.