My team and I process many short sales and recently have been successful in getting properties marketed, accepted, and closed within 90 days. If you would like more information about how we can help you, please visit my website below and specifically the short sale information...
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If you decide to move forward with a short sale, the bank will usually py the property taxes. It is rare the banks will pay any past due HOA fees. Your agent can negotiate with the buyer and see if they can come up with some money to pay the HOA. If you decide to walk away, the HOA can come after you personally to collect their money. I had a seller in your exact situation and the HOA ended up taking about 50% of what was owed. You do want to get something in writing that says they will accept the lesser amount as payment in full just so they don't try and collect the difference later on.
As an example: If the association fees are not paid they can ultimately foreclose on the property and gain possession. If there is a mortgage there is contact between the association and the mortgage company. So can they take your pension? No, I have never heard of that happening. I have been selling real estate for the past 33+ years and I am positive I have never herd of anything like that. - Ed
You really need to sit down with your attorney or your financial expert and discuss these questions and whether or not foreclosure is a good idea for you. But also know that another alternative is a short-sale which can be a pretty simple and painless for you. It can also look a lot better on your credit report and includes the pay-off of association dues & property taxes. Look at all of your options w/ the proper professional before you make any big leaps!
Jay M. Jones, Realtor