Foreclosure in 77377>Question Details

Frustrated!, Home Buyer in 77377

Is the bank obligated to pay HOA dues that were incurred prior to foreclosure? I am trying to close on and this HOA debt is holding everything

Asked by Frustrated!, 77377 Fri Oct 1, 2010

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Once foreclosed, the HOA dues are wiped clean.
0 votes Thank Flag Link Thu Mar 10, 2011
It sounds like you have an offer in on an REO property, is that right? You're going to need to read your contract very carefully. Read the bank's addenda as well. I'm not sure where you are in process. Has the contract been accepted by all parties? Is this a requirement of the Title Company? Has a contingency been placed on the contract?
If the Title Company says that the deed/title cannot be released and transferred with the HOA lien on there, someone will have to pay it.
Banks are notorious for letting hundreds of thousands of dollars slip through their hands on a sale just so they don't have to pay a few hundred for some small thing.
If you are very close to closing on this contract and the bank won't pay, you will need to decide if it's worth it to you to pay the outstanding HOA dues in order to get the property.
Good luck.
Web Reference: http://www.mariasellskc.com
0 votes Thank Flag Link Fri Oct 8, 2010
I am not an attorney so please do not take this information as legal advice. Your first step should be to get an opinion from the Title Company. They can usually steer you in the right direction. If the situation is still unclear, then you will need to consult a real estate attorney.

Please take the following as the ramblings of a real estate practitioner and NOT an attorney:

If this is an REO property and the bank owns it, then they own it by virtue of a completed foreclosure or a deed in lieu. It should not have been listed for sale if there was still an HOA encumbrance on the property. HOA debt is usually wiped out by the foreclosure process. However, there are a few HOA's that will not subordinate their lien. You cannot buy or refinance a home in these subdivisions unless the mortgage company agrees to take 2nd position to the HOA. In these cases the 1st lien is actually a 2nd lien, and, as a result of the pecking order, the HOA could potentially foreclose and wipe out the bank. If this is what you are dealing with then it is in the banks best interest to settle with the HOA. If the bank won't play fair, then you might want to terminate the deal or consult a real estate attorney to help you examine other options.

If the property was posted for foreclosure but it has not yet gone to auction then you are dealing with a pre-foreclosure situation -- most likely a short sale. Legally, the property is still owned by the borrower but the borrower's bank must approve the price and terms of the sale. In such a case, HOA debt becomes a negotiable matter. Someone must settle up with the HOA in order to provide clear title to the Buyer. The best candidate is the Seller if he has any money. However, short sale Sellers usually lack the funds to cover the payoff amount. Next comes the bank in the person of the short sale negotiator. They will sometimes agree to take on the HOA debt as a Seller closing cost even though it increases the shortfall to the bank. Finally, if push comes to shove, it might be in the Buyer's best interest to settle the HOA debt if, and only if, the deal still makes sense and the first 2 options are ruled out.
0 votes Thank Flag Link Fri Oct 8, 2010
First, are you talking pre-foreclosure or has the property been foreclosed on? If before, they are in total power sorry to say. The bank if pre-foreclosure is not obligated to do anything. They may or may not allow it to be paid. The HOA is against the owner and the property. If it forecloses, they are wiped out, but I have seen many cases where they come back and try to get the new owner to pay. It sounds like you are trying to close on a short sale. If this is the case, time and time again, the HOA can kill the deal and they will take nothing less than what is owed, and sorry to say, but depending on the association, they very seldom will negotiate. The one solution I can say that does work for them to release is to pay it. If the bank won't allow it, the buyer or realtor's will pay to get it settled and closed or, move on to another property and let it foreclose. After foreclosure? Again, the bank has to give clear title, so if they are coming back after the fact, you need to consult and attorney. In either case, consult an attorney. I personally specializing in short sales have tried in all my years to negotiate with the HOA's and very seldom have been able to get them to negotiate for a settlement. After it has foreclosed? Consult and attorney. Short sale or pre-foreclosure? Someone will other than the owner will have to pay if you really want the property.
0 votes Thank Flag Link Sat Oct 2, 2010
It depends entirely on the HOA bylaws. Have your Realtor call the HOA and find out how it is to be handled in the bylaws. Your Realtor may need to do some negotiating on your behalf but my guess is that the Subdivision would rather settle on a possible lower amount or waive the amount and get a new homeowner than lose the sale in the subdivision. That's when it helps to have a savvy Realtor
0 votes Thank Flag Link Fri Oct 1, 2010
This depends heavily on what the contract does and does not say. In the cases I've been in they have paid them, but I made sure that's what the contract said when I submitted the offer for the buyer. Talk to your agent and/or the title/closing company, they should know what the contracts and/or bank addendums stipulate. Good luck and I hope things get cleared up.
0 votes Thank Flag Link Fri Oct 1, 2010
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