Foreclosure in Chicago>Question Details

Daniel85, Home Buyer in Chicago, IL

REO Condo purchase, can they make you pay 6/mo assessments plus interest, 6/mo special late fees, plues legal fees?

Asked by Daniel85, Chicago, IL Wed Oct 12, 2011

I am purchasing a Fannie Mae condo with cash. When the association finally got us the 22.1 disclosure they said I, the buyer, am responsible for six months of assessments($2,623.80), six months of special assessment payments($1,476.84), six months of late fees($120.00), six months of interest on the 2009 special assessment($276.84) and all legal fees leading up to the foreclosure($7,231.82). For total of $11,729.30. Can they charge me all of this? I was walking into the situation thinking worst case scenario I have to pay 6 months assessments.

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I just closed an REO transaction of a similar scenario last week. I had a cash buyer purchasing Fannie Mae/ HomePath condo with cash. The seller wanted them to pay 50% of 6 months assessments + late charges + legal fees. At the end the seller paid everything at 100%. It depends on how offer is written & on attorney REO knowledge & negotiation skills, of course. My buyer used Peter Weil of Peter N. Weil & Associates 847/793-2442
1 vote Thank Flag Link Thu Oct 13, 2011
Illinois law gives home owners associations the right to collect on these fees. In some situations, banks pay any outstanding HOS fees when they take possession but most of them don't. You can try to negotiate that at least a portion of these fees is paid by the seller, however there is no guarantee your request will be granted.
1 vote Thank Flag Link Wed Oct 12, 2011
Are you paying assessments backwards? For the seller's unpaid balance? Or is it pre-payment for future months?
0 votes Thank Flag Link Mon Oct 17, 2011
Looks like im going to be paying only the 6 months assessment @ 2623. The association isn't going to charge anything related to the special, and the bank is going to eat the rest of the 11729. In the end the HOA is basically wiping out whatever cash the bank would be getting from the deal. Still kinda wish I had just let the condo gone back to the market and then just put in an offer 11,729 less, but then I would have run the risk of not getting it.
0 votes Thank Flag Link Mon Oct 17, 2011
I haven't come across this yet myself, but it sounds negotiable.

How did it work out for you?

Mark Fleysher
0 votes Thank Flag Link Mon Oct 17, 2011
Lucy hit the nail on the head, it is negotiable. It is also by statute something you are responsible for unless Fannie Mae says they will pick it up.
The statute does not mandate responsibility for late fees or attorney fees, but they certainly can make all this a condition of the sale if the contract is in attorney approval.
Where is your agent and attorney on this?
Minimize your risk and maximize the optimal outcome when you buy a foreclosure or short sale, use an agent and an attorney who know the process.
0 votes Thank Flag Link Thu Oct 13, 2011
In an REO situation the bank should pay all legitimate fees and pass you clear title. Those fees and charges apply to the current owner, FNMA. Write your offer asking assurance that all these items are paid so that you start off fresh. Also, if they are charging special assessments you should look a bit more closely at this situation.
0 votes Thank Flag Link Wed Oct 12, 2011
This is a textbook example of why a buyer should use an experienced agent when buying an reo. A good agent would have wrote the contract in a way to avoid all this.

Daniel, what is your agent's advice to you?
0 votes Thank Flag Link Wed Oct 12, 2011

If you are still in the attorney review and/or modification period, you have choices: walk away; have your attorney negotiate away as much as possible and pay the remainder. Good luck to you!
0 votes Thank Flag Link Wed Oct 12, 2011
I am inquiring to see if anyone has a had a previously encountered a similar situation and how have they dealt with it
0 votes Thank Flag Link Wed Oct 12, 2011

You really need to seek legal and professional assistsance directly through an attorney, not through Trulia. I have noticed similar questions posted many times. Each time, respondents have encouraged you to seek professional opinions. If you had received counsel from an agent and an attorney specifically regarding this purchase, you probably wouldn't have found yourself in a situation like this. I hope that you will consult an attorney for assistance in resolving it.
0 votes Thank Flag Link Wed Oct 12, 2011
You could be resposible for 6 months back assessments and taxes. If there was a special on there, you could be held for the recent 6 months, but not sure. The rest of it you should not be resposible for. Have you spoken to your attorney about this?
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0 votes Thank Flag Link Wed Oct 12, 2011
There is a great deal of legal uncertainty surrounding this topic. I have purchased an auction property and got stuck paying all of these fees. The law is written ambiguously, and while most attorneys would agree that the association is trying to charge you fees that they shouldn't (late fees and legal costs), they will also advise you that it's probably not worth fighting from a cost perspective. Until someone puts up the cash to fight one of these cases, buyers will be stuck paying these ridiculous fees.

I would probably threaten to back out unless legal fees were waived.
0 votes Thank Flag Link Wed Oct 12, 2011
It all depends on the way the contract is structured and the type of deed you are getting. Special Warranty Deeds can sometimes require the buyer to pay for liens, etc.

Have your attorney review the title and the contract. From the HOA standpoint and the other condo owners, somebody has to pay these back fees. Is it fair for the buyer to pay? That depends on your deal with the seller. Maybe some of these things can be negotiated. You have to weigh if it is a good deal or not and if you are required to pay per contract.

The banks are tricky on these REO's. Some things are legal and some skirt the legal issues. You should always work with an attorney and a Realtor to help ensure you are protected and there are no surprises.
0 votes Thank Flag Link Wed Oct 12, 2011

Your question more comfortably dwells in the realm of what an attorney will handle. But oddly enough, the buyer can be responsible if he chooses to stay in this deal for the tidal wave of fees you just delineated. One important step that I and other experienced agents take when dealing with suppressed value transactions is making sure the bank or other lien holder is responsible for fees that include unpaid taxes, liens, fees, utility charges, unpaid taxes and legal costs. A responsibly written and insightful contract will seek to shield the buyer from costs that have nothing to do with him.

I hope you have an attorney because this question at this juncture is simply legal. When you executed the contract you did not have these fees in mind. Your attorney in the course of review may seek to extricate agreement on the seller's part to assume some portion of these fees or perhaps you have the latitude to unilaterally cancel the contract as these terms were not those you initally agreed to.

I wish you the best of luck in resolving this situation in your favor.

Tom McCarey
The Real Estate Lounge Chicago with @properties
Award-Winning Realtor Since 2002


zillow considers my blog one of Chicago's best - check it out
0 votes Thank Flag Link Wed Oct 12, 2011

In order to get the best answer on this, it's best you sit with the lawyer assisting you with this transaction. If you aren't working with a lawyer as of your Broker for a recommendation for a lawyer who deals with these types of transactions.
0 votes Thank Flag Link Wed Oct 12, 2011
For Fannie to request that you pay any delinquent fee's that the previous owner incurred is definately customary these days. Of course it's up to you to agree to the terms and still purchase the property. There's a lot of fine print on the Fannie Mae contracts, so it's always advisable that you work with an attorney who is also familiar with their contracts. Hope this helps.

Cecelia Marlow
Mortgage Banker
Chicago Bancorp
0 votes Thank Flag Link Wed Oct 12, 2011
Hi Daniel

They can legally require you to pay up to 6 months assessment fees, including late fees. Please consult your Atty on the legal fees.
0 votes Thank Flag Link Wed Oct 12, 2011
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