You are trying to do the right thing by working with the bank(s) on your mortgage payments. If you cannot find a renter to bring in some money to help cover your expenses, the debt will pile up faster. So, it is best to try to find either a buyer or a renter.

Generally, summer is the best time to find both buyers and renters, and depending on the location and condition of the propert(ies), you could have a renter in a few weeks. Getting money either from a renter or a buyer will demonstrate that you are trying to solve the problem. Simply doing a sale may not convince the bank that you want to minimize your (and their) loss.

As to HOAs, the priority of liens is taxes, HOAs, and mortgages. After that come mechanics and other types of liens. This priority is because taxes (government liens) always are first, regardless, and all others go by the filing date of their document(s). Your HOA documents were filed long before your mortgage.

Having said that HOA are above the first mortgage is not wholly accurate, though. Almost every HOA declaration of covenants contains a Subordination clause. This clause is almost always required by lending banks in order for them to lend to a homebuyer subject to HOA. The clause usually provides that even though the HOA is superior, they will subordinate their claims to the claim of a lender (first mortgage). This subordination allows the mortgage company to foreclose for non-payment and yet not have to worry about the HOA in turn foreclosing on them. An out-of-state Realtor responded that the HOA is first -- they're almost assuredly not.

Foreclosure wipes out all junior liens, including second mortgages, mechanics' liens and so on. They're just gone after foreclosure. The document that created the lien may have a provision to provide that the amount owing becomes a personal lien, but the property is free and clear of all junior liens. Obviously, taxes are never junior.

The strange effect is that if the HOA decides that it wants to foreclose, they don't wipe out all other liens. Yes, they do have the power to place a lien and then foreclose it for non-payment. If the subordination clause is present (depending on what it says), when the HOA forecloses they get title to the property subject to the mortgage and any superior liens, specifically taxes. Your attorney can explain this best.

Associations often don't understand this problem. They threaten and finally do something, only to have the bank foreclose on them, because the HOA did not pay the mortgage. Okay, they could pay the mortage after they foreclose, but most associations are not rich enough or educated enough to do that. You have no obligation to educate them.

Read the Declaration of Covenants, Conditions and Restrictions (CCRs) -- these created the HOA's power to place a lien superior to your mortgage, then read the Articles of Incorporation and the By-Laws of the HOA corporate entity. Usually the By-Laws tell you what powers the HOA corporate Board has to enforce the covenants and rules. The rules & regulations are things created by the Board after it is formed. Rules can be altered fairly easily, typically by a Board vote. Covenants, By-Laws and Articles are usually much harder to change, often requiring the consent of a super-majority of the homeowners subject to the HOA.

When you closed on the property, you should have received a copy of all 3 of these documents plus the rules, if any. After looking them over (try not to fall asleep), you will understand better what the procedure should be to get you to pay and when/how they foreclose if you don't (and whether the subordination clause is included). Then you can contact the HOA management, which might be a separate company hired by the Board, and explain your troubles. The name at the bottom of the threatening letters is a good place to start.

You don't have to teach them what you learned in reading the CCRs etc., but you should find out what they're planning to do and how you can get them to back off from legal action. Your objective is to get the money for them, but you don't have it yet, and you need to explain that, and that spending time and money to take and respond to legal action will only make it harder to pay them off.

Do mortgage companies pay the HOA when they agree to a short sale? Usually, they do.
But, again, your objective should be to get some money, either as rental income or from a sale.

Because of the larger number of foreclosures in the D/FW area (about double that of past years), the rental market is pretty strong. It is surprising that you can't find renters unless the properties are in bad locations or poorly priced.

Let me also apologize for the noise from out-of-state jokers who don't have a clue about Texas law or the Dallas market, and then muddy up your genuine problems with their whining about their bruised ego and need to keep that off-line.

I don't take kindly to self absorbed pretentious people, especially those calling themselves professionals.

I contribute my time and advice in these forums out of the kindness of my heart, no agent is going to get enough clients from these forums to make a living and thinking so your fooling yourself. As a result, I get business without asking for it, maybe people see that I really care and see some value in the knowledge I offer freely. From time to time I may refer people to other professionals I know in other areas of the world and sometimes toss the offer out there with a hint of sarcasm when I feel its warranted.

After getting a private email from an un-named Texas realtor scolding me for being "unprofessional" for adding my two cents to her "very accurate advise" and after being subjected to endure hearing her qualifications as an expert Realtor, state licensed Mediator and Arbitrator, ABR, SRES, GRI, CDPS and being subjected to her need to put me in my place for daring to reply to her comments hinting Realtors from other areas are offering inaccurate advice that should not be listened to.

Sorry, I wasn't aware words of caution could be perceived as inaccurate, confusing or misleading.

I also didn't need to have pointed out verbatim:
"Your response will likely only serve to confuse and frustrate someone who already has a significant level of fear and misunderstanding about what has happened to this point."

I'll give the seller more credit than that, I'm sure they did not get to this point with blinders on having someone else running the show for them up until this point. I'll go as far as to say nobody knows the sellers situation better than the seller or is that being too presumptuous?

Once again for some strange reason I feel it necessary to point out that only a licensed attorney is "qualified" to give legal advice so admitting your not an attorney then proceeding to explain why you are in deed qualified to give legal advice does not hold water.

Too many agents out there these days saying I"m not a home inspector BUT or you should consult an attorney BUT...

You might as well add bla...bla...bla... after every BUT. See a good example below ;-)

"As I am not an attorney, I cannot give legal advice, nor would I. I do feel strongly that it is my ethical obligation to share my knowledge and experience with distressed sellers and as an Arbitrator for the State of Texas, I do have a strong understanding of Texas Property Code Law."

Maybe my advice is being overly cautious but ethically "MY" duties dictate I advise you to seek legal counsel from someone licensed to offer it.

If anyone else here feels that suggestion is out of line or feels I gave bad advice in any shape or form in my previous posts please feel free to voice your opinions here.

Scolding me or wanting to point out you know more than me in private is obviously useless, do so here for all to see. Spare me the private messages, that privilege is reserved for potential clients ;-)

Back to the quasi client:
Scared in Ca should be aware of the all possible outcomes, good as well as the bad, it's not all rosy and sweet as the government bailouts are. Full Disclosure and honesty is important, if you want that referral I'll be happy to supply it if not I'm just as fine with it and still advise you seek legal counsel in addition to help from a competent short sale specialist but be sure your talking with one, below I outline how.

Disclosure to avoid confusion: This statement is not geared toward anyone in this forum in particular so don't lash out at me for anything I say. I'm just offering what hopefully turns out to be some good useful advice from a caring real estate BROKER.

To know your dealing with a short sales "specialist" ask to see their book of business, basically printouts from the mls showing short sales that they have personally guided to closing with that agents name on the sheet reflecting so. Successfully negotiating short sales is harder than it sounds and the proof means more than the words from someone trying to get a listing saying "I"m a short sale specialist" or shows you a piece of paper saying they paid for and attended a short sale specialist seminar or class.

Be cautious of agents telling you to be cautious of other agents trying to scam you, take advise from those that tell you how to weed out those that are trying to scam you.

I wish you much luck and a successful, desirable outcome to the unfortunate situation you now find yourself in. God Bless...

HOA fees usually do take precedence but you should check what your state LAWS are by consulting with a TEXAS "Attorney", don't seek legal advice from a TEXAS "Realtor", they are not licensed to give such advice.

Perhaps Sharon can answer by contributing a little of her Texas knowledge without the prerequisite of a private consultation if she really knows the answer to that and willing to post it publicly. If not I can refer you to an excellent broker in your area that can help you out if you contact me.

As far as mortgage fraud, when doing short sales you need to submit a package to the bank for approval explaining your financial situation and hardship causing the inability to pay explaining what changes in your financial situation no longer permit you to continue making your mortgage payment(s). If the income shown in your short sale financial sheet differs greatly from that which was submitted on your mortgage application when you purchased without a change in job, the mortgage company would have a mortgage fraud case (just a warning, not saying that is your situation).

This would also be the case if when you purchased, it was not specifically stated that you own other homes, one of which you live in. Did you put down 20% for any of these properties? Did you purchase via FHA mortgages? FHA does not give loans to investors, they are strictly for owner occupants and if any of your loans are of FHA variety, then you signed documents stating that you would be living in the home being purchased as the primary residence. (Many so called short sale experts DO NOT inform their clients of the possible negative pitfalls or are simply unaware of them themselves.)

Sharon's be all end all solution of advice should be taken with caution and advice from a legal expert consultation as well. Calling my words of caution bad advice doesn't give ME a lot of confidence in her intentions, motivations or advice.

Other potential issues are bank recourse for deficiency in sale amount vs. mortgage owed, some states the lender can still come after you for the deficiency amount even if they agree to a short payoff.

"Legal advice" in concert with realtor "services" should be sought in such situations. Generally speaking the majority of the time banks will not approve short sales or loan modifications for investor owned properties (sometimes it can be done and approved, case by case basis).

How long since you made your last HOA payment and are you still paying your property taxes, sewer & water bills? These can also trump normally 1st position mortgages.

you are getting responses from real estate agents from around the country....they do not know TEXAS law. Please consult a Dallas area Realtor to make sure you are getting accurate info. In Texas, if you do a short sale, the lender WILL pay the HOA fees just as they will taxes etc if you have a skilled short sale negotiator getting this concession on your behalf. There are lots of people still "scaming" to get your business. I am happy to give you info with no strings attached and tell you how you can verify what I am telling you. Please be careful. I have made a business niche of picking up after agents that have given out bad advice.

Please call if I can be of assistance.

Sharon Dolan
Keller Williams Realty
Dallas, TX
214-789-8533 cell
sharon @ Dallas Home Rescue.info http://www.DallasHomesToday.com

The properties are vacant and I never said I was going to live in the properties so there is no fraud going on.
I am already underwater--the house is worth less than the price the bank and I bought it for.

Does the gentleman from NJ know for a fact that the HOA has precedence over the bank in Texas?

The HOA will be able to put a lien on the property that takes 1st position even over the bank. You won't be able to settle a short sale at closing unless the HOA dues are all paid up. If I were you I would not ignore them but would discuss your situation with them and let them know what is going on.

Is the property vacant or is someone living there?

You should contact a bankruptcy attorney because you may not be able to perform a short sale, banks usually will not do a short sale with investors for investment properties especially if you took a mortgage saying you'd be occupying the property as your primary residence. As a matter of fact if that is the case, they can sue you for mortgage fraud.

I am a certified short sale specialist and frequently handle properties in McKinney. Don't ignore the lender or the HOA. It will create huge problems for you in the long run. I would be happy to discuss all of your options with you if you would like to contact me.

Sharon Dolan CDPS
214-789-8533 cell
sharon@dallashomerescue.info

Hi Scared,
Why not talk to a Texas Realtor about your situation. It would be best to short sale the property before it gets any worse for you. A good Realtor will be able to guide you.

Be careful too that they don't garnish your wages. They can do that and they can freeze your bank account through the county after filing the lien or judgment against you. It gets nasty. Call them and tell them your situation so that they don't take you to court.

Scared
The HOAs will place a lien on the property. You will not be able to sell it unless the lien is settled.
Depending upon the situation the lender may or may not agree to pay any or part of the amount. You might be able to get the buyer to pay for part of it.

Depending on how much is owned, most HOA's goal is to get the property into the hands of an owner that IS going to pay, so they WILL negotiate a lower pay off amount so the lien can be removed so a buyer that will pay the dues can buy it.

Don't waste time. Proceed with a short sale asap.

Good morning Scared,

Pay the HOA otherwise they can/will foreclose and you have lost everything.

Pay the taxes otherwise the taxing jurisdiction can/will foreclose and you have lost everything.

Stay in touch with you lender and tell them your situation. They will work with you if you are honest and upfront with them.

If you properties are leased, talk with the tenants. See if any of them want to buy or take over the loan. Saves you any negative marks on yoru credit history.

A short sale may be the answer. If you are already working with an agent here in Texas then our ethics do not allow us to discuss your issues in detail.

Good luck

Dominick Dina, Broker/Owner
Christian Realty San Antonio

That is the one you want to pay.
Lien from association can get heavy.
Water, gas, electric keep paid.
Banks are working with payments.

CA....sorry to hear of your problems.

HOAs can and do foreclose in Texas.
Typically your lender can also foreclose if you don't pay taxes or HOA dues.

Best thing to do is talk to them. Tell them your situation.

Then get the property listed and lets get some offers and contracts working.
We can do all of this long distance by phone, fax, and email.

Bruce Lynn
Keller Williams Realty
214-675-6992

If you are already involved in a short sale than the HOA will have to be paid by the mortgage company or the buyers at closing. I would worry more about the mortgage company that the HOA. Be sure you have a Realtor experienced with negotiating short sales helping you in the process.