I wouldnâ€™t pay anything off unless you absolutely have to. Usually in a short sale the bank pays outstanding HOA fees because it's a lien on title and they have to clear it before the property can close. Sometimes they will try and negotiate them or refuse to pay, but I would have your realtor push back and see what they can do. Having you come up with the money should be the last option.
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JSCA Real Estate Group
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We now have a fiure we can include in our Estimated HUD that goes to the lender with the offer that has been accepted by the Seller. That's a win for the lender because it reduces the unknowns and increases the likelihood the transaction will actually close
My real concern here is that you have also asked whether the lender is likely to allow a credit for repairs ... I presume on the same property. If you insist on asking for all of this stuff you will have gotten the lender to the point where they would find it easier to simply take the property back and then they don't have to deal with you.
Be Careful how you structure the deal ... that will be crucial to your success.
Broker / Owner
Normally right before a purchase contract is sent to the lenders to be approved, we will do an estimated HUD 1 (closing statement) which should show all unpaid fees, taxes, etc up till the estimated closing date) along with the purchase contract to the lenders to be approved. .
Then depending on the purchase price and how much is owed to the lenders, the lenders will decide either to take the offering amount, which may cover everything; or it might counter back to the buyer for higher purchase price and/or ask the buyer to pay for certain items, including the HOA fee.
So, I'd wait and see the terms on the short sale approval before I do anything.
Marin, Sonoma, S.F. NorthBay
Frank Howard Allen Realtors
If the property has had a lien filed against it by the HOA association, and that lien isn't satisfied, the HOA can institute foreclosure against the property, too.
Not all banks pay off HOA.
If the bank refuses to pay for HOA delinquent fees and fines, the listing agent and the seller should try to negotiate a payoff to the HOA. If the seller is unable to come up with the cash, one can ask the buyer to contribute towards paying off the HOA. As long as this arrangement is on the HUD and the bank agrees, that's another option.
This actually happened to one of my listings where Bank of America had both loans. Even before the property was listed as a short sale, the HOA had already filed a lien against the property and it was on record. BOA refused to pay the HOA. The buyer offered less than list price and also offered to pay a lesser amount that was owed on the HOA. The HOA attorney agreed to the payoff. The BOA accepted. This agreement was reflected on the HUD statement. And the escrow closed.
All you can do is try....and explore all possibilities.
I agree with many perspectives below. However, the Listing Agent is the only person that can negotiate with the banks. A good listing agent will be working with an extremely pro-active escrow in estimating ALL the costs of the sale on the HUD-1. Typically, right before the negotiator submits the final package for approval they will request the most up-to-date information through a new estimated HUD. Escrow will ask for a final demand statement from the HOA and update all other debts. In itemizing all debts owed and costs in connection with the sale of the property (back HOA's, back property taxes, any other related liens, agent fees, closing costs, etc) on the final estimated HUD, the listing agent is automatically requesting that all these items be covered by the sales proceeds, by the bank.
Based on the Broker Price Opinion (BPO/Appraisal), the sales price offered on the buyer's purchase offer submitted and the bank's final analysis of all other factors, the bank decides what to pay for and what not to pay for. I've seen banks willing to cover everything on the HUD. But I've also seen banks that will only cover a portion of certain delinquent costs. But typically the bank is willing to cover some costs. The approval given is usually pretty firm. Although, if parties to the transaction are willing to buck up some of the cost difference you can usually negotiate to squeeze a little more out of the banks. Another place to squeeze money from the HOA. Many times the HOA is willing to take a little less that total debt owed.
So let's say the seller is $5500 behind on HOA dues. And the bank approves that only $3000 shall be allotted from the sales proceeds towards that debt. That leaves a $2500 shortage. As a buyer if you are getting the property at a great price and you have the funds it may be worth it to pay the difference. But let's say you can only cover $1000. The listing agent should go back to the bank saying essentially "look, the buyer is willing to anty up another $1000. We're going to loose the deal if we can't bridge the gap.
Sorry for the length... but another option, is for the seller/listing agent/buyers agent to all pitch in a little bit to get the sale to work. Especially on short sales where you are negotiating with a Fannie Mae / Freddie Mac backed loans because then the bank cannot reduce the agent's commission below the listing contract's agreed to commission unless it is over a 6% total. For each agent to throw in a 0.5% and drop to a 2.5% commission is not too much to ask. But that's me. I'm typically willing to throw in something when needed to make things work if it means a better experience for my client.
Residential Sales & Appraisals
This is not an uncommon practice by the bank involved as we have been seeing a lot more banks take similar stances on such additional property expenses. Many have even imposed strict policies regarding short sales and do not allow certain costs to be included in their debt charge-off; such being anything from home warranty and NHD report costs to unpaid HOA dues. We have even seen a few banks that will not pay any back property taxes as they are trying to limit their losses any way possible.
Talk with your realtor and find out who the bank(s) are that the seller is dealing with. Also discuss your possible options â€“ Can you ask the seller to re-negotiate the sales price with their lender? Is it a possibility to negotiate the amount of unpaid HOA dues? Has it been difficult to negotiate with the sellerâ€™s lender? Is there any other way to cover the cost of the unpaid HOA dues?
Also, take the time to really re-evaluate the opportunity that you have â€“ are you getting a good price for the property? Does this property meet your full satisfaction? Is there anything else available on the market that you would rather purchase? How are the inventory levels in your market?
In the area that we cover, San Jose and its surrounding communities, we are seeing a lack of inventory throughout much of our housing market. So if you decide to kill the deal because of a few thousand dollars worth of unpaid HOA dues then you might be making a very costly mistake.
Hope this helps!
So here's the book! This page about buying short sales will explain the answer to your question, it is part of a superb real estate primer and reference work that you'll use over and again as time goes by - bookmark it.
In addition, as an agent representing the seller in a short, I mandate that HOA's, taxes, and any other community fees be paid and current throughout the process. This approach has suited me well..I have never lost a short listing to the bank...ever.
Remember, one of the upsides of short selling for the seller is the effect on their credit compared to losing their property to foreclosure. In most cases, a short seller can be healthy enough for purchase again in about 26 months from close assuming that mortgage lates and mortgage misses are the only credit hit they are taking. I just went full circle with a client. Short sold their home and they just purchased again.
So long and short of it to add my 2 cents, the sellers agent really needs to put it all on the table for the seller to evaluate on the front end of the deal before taking the listing, making sure the seller understands the reasoning of why it is so important for a smoother deal on the back end if HOA's and taxes are current throughout the process. They may be completely broke and don't have the means to keep current, but very adventageous if they can keep them current throughout.
Finally, just remember as well that the short lender wants to get a deal done just as badly as the seller and buyer do. You'd think that would not be the case, but the reality is that they really dont want to add another property to their books. They would much rather sell it to you and be done with it.
Greg Copland/Estate Agent
As for a short sale, remember, the bank is NOT obligated by any means to accept ANY offer. They are being asked to take less than is owed on the mortgage..... they do NOT own the home, therefore, any other liens on the home, including HOA fees will be the responsibility of the buyer....
Do your homework, and get a sharp agent!
Bank of America did not approve paying for any HOA related fees, fines, etc even thought the HOA filed a lien against the property and it was on record. We had to negotiate with the HOA for a reduced amount. The buyer offered less than list price, but also agreed to pay off the HOA to get the deal done. It still came out as a good value for the buyer considering what he paid for it, and compared to other sales in the complex.
Wachovia, on the other hand, paid the HOA, no questions asked. Wachovia was also the fastest, the easiest bank to deal with when it comes to short sales.
It really does depend on the bank.....
Good luck to you.
Before agreeing to pay the HOA on a short sale I recommend you have your agent ask the listing agent if the seller has tried to negotiate a settlement with the HOA for less than what's owed, what the result was, and for documentary evidence of such.
This recently happened to someone I know and following this advice they were able to save about 50% from what they expected to pay. It's not unheard of for the HOA to accept 10 cents on the dollar as they are able to spread the cost among the remaining membership.
Feel free to contact me for further information.
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What a HUD really is, is a closing settlement statement. The reason that the bank wants to see a preliminary HUD when evaluating a short sale is so they can see all charges that they will have to pay out of the proceeds of the sale, including real estate commissions and any other seller charges.
Two words for you 'Caveat Emptor' which means 'Let the buyer beware'. Homeowners Associations have the collection and enforcement powers similar to those in codo's and have a statutory automatic lien for unpaid assessments. That being said, the lien does not have to be recorded in the county land records. Title examiners or your agent (if you work with one) can check with the homeowners association to see if there are any such lien.
Most banks will absorb this cost of fees. However, some might try to get the seller to pay this, which will delay the closing. You should not let the property close until this issue is dissolved. Once a bank ceases property in foreclosure the bank is the owner, technically, and should pay the HOA from time of possession until the transfer of title to new owner.
If you know that there is a lien on this short sale property for HOA, and this is the only thing standing between you and the property. I would definitely negotiate to lower the price or have it completely paid by the bank. I would try the later first.
Hope this helps.
they weren't your responsibility to begin with were they ?
an unpaid hoa is essentially a lein on the property.
if your title company is worth its weight ....then they will not allow you
to purchase a property with leins on it.
I agree with the most answers in this matter
You are the last person to be involved on unpaid fees and liens! Your agent should make sure at the closing all unpaid fees and liens are satisfy before you close
First is the listing agent job to provide all the information on the time manner and second and the most is your agent to fight and negotiate on your behalf!
None of the fees have to come from your pocked! If the Bank either Home Association cannot find the way to accept the loss and start fresh means that both agents didnâ€™t done they job as supposed to be
None of my short sale failed because I have been day by day in touch with all the partyâ€™s involve,
So is your agent that is not doing his job properly
Keller Williams of the Palm Beaches
Your options are:
1. Make sure the listing agent tells the bank BEFORE they approve the short sale. After they've approved it they are less likely to budge.
2. IF the bank won't negotiate - most will "HELP" then your next step is to talk to the homeowner.
3. If the home owner has no money (likely) then you could talk to the agents (OUCH!)
4. Finally, depending on the amount and the situation then paying it might make sense.
Hopefully the contract is worded in a way that gives you the power to negotiate this way. It might mean waiting 30 more days to get an answer from the bank.
In the past, I had few short sale listings which banks paid for HOA, credit for buyer's closing cost . However, Bank's policy on short sale is constantly changing and every bank procedure is different . This is why it is important to have the total amount of liens on the property (not just estimated number ) and restructure the deal ( such as price reducing, payoff reduction ....)with all parties that bank will accept before submitting the short sale package to the bank. What stage of your short sale transaction are you in?
Generally I've gotten the lender to agree to pay the full balance the HOA demands, after you don't want to short change your future HOA. However if the seller's agent can't get the lender to agree than try to get it from the seller, or get the HOA to accept less.
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The fact that you are asking this question leads me to believe this is not the case. The HOA wants to collect the delinquent fees and will not transfer HOA records to the new buyer until the delinquent fees are paid. The lender does not want to pay them. That is negotiable with the lender and the HOA. The lender is taking a loss on their loan and paying HOA fees increases their loss. It is the same with unpaid taxes, and you certainly expect the lender to pay those. Lenders seem to arbitrarily decide what they donâ€™t want to pay. If you are in love with the house, are getting it at a great price, just have to have it and no other house will doâ€¦pay the delinquent fees. If you are ready to move on if this deal does not work out, tell the lender â€œnoâ€ on the fees.
It takes lenders a long time to respond on a short sale offer. If you cancel out, it may be months before the lender has another opportunity to close this short sale. During that time, the HOA delinquency problem, along with all other financial delinquencies having to do with the property will only grow.
On the other hand, maybe the HOA will take a reduced amount rather that nothing. And nothing is what they may get for months to come if you cancel out on this transaction.
Your agent can go to bat for you in pushing back to the lender and the HOA.
The best thing to do is to make sure that your agent is negotiating with the lender to cover as many fees as possible hoa being one of them, now depending on what lender you are working with most of them will cover hoa fees depending on what the purchase price has been negotiated. When your agent gets their final hud-1 closing statements that is when you can negotiate with lender for them to pay off the fees or to split them 5-/50 etc, hope this advice was helpful.