A seller approached me today and said his HOA is FC on him for late and attorney fees of $6100

Asked by Mike Luzzo, Orlando, FL Wed Oct 20, 2010

. Owes $200K on property - worth $100K. Not late on his mortgage. Tenant occupied. Negative cash flow per month $137 He asked what should he do?
PAY WHAT HE OWES -
SELL AS A SHORT -
WALK AWAY WHAT SAY YOU?

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4
Nicholas Pol…, Agent, Atlantic City, NJ
Fri Oct 22, 2010
I am on a HOA board and we have run into problems of residents not paying their maintenance fee. The last thing we want is to go after neighbors with lawsuits. I would have to agree with the previous answer, call them and set up a payment plan. The HOA wants this resolved quickly and painlessly.
0 votes
Mike Luzzo, , Orlando, FL
Fri Oct 22, 2010
Alma, thanks good points. The investor (seller) does not live in the specific area and can not (nor wishes to) move in to the subject property.

Randy also good points: Rents average in the area about what he's getting. $1200

All in all, I say investments are risks, not guarantees. Right now the 'seas are stormy' and you must take shelter from the storm. In the long run 'the storm' will pass, howvever but not without collateral damage.
0 votes
Alma Kee, Agent, Tampa, FL
Wed Oct 20, 2010
Hi Mike,

The HOA legally has the right to collect the rents from the tenant according to a new law.

If the Seller does a short sale or deed in lieu of foreclosure and is forgiven the $100K plus loss the lender will issue a form 1099 and the seller will have to include 100% of that money as ordinary income and cannot get an exemption on a "rental" investment property. Primary residences have certain exemptions for the "loss forgiveness" reported on the 1099.

My advice is for your client to immediately get the tenant out and make it his primary residence so he can get an exemption and sell via Short Sale. That's if he has no other assets and truly has a hardship.
0 votes
Randy Charbo…, Agent, Grandville, MI
Wed Oct 20, 2010
Tell him to contact his HOA and work out a payment plan. They are usually open to that kind of arrangement given the economic conditions. The condo will probably not recover to the 200K range for many many years. Its a very bad situation and one millions are facing now days. There aren't easy answers. If he is financially viable and can handle the payments and cash flow issue, He should keep at it. Hopefully he can make some extra money elsewhere and eventually pay down what he owes. By then, the condo may have appreciated a bit to allow him to sell and get out of it. He may also want to reevaluate the rent and see if he can get more per month. Its pretty easy to rent out stuff so perhaps there is a demand there which would allow him to get more cash flow. Another thing I would do is contact the mortgage company and explain the negative cash flow issue and see if they are willing to rework the mortgage. That is a common fix to these types of issues. Good Luck!
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