Past HOA dues after foreclosure or short-sale?

Asked by Hoa, Orange County, CA Sun Aug 29, 2010

I live in California. I filed Ch.7 a year ago. I have paid neither mortgage nor HOA for more than a year. Thus I owe post-petition association fees. I have tried to modify my loan on this 2nd rental property, but I feel that I may have to let this home go either through foreclosure or short-sale. As I understand, I may still owe the post-petition association fees that will exceed $3000 by the date the foreclosure or short sale is completed. This is going to be a real hardship, since the property has been vacant for a year, now. My questions:
1. The value of the property will hardly cover the 1st mortgage and I have also a 2nd. What are the chances that the Association may file a deficiency judgment after foreclosure or short-sale?
2. I have heard that the Associations will often receive the past dues from new owner or the bank after foreclosure or sale and do not come after the first owner after the sale through short-sale or foreclosure? Thanks.

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Debby Thompson’s answer
Debby Thomps…, Agent, Wauwatosa, WI
Wed Sep 29, 2010
I would read the information you got on your association. It should explain what they can do. I would list the home and it is true that we deal with as a real estate agent working a short sale. to include what you owe for all the liens on the property. Your bank can pick to approval the sale and include the dues owed. But they do not have to. They can do anything they want. It is possible for the association to foreclose on your condo also. But I would read and if you need additional help contact an attorney to explain what you can do.
Homestead Realty Inc
0 votes
angelic1111, Landlord, Flat Rock, MI
Wed Sep 29, 2010
Now if this purchase is a county sale for back taxes - then how are the back HOA's addressed - I assume that I being the new owner are not responsible for the back HOA's??? Thank you
0 votes
Bob Movin-On, , Hartford, CT
Thu Sep 2, 2010
Question 1, The Association has lien rights like your city or town does for taxes therefore the deficiency is attached to the property not you and you should not be looking at a deficiency judgment.
Question 2, Because the Association has lien rights they will get paid prior to the title transfer to the end user, yes usually the bank pays that.

Do you know what a foreclosure will do to you, yes short sale is a form of foreclosure?

Ramifications of Foreclosure, Short Sale or Deed-in-lieu-of Foreclosure

Here are some of the ramifications of foreclosure, short sale or deed-in-lieu-of-foreclosure, there are many more like; insurance rates, your job (yes employers are checking credit records these days).

Your credit score will be reduced by 200-400 points, short sale and deed-in-lieu-of a little less 100-200 points.

All forms of foreclosure stay on your credit report for 10 years.

After you have gone through foreclosure, short sale or deed-in-lieu-of-foreclosure there will be what is known as the "waiting period", this period of time varies for each and can be reduced if you had some type of extenuating circumstances that caused the foreclosure:
Waiting Periods to Buy After Foreclosure – “YES” Short Sale and Deed-in-lieu-of are forms of foreclosure
• Buying after a Walk Away Foreclosure
The waiting period is 7 years
• Buying after a Foreclosure
The waiting period is 5 years with 20% deposit up to 7 years.
• Buying after a Foreclosure with Extenuating Circumstances
The waiting period is 3 years with 10% deposit up to 7 years.
• Buying after a Deed-in-Lieu-of Foreclosure
The waiting period is 2 years with 20% deposit, 4 years with 10% deposit up to 7 years.
• Buying after a Deed-in-Lieu-of Foreclosure with Extenuating Circumstances
The waiting period is 2 years with 10% deposit.
• Buying after a Short Sale
The waiting period is 2 years with 20% deposit, 4 years with 10% deposit up to 7 years.
• Buying after a Short Sale with Extenuating Circumstances
The waiting period is 2 years with 10% deposit.

In addition to the waiting period and minimum down payment, you will be required to have a minimum FICO score and the home purchase must also be the principal place of residence, not a rental nor a vacation home.

Lastly, most loan applications will ask the dreaded question "Have you ever been foreclosed on?" this stays with you for life, many think that because it will not show up on the credit report after 10 years they can answer "no", well lying on a loan application is a felony that carries a major jail term, so be aware.

Good Luck
Bob Patrick
Buy a home after foreclosure, short sale or deed-in-lieu-of expert
0 votes
Ronald Britt…, , Los Angeles, CA
Wed Sep 1, 2010
My office can stop foreclosures in hours !!!

Step 1 List Your Home for Short Sale Today !

Step 2 Our Property Management Company will Find a Renter for You for Free, and you can decide what to
do with the money.

Step 3 Relax and Let a Real Estate Short Sale Specialist like me finish up the Short Sale.

0 votes
Thom Colby, Agent, Irvine, CA
Mon Aug 30, 2010
Scott, yes, homeowners are renting their properties, keeping the rent and not paying their mortgages or HOA and it is not ethical, or in some cases legal. This property was not described as "secondary properties" - it was decribed as a 2nd rental property. Most likely the Loan Docs have a rider that assigns all rents to the lender once in default of the mortgage. In Southern California, HOAs have no desire to become landlords of other peoples properties. They simply record a Lien or in many cases foreclose simply to be given a Trustees Deed so that are assured to be paid when it finally sells.

The best situation is for this owner to list the property for sale (assuming the BK Executor is OK with it) and sell it short. The Past Due HOA fees can be negotiated into the final price.

Scott, nearly 100% of my business for the past 3 years has been Short Sales & REOs, I don't need to read Trulia posts to know what's really happening.

Thom Colby
CA DRE # 01398570
0 votes
Jacqueline W…, Agent, Irvine, CA
Mon Aug 30, 2010
Emily's answer below is absolutely correct. Get this property listed and sold via short sale.....but choose your agent with care. Short sales can be very complex and you need to make sure you list with one who knows what needs to be done.
0 votes
Emily Knell, Agent, Huntington Beach, CA
Sun Aug 29, 2010
Please, for the love of (enter deity here) do a short sale before letting it go to foreclosure. I work on many short sales and all of the time I have been able to get the 1st lien holder to cover back HOA dues plus late fees incurred, plus payoff an amount that will satisfy the 2nd lien & make it so they release your 2nd lien as "paid in FULL". (meaning, the 2nd can't issue a deficiency judgment in the future)

So far the only time I've had an owner or buyer contribute towards any HOA dues, was when the HOA was charging for some kind of violation (i.e. you didn't landscape your backyard within 9mos of purchasing the house) That doesn't sound like the case with your HOA dues.

It would be interesting to know how you originally purchased this property, did you buy it owner occupied & then rented it out later? If you did purchase it that way, you may get some more benefits with a short sale & the Mortg. Debt Forgiveness Act.

Please email me directly, I'm confident I can advise you well in your situation (I will not check back on this same Trulia post if you respond here)
562-430-3053 cell

P.S. Depending on what you owe on the 2nd lien, it is very possible, if the 1st gives us a hard time paying off the HOA liens, I can get the buyer to pay it off.
0 votes
Scott Miller, Agent, Boca Raton, FL
Sun Aug 29, 2010
Thom, you're telling us that owners in CA of secondary properties are assigning rents-paid back to the lenders because they signed a document that said they would? You're kidding us, right? Have you been reading posts here on Trulia? Have you been reading/listening to the news? Millions of 'homeowners' (they really shouldn't be called homeowners since they own nothing) are taking rents-paid and going on vacation, to the Apple Store, cruises, food shopping or buying new cars.

The person that posted this question wants to know how he can pay back-HOA fees. If the HOA won't rent it out for him, as you wrote, then why can't the owner rent it out and pay the back fees? What good is a vacant property doing sitting with -0- income stream? It only makes sense to rent it out, even month to month. At $750/month, they have their $3000 in delinquent fees in 4 months.

Scott Miller, Realty Associates, Boca Raton, FL
0 votes
Marilyn Jenne, Agent, Los Angeles, CA
Sun Aug 29, 2010
If it goes to foreclosure, the lender becomes the owner (therefore taking on payment of HOD). A short sale could turn out differently, since you are still the "owner" selling with the bank's consent. On a short sale transaction of mine closed in June 2010, the delinquent HOD were not assumed by the buyer, and the seller had no money to contribute. Therefore, somewhere, the lender acquired and disposed of the delinquent HOD. You'll simply want to check (free legal advice?) on what, if any, rights the Association has to pursue you, under either scenario.
0 votes
Thom Colby, Agent, Irvine, CA
Sun Aug 29, 2010

In CALIFORNIA - most likely there is already a lien against the property by the HOA - or - they already have a Trustees Deed against the property. This is pretty typical in OC. Very few HOAs will negotiate a lower payoff of the past due amount because it will remain on the bill for the new owners to assume at closing. This will be a big drawback when you list. I've done MANY of these.... It is possible to get them sold and closed without money out of YOUR pocket at closing - sometimes...

As for "giving it to the HOA to rent and keep the rent" - not true. If this was not a primary residence, you likely signed some documents with your loan that assigns all rents to the lender - plus - no HOA in OC will do it.

If you want more info, please contact me - I'm right here in Newport Beach and nearly 100% of my business has been successful short sales for the past 3 years.

Thom Colby
Broker / Owner & Certified HAFA Specialist
Thom Colby Properties
Newport Beach, CA
Moving Lives Forward (TM)
We NEVER DOUBLE-END a Transaction in our Brokerage. There is NO benefit to the Seller or Buyer but only benefits the Agent.
888-391-5245 Direct Cell
0 votes
karen numme, Agent, los angeles, CA
Sun Aug 29, 2010
I have done short sales and my clients have been living in their property until it is sold. So renting usually doesn't work. My currect short sale is $14,000 arrears in HOA fees. The buyer is willing to pay 1/3 to 1/2 of the dues. So as soon as the bank approves the sale I will negotiate the HOA back fees with the HOA Board. Hopefully they will realize if it forecloses they will get nothing. Even if they sue my client, you can't take blood from a stone.
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Scott Miller, Agent, Boca Raton, FL
Sun Aug 29, 2010
Hi Hoa. Why don't you contact the president of the HOA and ask them to rent out your unit starting tomorrow? Ask them to keep all of the monies that are paid for rent and apply them to what you owe. This is what's being done in Florida.

Why has the property been vacant for a year???!!! The rental market is booming!

Scott Miller, Realty Associates, Boca Raton, FL
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