When buying a foreclosure, how can I make sure I don't get stuck with past due HOA fees and taxes?

Asked by Firsttimebuyer, Chicago, IL Thu Jul 8, 2010

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Paul Garver, Other Pro, Hinsdale, IL
Thu Jul 8, 2010
I am a real estate attorney here in the Chicago area. Many, many REO Sellers try to pass on unpaid assessments for Condominium or Townhome Associations to the Buyers at closing. The funny thing about this to me is that almost all the contracts state that the Seller will bring assessments current to the date of closing. This is because the law that allows the Selling Bank to pass on the past 6 months of dues is an Illinois specific law, and the addendums to the typical real estate contract that the banks use are written on a national basis. I coach all of my REO buyers to be prepared at closing to make a stand and walk if the Seller tries to make these the obligation of the Buyer at closing, as it is a clear violation of the contract (realize this is in a situation where the contract states that the dues will be current as of closing). I have found that faced with that option, the Seller's attorney will go back to the bank, explain it to them, and generally we will end up closing a few days later. In this scenario, it is almost impossible to close on the same day, as this has to go through the hierarchy at the asset management office and the bank.

As a side note to other posters who will read this - Yes we have tried to work this out prior to closing, sometimes it works, and sometimes it does not. I have actually had Seller's attorney's offices certify in attorney review that all the back assessments will be paid by the Seller, only to show up and closing and have charges on the Buyer's side.


Paul Garver
Web Reference:  http://www.hg-legal.com
3 votes
Rich Homer, Agent, NAPLES, FL
Sun Jul 11, 2010
Just finished an REO here in naples, Florida and it depends on the bank and The Agreement. Most are brought current which is standard. The problem you are concerned about is more common outside of the REO arena, such as pre-foreclosure, foreclosure, and short sales.
0 votes
Eric Egeland, Agent, Buffalo Grove, IL
Sun Jul 11, 2010
In most REO sales that are listed in the MLS the HOAs, taxes are made current prior to close (it would typically be disclosed in the MLS remarks if this was not that case & the purchase price should be adjusted accordingly). Your attorney will also firm this up in attorney review.

If you are buying a foreclosure from auction you will be taking on possible liens as well....you really need to do the research before prior to bidding.
0 votes
Brandon Schu…, Agent, Western Springs, IL
Fri Jul 9, 2010
This is one of the benefits in Illinois that we use attorneys for real estate contracts.
0 votes
Simir Shah, Agent, Chicago, IL
Thu Jul 8, 2010
Pursuant to Illinois Condo Act buyer can be liable for up to 6 months of HOA fees but the last three bank owned properties I sold the bank paid them in 2 of them and refused on 1 of them. It just depends on the deal, the bank and how much you offered.
0 votes
Matt Laricy, Agent, Chicago, IL
Thu Jul 8, 2010
You will be held liable for 6 months past assessments and taxes. Sometimes your lawyer may be able to get you out of them, but I would go in assuming you are paying it. If you state on the contract you wont pay them, you are positioning your offer to be rejected for a more favorable one.

Matt Laricy
Americorp Real Estate
Brokers Associate, e-PRO
mlaricy@americorpre. com
0 votes
Jeff Nobleza, Agent, Chicago, IL
Thu Jul 8, 2010
If you are buying a property and getting a loan, your lender will require you get title insurance. At closing the title company will check to see there are no unpaid taxes or liens. In addition, they will insure you if something comes up that they did not find.

When writing an offer, some standard contracts have language that protects against unpaid assessments. In addition, your lawyer should address unpaid assessments during attorney review. However, note that you can get stuck with up to six months of back assessments per governmental statute.

Having a knowledgeable real estate agent and real estate lawyer should be able to guide you through all of this. If you do not have past experience buying foreclosures and/or are not familiar with the procedures and customs in buying one, you should probably engage the services of a real estate agent and definitely one of a lawyer.

Let me know if I can be of any assistance.
0 votes
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