Homeowners and Investors Association Foreclosures

It’s been front page news, so everyone knows there are opportunities for investors to buy real estate below market value if the property is facing foreclosure. But have you considered homeowners association foreclosures?

As you know, when a lender initiates a conventional foreclosure, they are required by law to post a public notice. Wow, does that make it easy to find the name and address of a struggling homeowner?

The problem is that it also means that you will have a lot of competition for that property. Every foreclosure investor in your area follows the foreclosure legal notices.

Home Owners Associations

The trick is to do something that others don’t do. One area of ​​foreclosure shopping that is not as well known is homeowners association (HOA) foreclosures.

In most cases, long before a homeowner stops making mortgage payments, they stop paying their HOA appraisal. That’s your signal that the homeowner is in serious financial trouble and may be interested in getting out of the HOA and mortgage payments.

That is a gigantic opportunity! Yes, it is an opportunity not only to buy a property, but also to help a homeowner out of a tight spot. .

It hasn’t been front page news, but many HOAs are seeing increases in overdue appraisals. In Arizona’s most populous counties, it has been reported that between 20% and 35% of HOAs owed are delinquent. That’s a big jump from previous years.

HOA Evaluations

Typically, overdue assessments are collected through overdue notices, prior lien letters, or HOA lien filings.

HOAs face an even bigger problem now with lenders foreclosing on their mortgages at record rates and some homeowners filing for bankruptcy to pay off their debts. The HOA deals with collection through small claims or judicial court vs. non-judicial foreclosure.

Remember that fees are the HOA’s only source of income to fund the upkeep of the community. When assessments are not paid, other owners in the development must make up the difference. That means your evaluations go up. Many of them are already on the verge of financial collapse and an increase in the HOA could be enough to push them over the edge.

HOA regulations

It varies from state to state, but an HOA has the power to foreclose on the property if the HOA’s delinquent payments reach a certain level. That foreclosure power is governed by HOA statutes and state law. As an example, this is how it works in California:

Before an HOA can enforce, either judicially or non-judicially, for delinquent appraisals, one of two thresholds must be met

Number one: HOA appraisal debt must be $1,800 or more, not including appraisal fees; Prayed

Number two: The debt, regardless of the amount, must be more than 12 months past due.

Pre-Foreclosure Investment

This could be considered a pre-foreclosure investment, because you will be looking at posted default notices filed by homeowners associations. Just remember that any ad posted will attract anywhere from dozens to thousands of other bargain hunters.

Could I get information about paying the back assessment directly from the HOA before it becomes public? Probably not, but it’s worth asking.

Another tactic might be to offer to pay the HOA for overdue appraisals in exchange for the information. The average HOA fee is probably between $125 and $250 per month. A few months evaluation can be a bargain price to pay for the information you would get before anyone else.

In my opinion, your best course of action may come through neighborhood marketing. You can point to developments that have an HOA, and that’s all that’s been built in the last ten years.

Using door signs or direct mail, offer to pay a homeowner’s delinquent appraisal. This can give homeowners in financial difficulty access. Then it’s up to you to find a way to make a profitable home purchase.

You can offer a lease option, buy subject to existing financing, or negotiate an equity agreement. There are many ways to buy from those facing foreclosure that can benefit both you and the seller.

Foreclosure investors are fighting each other trying to make a profit through conventional methods. You can reduce the competition to almost zero by understanding the opportunity homeowners offer behind HOA appraisals.