Investors and Homeowners 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 faces foreclosure. But have you considered homeowner association foreclosures?

As you know, when a lender initiates a conventional foreclosure, they are required by law to post a public notice. Wow, that makes it easy to find the name and address of a distressed landlord.

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.

Homeowners Associations

The trick is to do something that others don’t. One area of ​​foreclosure buying 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 for the HOA assessment. That’s your sign 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 get out of a tight spot. .

It hasn’t made headlines, but many homeowners associations are seeing increases in overdue assessments. In Arizona’s most populous counties, it has been reported that between 20% and 35% of Homeowners Association dues are in arrears. That is a huge leap from previous years.

HOA Evaluations

Overdue assessments are typically collected through overdue notices, pre-lien letters, or submission of HOA links.

Homeowners associations now face an even bigger problem: Lenders foreclose at record rates and some homeowners file for bankruptcy to pay off their debts. HOA faces collection through small claims court or judicial vs. non-judicial foreclosure.

Remember that fees are the only source of income for HOAs to fund community upkeep. When assessments are not paid, other homeowners in the development must make up the difference. That means their evaluations increase. Many of them are already on the brink of financial collapse and an increase in the HOA payment could be enough to push them to the limit.

HOA regulation

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

Before an HOA can foreclose, judicially or non-judicially, for delinquent assessments, one of two thresholds must be met.

Number one: the HOA’s appraisal debt must be $ 1,800 or more, not including appraisal fees; gold

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 viewing the published default notices filed by homeowners associations. Just remember that any ad posted will attract tens of thousands of other bargain hunters.

Could you get information on the appraisal late payment directly from the Homeowner’s Association before it goes public? Probably not, but it doesn’t hurt to ask.

Another tactic might be to offer to pay back fees to the HOA in exchange for the information. The average HOA fee likely ranges from $ 125 to $ 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 from neighborhood marketing. You can point to developments that have an HOA, and that’s about all the ones that have been built in the last ten years.

Using door hangers or direct mail, offer to pay the landlord’s delinquent appraisal. This can give you access to homeowners with financial difficulties. Then it is 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 participation agreement. There are many ways to buy from those facing foreclosure that can benefit both you and the seller.

Investors in foreclosures are pitting each other by trying to make a profit through conventional methods. You can reduce the competition to near zero by understanding the opportunity offered by the homeowners behind HOA assessments.