Every year, around 0.11% of all US housing units face foreclosure. Yet many people believe only lenders can start these proceedings. But did you know an HOA can do it as well?
As an HOA, a time may come when you need to start foreclosure procedings. Read on as we give the essential guide on HOA foreclosure.
What Is an HOA Foreclosure?
Most people are familiar with foreclosure in relation to a mortgage. If the person who took out the loan for the property does not pay, then the lender can foreclose on the property and seize it.
Many people are surprised that an HOA can foreclose on a property. It will happen when a homeowner does not pay assessments or has unpaid dues.
How Does an HOA Foreclosure Work?
For an HOA to foreclose a property, they need to apply for a Claim of Lien. This prevents an owner from selling the property or refinancing unless they have paid the debt. It will stay attached to the property for three years if it is not paid and when it expires the HOA will have to apply for another.
The process will start with a hearing. In this, confirmation that the homeowner is behind on their payments by at least 90 days shall be given. A vote then gets taken to act on foreclosure and notice will be served to the homeowner to allow them to pay their debts.
Failure to reach an agreement means the second phase begins. This starts with the posting of a notice of sale and the HOA begins a lawsuit against the homeowner.
Can Other People Bid on the HOA Foreclosure Sale?
When a foreclosure takes place, other people can bid on the property. These third parties must submit a bid that is higher than the one the HOA has. The bidder then pays 5% to the trustee of the property at that given time.
Can It Be Contested?
When contesting of foreclosure takes place, the attorney for the HOA can no longer be its trustee and attorney at the same time, so someone else must become a trustee. This person is normally a lawyer as well, increasing the cost.
A foreclosure does tend to fall in the favour of HOAs. This is because there is a long process in place before it gets to this point, giving the owner plenty of time to rectify the situation in the run-up. A defendant can also not use facts such as the amount owed or if the HOA did their duty as a defence.
Now you know about HOA foreclosure, you can see that it should take a long time to reach if due diligence had been served. Systems are in place to allow resolution of the conflict before this happens.
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