Dealing with your HOA on a Short Sale

An interesting article was featured on the NPR website recently, about a homeowners association that decided to foreclose on the home of an army captain over $800 in unpaid dues.

While the circumstances of the situation that lead to this horrible outcome are somewhat uncommon, dealing with a stubborn HOA is not.

When someone is no longer able to pay their mortgage, it only makes sense that they are unable to pay their monthly association dues as well.

But when it comes time to sell the home, the HOA can refuse to remove the lien they have on the property, blocking the sale from going through until they receive payment of the outstanding dues.

Increasingly, we find ourselves having to negotiate with the HOA if the lender won’t absorb all of the outstanding dues. More times than not, the HOA is unwilling to reduce the balance.

It’s a shortsighted move on the part of the HOA.

Let’s say the association is owed $4,000 and we come to them with $2,000. Ideal? No. But, it means they get half the money owed to them and – more importantly – a new resident moves in and resumes making the monthly payments that had ceased.

When they say no, they get nothing. The home goes into foreclosure and in a redemption state like Michigan, it will sit empty for at least 6-10 months. Likely, it will be for longer since condos aren’t very popular here at the moment. Even if they pursue for the money owed, what are the odds they collect? The legal costs to pursue will likely cost more than the $4k balance and the person they’re pursing is probably insolvent and either on the verge of bankruptcy, or already there.

Most associations only look at what they’re receiving today, not what they stand to lose in the months or years to come.

Don’t let your HOA stop you from short selling your home. Make them realize the big picture…