Distressed Homeowners are not the only ones struggling from the devastation of the foreclosure crises our nation has experienced over the past several years. Homeowners Associations are among many entities affected. As homeowners find themselves in financial hardship, in addition to their inability to pay their mortgage payment many times they quit paying the HOA bill too. As a result many HOAs have found themselves in a treacherous financial position as well.
In the past the Homeowners Association would most typically file a lien on the property and sometimes begin foreclosure proceedings on the property. Some associations even took more aggressive action to foreclose on the property and then rent it out to recoup as much of their losses as possible until the bank ultimately foreclosed on the property. All of these methods are costly and time consuming, and many times the HOA would not be able to recover all of their losses and expenses. In Colorado the HOA is limited by something called a super lien. Once the bank has foreclosed on the property the most the HOA can collect from the bank is 6 months HOA payments no matter how many months are past due. In a case where the property goes through the entire foreclosure process it will almost always be more than 6 months and can easily be a year or more.
These days more and more Homeowners associations are realizing the value of short sales. What the more astute officers of homeowners associations are discovering is that a short sale is better for them and the community they represent, as well as the distressed homeowner. By encouraging a distressed homeowner to complete a short sale transaction on the property they can no longer afford, the HOA may avoid some of the legal fees and court costs which add to their expenses. In most cases they will receive most, if not all of the past due proceeds in the short sale transaction. Additionally, when the homeowners discover the HOA is working with them and not against them, much of the time they are willing to pay the more affordable HOA payment even though they cannot afford to make the mortgage payment. By working with the homeowner to accomplish a successful short sale transaction the property will not be left vacant by a homeowner who abandons the property and there will be a new paying customer in the form of a new buyer in the property sooner than if it had gone through a foreclosure process. The short sale transaction also helps keep property values up in the neighborhood as a short sale typically will sell for more than a bank owned foreclosure property.
As a short sale specialist realtor I always encourage the homeowner to stay current on their HOA payments and if possible catch them up if they are delinquent. It is better for the community and makes for a less difficult short sale transaction than if we have to deal with delinquent HOA payments and a possible lien on top of everything else.