Buying HOA Lien at Auction - questions about 90 day right of redemption & paying off first
Submitted by Michelle Newell
from CA
- 01/17/2012 - 8:27pm
The HOA lien is coming up for auction. The 1st is also scheduled for auction but a few months later. I have some detailed questions and hope you can help! If I buy the HOA lien can I immediately contact the lender for the 1st to set up taking over that loan? Do I have to wait out the 90 day redemption period and hope that the owners don't come back to me with the amount of the HOA lien? And if they don't do I have to wait for the 90 days to be up to tackle the 1st mortgage? What if I do have to wait and the 1st gets sold at auction?
Thank you
- Forums:
Comments
As MikeT wrote in another post
"This brings up too many scenarios to discuss here. If you get possession, at some point down the line you should be able to get title insurance. You might have to wait a year. IF you let the first go to sale, they will probably want to interplead the overbid - and - most likely, will send notice of same to the former owner - who would have no reason not to make a claim and muddy the waters.
If you advance to the first during the redemption period, you should be able to get your advance back if, in the long shot, the former owner redeems. Problem is, if there is a lot of equity, a speculator could approach the owner and buy his interest and redeem."
As Michelle's reposting of a comment from MikeT from another post alludes, it is complicated.
That said, when I've bought HOA Liens, I have typically approached the prior owner in an effort to get them to quit claim the property to me - usually as part of a cash-4-keys agreement. That resolves redemption, concerns about homeowner claims, and the possibility of interference from another investor.
If I couldn't get the quit claim, I personally would wait out the 90 days before advancing anything. If a senior loan was scheduled during that period, I would be prepared to bid it up sufficient to cover whatever I paid for the HOA lien, and whatever profit I desired (as the owner you'd be entitled to any excess proceeds - the amount bid over the amount owed), thus protecting my position.
Thank you Sean and Michelle. I am thinking of simply approaching the owner who seems to have been unable to pay either mortgage or HOA for some time. Would you recommend approaching before the HOA lien comes up again?
If there is enough equity in the property for you to be willing to purchase the HOA lien, then yes, it might make sense to simply approach them with an offer to buy the property. These days most of these are underwater, so the question rarely comes up anymore. Before you approach them make sure you read up on Civil Code 1694 if you plan to buy the house as investment, though don't worry about it if you intend to live there.
Post new comment