Sunday, February 17, 2013

Investors Profit Through HOA Auctions

Homeowner Associations (HOA) throughout the United States are allowed to record a lien on a homeowner's property if the association fees aren't paid in a timely manner. If the owner still doesn't pay what is owed, the property may be sold at an HOA foreclosure auction to the highest bidder. The association fees are paid, but any mortgage liens remain on the property since it was pledged as collateral for the loan.

So the investor now owns a property that he may have bought for an amount equal to or slightly higher than the unpaid association fees. If HOA rules allow leasing, that investor is free to rent the property until the bank forecloses. In judicial states, like Florida, where foreclosures have to proceed through the courts, this may take years. The investor can collect rent during this entire time. In some cases, the lender allows the investor to satisfy the mortgage lien by paying it off at a deeply discounted amount equal to what it would sell for at a foreclosure auction. Unfortunately, in other circumstabces, the investors aren't maintaining the property or paying their HOA fees, and the property is sold again at another HOA auction.

If you're interested in pursuing this, search the Internet for county name HOA auction. Remember that you will still be responsible for the mortgage lien although you are probably not required to disclose to prospective tenants that the bank may claim the property.

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