When a home falls into foreclosure, quite often the homeowner quits paying home owner’s association (HOA) dues long before a bank takes over the property and long before a new owner resumes paying regular monthly dues. What happens to the obligation to pay HOA dues when a home is foreclosed?
So many folks who I work with on real property (land) matters have at least some confusion about how property ownership generally works, especially between spouses. Here are some of the issues I see the most often and a basic explanation of the law related to each instance: Continue reading “Basics of Property Ownership Between Spouses”
Many small to mid-size home owners associations (“HOAs”) are run by a board made of a few active members. It can be a thankless job, especially when the HOA cannot afford to pay an outside management company to be responsible for the day-to-day management of the HOA. The question that always arises is how to handle the member that has stopped paying assessment dues. In a small HOA, delinquency of even a few hundred dollars can be a large percentage of the HOA’s budget. Here are my tips on how to handle delinquent members.
For over a year I’ve been providing clients an hour long “primer” on foreclosure and the risks in walking away from a home that is underwater. What strikes me in almost every case is the client’s strong sense of ethics/values/morals surrounding homeownership and ability/obligation to pay. Brent White, a University of Airzona law professor has written a book called Underwater Home: What Should You Do if You Owe More on Your Home than It’s Worth? which lays out the case for and against walking away from an upside-down mortgage where the home is worth less than the mortgage balance. Mr. White strips away the moral issues embroiled in the decision to keep paying on a home that you can’t afford. Mr. White states:
I think it‘s OK to stop paying the mortgage long before you clean out your savings, sacrifice your retirement, spend your children‘s college fund, and certainly before you have to start using your credit cards to survive. Before you do any of those things, I think the more moral course is to stop paying your mortgage. Indeed, I think it‘s morally acceptable to default if your mortgage threatens your ability to save adequately for the future, regardless of whether you can pay it according to some arbitrary definition of “affordability.” It may be more responsible to put the money saved from giving up your home and renting instead into an investment account, so that you are secure in retirement. Or put it into a college fund, so that you can give your children a chance at a higher education.
Certainly food for thought.
The purpose of this article is to provide potential purchasers and investors of properties in foreclosure an overview of the process and suggestions on how to proceed with negotiating your purchase.
*This article is not intended to be a comprehensive overview of the laws and rules on foreclosure and only applies to foreclosures in Minnesota.
A home for sale that is reffered to as a “Short Sale” is simply a home for sale that is “under water”. This means there is more owed against the home than it is worth.
A short sale seller has recognized that their home is underwater and has pre-negotiated or started negotiations with the bank to allow a sale despite the fact the bank will likely not be entirely paid off at the time of the sale. Depending on the scenario, the seller pledges to make up the difference out of other assets or the bank actually foregives the difference between the sale price and what is owed against the property.
In almost all cases the bank will have to approve a short sale purchase agreement. Banks are not always the quickest to respond to purchase agreements. It can take 60 to 90 days to approve a short sale. I often hear of short sale closing dates being pushed back and pushed back due to slow bank approval. This should not necessarily detere you from bidding on a short sale but you should think about your position as a buyer.
Are you an investor? Is this your second home? Would it be okay if you had to live in an apartment or with relatives after the sale of your current home closed and before the purchase of your short sale closed? Can you wait to put your current home on the market until your short sale purchase is closed or approved? Are you not worried about “locking” in an interest rate with a lender? If your answer is yes to some of these questions it may be okay to be on the bank’s time line. But, if for example you cannot afford or do not want to be in the position of waiting on the bank, a short sale might not be the best option.
Bottom line, there are great deals out there in today’s market if you are a careful, well informed buyer. If you are looking to buy real estate, short sale or not, I always suggest you consult an attorney licensed to practice in your geographic area. I would also sugest you watch My General Counselor for future postings on matters relating to buying and selling real estate.