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Board Member FAQ: HOA Foreclosures

Elizabeth Martin's picture

As a community association board member, the last thing you want to do is drive members out of your community. When every other attempt to collect on dues and assessments have failed, you may have to resort to an HOA foreclosure. But the process may be more difficult than you expect.

Most community associations' bylaws create an automatic lien on the property of a member who fails to pay his or her HOA assessments and dues. But a lien is only a promise of money if a property is sold.  If a long-time member of your community refuses to pay dues and isn't planning on moving, your collections specialists may need to force the issue with an HOA foreclosure.

Judicial HOA Foreclosures

In states that follow the judicial foreclosure process (about 22 of them), your condo association will need to go to court before you can collect on your lien. Here are the steps in a judicial foreclosure:

1.A Notice of Intent to Begin Foreclosure is sent to the debtor in default a certain number of days before the lawsuit begins. The homeowner then has a chance to catch up on missed payments, costs, and interest charges.

2.A Lawsuit is filed in the local district court. This suit isn't asking for a money judgment. It is requesting the court's permission to sell the property the lien is attached to.

READ MORE: Collections Lawsuits

3.A Notice of Intent to Sell is sent out after the judgment is entered.

4.A Redemption Period allows the homeowner one last chance to pay everything off and keep their home. The length of the redemption period depends on the state.

5.An Auction is held allowing anyone from residents to investors to purchase the property, often well below fair market price.

6.An Eviction may be necessary to remove the non-paying former owner. This often requires a posted notice and another court order.

Non-Judicial Trustee Sales

Some states' laws (as many as 30 in some cases) allow HOAs and other creditors with liens to skip the courthouse and go straight to the sale. In place of a formal lawsuit, the Trustee Sale requires several notices, including a Notice of Default and a Notice of Sale. Some states allow a redemption period after the sale during which the homeowner can pay off the debt and keep possession of the property.

HOA Foreclosure Defenses

No matter your state's process, there will always be a way for a homeowner to challenge your right to foreclose. However, these defenses are limited to problems with the process, not a resident's inability to pay. That's why using skilled collections specialists is so crucial. Contact Equity Experts today to schedule an appointment with one of our Relationship Managers. 

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