Homeowners Associations are generally non-profit organizations created by a specific community, wherein distinct property owners act as a governing body for households in a designated area. Examples of where homeowners associations operate include townhouses, condominiums and homes on certain streets or in an entire neighborhood.
The purpose of a Homeowners Association is to establish general guidelines (or rules) for the properties encompassed within the HOA. Generally, these restrictions pertain to issues like how many people can occupy a property, whether or not an owner can paint their house a certain color and how disputes between owners can be mediated. Additionally, these associations often provide maintenance to communal properties like townhouses and condos, such as gardening, pool cleaning and repairs.
It is important for potential home buyers interested in HOA properties to understand the financial impact of living in this setting. Homeowners Associations require residents to pay annual dues, they also assess fines to owners who violate community bylaws. The dollar amount varies by HOA; however some Homeowner Associations charge costly fees.
These fees have been a point of contention for many residents over the past several years. Seemingly, every few months a headline comes out about a foreclosure that occurred because an owner either couldn’t pay their dues or refused to do so.
The first question interested home buyers usually ask about an HOA is “can they really foreclose on my property”? The answer, which often comes as a shock, is yes they can cause a foreclosure. Understand, an HOA is a legal entity, with the power to place a lien on your property if you become delinquent in your payments. Even if you are current on your mortgage, you are not entitled to avoid HOA charges. Failure to pay will result in late charges and interest, compounding the issue.
The process of an HOA foreclosure varies by state, but specific standards must be met before an HOA can bring forth foreclosure proceedings. In California, charges must be at least 12 months old and exceed $1,800.
The Homeowners Association must notify the resident in writing of the boards’ formal decision to foreclose as well the county recorder. In order to judicially foreclose on a resident, the board must file a lawsuit against the owner and obtain a court ordered judgment allowing the sale of the home to satisfy the lien.
In the event of a foreclosure, the owner can legally defend themselves on the basis of incorrect accounting, unreasonable charges and a failure to properly follow procedure (among other reasons). Additionally, most states allow the owner the first opportunity to buy back their home following a foreclosure (known as the right of redemption).
Not paying HOA fees is a serious issue, one that brings about severe ramifications. A lien on your property will convolute its title, impeding the ability to refinance or sell, causing the owner a giant headache that may end with the outright repossession of the home.
Upside down homeowners lacking equity are eligible to receive VA Home Loan Centers services at no out of pocket cost, learn more here.
If you choose to have VA Home Loan Centers represent you in selling your home as a short sale, you can stop using our services at any time. VA Home Loan Centers charges no up-front fees to assist you with your short sale. Our partner real estate brokerages will charge a real estate commission but if the bank agrees to a short sale, this is paid for by your lender. VA Home Loan Centers is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change the terms of your mortgage including approving your short sale. It is recommended that you continue to make payments on your mortgage throughout the process. Should you default on your payments, you can see a negative impact to your credit report and your home could be foreclosed upon.