Depending on the state of the property, acquiring it due to an assessment lien may be a better investment for the HOA than convincing the original owner to settle their dues, especially if the property forecloses.
How does a property acquire assessment liens?
Many factors contribute to an assessment lien. Delinquency in paying the HOA fees is a common reason. A few other common ones include:
- Fines and penalties for violating the rules and regulations
- Maintenance or repair work costs for shared areas
- Special assessment to do major repairs or improvements on shared areas
After the assessment, the HOA may put a lien on the unpaid property.
What happens after acquiring the property?
Acquiring a foreclosed property can be an accomplishment after a prolonged battle with the delinquent homeowner. However, the process doesn’t end there. Beyond the hours of research, debate and negotiation, several steps typically follow.
- Auction or sale of the property: Selling the property through an auction or a sheriff’s sale, in which the highest bidder becomes the new owner.
- Distribution of proceeds to settle the liens: The HOA should receive payment of assessment liens before they distribute any available and remaining funds by order of priority.
- Redemption period: Within 6 months, the original homeowner can redeem the property by paying the sale price, interest and any additional costs incurred.
- Eviction: If the original owner is not able to pay the sale price together with the liens plus incurred penalties, within the redemption period or if a new owner buys the property, they need to vacate the property.
- Title transfer: Having the title transferred to the new owner may also involve transferring the remaining liens
The process may differ depending on the original owner’s circumstances and situation. An auction or sale typically starts the process; however, they may forego the redemption period or the eviction may not happen at all if the original owner decides to leave.
If you are planning to acquire a property set for foreclosure, approach the purchase with careful consideration and due diligence. By understanding the legal process, evaluating the property’s value and seeking professional advice, you can navigate the complexities and make informed decisions.