[youtube=http://www.youtube.com/watch?v=5Z_0xA0cais&feature=player_embedded]
These guys are on the cutting edge of short sales. Still don’t understand short sales? Well call me and I’ll get you up to speed. Often if someone is in a position to go through a short sale….they probably haven’t been paying their HOA either. This gets tricky–you are basically trying to get the bank to accept less on the property, however if you haven’t been paying your HOA, they may have placed a lien on the property. Often managers of HOA’s are thick skulled and fight the bank when they are told, “Ok Mr. HOA president, this homeowner is trying to do a short sale and you’ve put a lien on the property because they haven’t paid lately…we’ll give you $200 and you will remove the lien.”

Very often the HOA says “NO” to the bank. They want what they are owed. However, if the short sale doesn’t work out and the bank forecloses….it is very likely that the HOA gets nothing. It makes much more sense to accept the loss on the front end–help expedite the short sale, and then get a new fresh start on a new buyer in a quicker time frame. So while they may be losing a “little” money–at least they are getting something ($200 in my scenario), moving a non-paying resident out, and getting a new resident who will hopefully pay regularly and get them in quicker rather than later.

Take aways: if you are behind on your mortgage and are doing a short sale, KEEP PAYING YOUR HOA DUES AT THE LEAST. Why? Thick skulled HOA managers could muck up the entire short sale process.

*disclaimer* Not all HOA managers are thick skulled 🙂

Amendment: I traded several emails with Brandon Miller, genius extraordinaire on all things real estate and the law, and he further informed this debate. He says in his title companies’ experience (Wagon Wheel Title for those that don’t know Brandon) that often the bank is the first to blink in these stand-offs. In TN, when HOA’s go unpaid and they place a lien on the unit–that lien runs with the property. What this means is that the lien isn’t against the delinquent owner but against that particular unit no matter who owns it. When HOA’s realize they have power in this game they sometimes are hard nosed with the banks–who he says often do cave just to get REO off the books. Although most of the time there is motivation on both sides to get the deal closed as often the HOA wants to get a new paying owner in the community. Long story short–no two short sales or foreclosures are the same in regards to past due HOA fees.