Crazy Story HELP! In escrow on a foreclosure-I find out HOA doesn't have insurance!

[prin]

What is the name of your state? California

I am currently in escrow on a condo that I am planning to use as a rental. I have always wanted to invest in real estate, and aside from my own home, this is my first venture.

I offered $95,000 on a 2 bdrm 1 bath condo in So. Ca. and my offer was accepted. All of the comps. come back at $150,000 - $170,000, so this has all the makings of a great deal. As a matter of fact when my offer was accepted and escrow opened, I was on top of the world.

During the course of this escrow, some difficulties have arisen. Yesterday, my loan processor called me saying that there was a problem with the condo association. As a requirement of my loan, the bank wants the association to fill out a questionnaire, the processor called the association to get a fax number, and they told her that they managed the condos across the street from the one that I am buying. So the selling realtors gave us the wrong information. I cannot get my loan without the HOA information, and when I asked my realtor what we should do, she said that we would have to research and find out the correct association. She said that we could go to the building, and talk to the other homeowners, and ask them. I wasn't very comfortable with that, and my mother-in-law knows someone who lives in the complex, so I asked her if she could find out for me. She called up her friend, got the name and number for the CORRECT association, and her friend told her that the HOA is having financial troubles. Some people live in the condos and do not pay their fees, so the others have had to pay more so that the building's utilities etc. are paid. She said that they fired the old property manager, because he wasn't doing anything about this situation, and they hired someone else who seems to be more aggressive about collecting the HOA fees. When my realtor contacted this property manager, we found out a couple of important things, number one, the association is currently in such bad financial shape that they don't even have property insurance (I know that my lender isn't going to like that at all), and that there are close to $5,000.00 in back HOA fees owed on the unit that I am buying.

Since I am buying this unit from a bank, there is a stipulation in the contract that reads that the bank is only responsible for HOA fees from the time that they foreclosed on the property. Will I have to pay these delinquent fees? Or should the property manager go after the previous owners for them?

Even if I do have to pay the $5,000.00, I think this may still be a great deal, but, I am concerned about the ramifications of the financial state of the HOA. What is the worst-case-scenario for the owners? Can't the HOA foreclose on the people who are not paying their fees, sell the units, and re-coup the costs? One factor that I believe is influential in things getting so bad is that many of the owners don't speak English. My mother-in-law's friend for instance. They are hard-working people struggling to get by and I think that they are being taken advantage of. What are their rights? Do they have a right to some of the extra money back that they have paid to keep the place going?

The current association fees are $230.00 a month, which I think are very high, considering the fact that the place requires very little upkeep/maintenance. There is only a tiny grassy area, no pool, no spa, and needed repairs on the outside of the buildings are not currently being made. And there is no insurance.

What do you think? Should I run- should I hide - Can I get out- Should I stay in and help - What should I do?

SheriWhat is the name of your state?

[Wyldrush]

Sheri... (first off I am a investor not a lawyer so you know)

Sounds like the association is not managing the property correctly. The association can not force other tenants to pay for back HOA fees. They would need to have meeting and have a special assessment to force everyone to pay and then again, the tenants not paying need to pay that as well. The association should have some money on it's books and be looking into obtaining a loan from the bank, using common areas (clubhouse, pool) as colateral. Then structure a 5yrs payment plan and then have a special 5yrs assessment to pay off the loan. This makes it easier for all to pay but you can give the options of a 1 time payment and no interest to owners as well.

As for insurance, the complex needs insurance policy since the banks require coverage if the building was to burn down or damages by a storm, etc plus damages to common areas as well as slip and falls, personal injury, etc.

Maintance fees are reasonable and honestly without knows all the cost involved in maintaing the complex, you do not know the what the monthly HOA should be plus savings. EXample.(roof needs to be replaced, parking lot resurface, painting building, etc)

As for the the mortgage questionaire, its a basic 10 question usually. They ask questions such as who is insurance carry so bank knows, Owner Occuppied unit percentage (if complex is generally more than 30% investor owned then lending guidelines will change), are there any legal actions currently against the association, any liens or special assessments pending.

Now as forthe $5000 in HOA due. The bank should either pay this or association should go after the prior owner. With the $5000 due, you can not have a clean title and the bank is obligated by law to deliver the unit with a clean title (of course you can consider having this paid thu closing but I would tell bank no personally)

As for foreclosing on the units. yes the association can foreclose once you fall behind 1 month. (NOw I live in Florida so we have tons of condos). But many do not foreclose because of the cost associated with the unit and the fact that t he bank has a 1st position so when the condo is sold the mortgages will take prority 1st and if you can not sell for profit the association will not recoup the back HOA or the attorney fees.

Hope this helps...

Andrew

[specul8tor]

If a HOA can file a lien against the owner of a condo unit for non payment of HOA fees, then won't they eventually collect, assuming the total HOA fees do not exceed the value of the property? I would expect if a homeowner doesn't pay, if the bank forecloses, the lien would still apply against the property. When the bank sells the property, they would need to deliver clean title, so wouldn't the bank have to pay the HOA fees?

Or is the rule that the lien is only good against the owner when the fee was due? So if a bank forecloses after a year of non payment of mortage (and HOA fees also), then the HOA loses this forever (assuming the owner is bankrupt) since the bank is not responsible for the HOA fee. In this situation, is the lien worthless to the HOA?

This has never been clear to me, I hope you can clarify it. Also, I am talking about condos in Florida if that makes any difference.

Thanks.

[TheGeekess]

Originally Posted by specul8tor

If a HOA can file a lien against the owner of a condo unit for non payment of HOA fees, then won't they eventually collect, assuming the total HOA fees do not exceed the value of the property? I would expect if a homeowner doesn't pay, if the bank forecloses, the lien would still apply against the property. When the bank sells the property, they would need to deliver clean title, so wouldn't the bank have to pay the HOA fees?

Or is the rule that the lien is only good against the owner when the fee was due? So if a bank forecloses after a year of non payment of mortage (and HOA fees also), then the HOA loses this forever (assuming the owner is bankrupt) since the bank is not responsible for the HOA fee. In this situation, is the lien worthless to the HOA?

This has never been clear to me, I hope you can clarify it. Also, I am talking about condos in Florida if that makes any difference.

Thanks.

You are posting to a thread that has been dead for over 6mths now. Please start your own thread.