Facing Foreclosure of Your Condo-Are There Choices?

There are a lot of people today having to think about foreclosure that never in their wildest dreams ever thought they would even have to imagine it in their lifetime. That was the stuff of the “dust bowl depression era” , right? Well, now it is upon the masses.

And I understand that options are limited. To top it off, if you live in a Condo or HOA, what does that mean in the scheme of things?

Owners today are confounded by the myriad of things they are being told when trying to decide what to do when jobs are lost, the income flow is abruptly stifled, or some other unfortunate thing happens that makes paying for a home next to impossible. Some widely touted financial advisors are telling people to walk away from their homes. And what is perhaps the most frustrating? Seeking a loan modification, deed in lieu, or short sale. If you have had good credit all your life, you are at a distinct disadvantage when crisis hits today and programs are offered to others who were already badly in debt and not you. I am sure that does not seem fair.

And here is a disturbing thought – I heard the other day that some lenders are advising owners not to pay their assessments because they cannot be considered for a loan modification, short sale or deed in lieu of foreclosure unless they show a bad credit history! So is “dirtying up” your credit history with others so you can try  for a loan modification or short sale the answer? Well, certainly, it’s not for everyone. And has finding someone to talk to at the bank who has any authority the issue? Frankly, one might get more mileage out of stopping the mortgage payments. Then the lender has to call you!

Understand, I am not advising anyone NOT to pay a debt, but reality is reality. So what is at least one simple thing I can tell you that will make you smarter when choosing options with regard to your Condo? If you are unable to pay your mortgage after all is said and done, but need a place to live, and live in a Condo or HOA, consider this:

 Banks are sitting on inventory (homes that are scheduled for foreclosure) for months and often more than a year. HOAs are sitting on upside down properties and foreclosing (although they also often have the right in California) no longer brings in sufficient funds to cover the delinquent amounts, in most cases.  And there is a critical difference between what happens to any deficiency in a bank loan on your property and the HOA assessment deficiency. If the bank forecloses, in most cases, the bank cannot come after you for the deficiency. BUT, if the HOA or Condo Association is trying to collect your debt of assessments, it can sue you for the amount as a personal debt as an alternative to foreclosure. In other words, you cannot duck the association debt by walking away.

So for the tip: If you are in dire straights and facing foreclosure by your lender, and need a place to live which  most people do, don’t walk away from the condo or HOA home and pay rent somewhere else. Stay where you are and instead of paying rent to someone else, stay in your home and pay the assessments (which are probably less than rent somewhere else) and thereby avoid the situation where you are getting further behind! Avoid the big unpleasant surprise when you get the HOA or Condo bill for months or years of assessments, late fees and collection costs, which you owe.

There is a comprehensive Primer for sale on my website that is all about HOA Foreclosure (that includes condos) for twenty five bucks.  It’s a “little understood”, or should I say really misunderstood, area of the law.  And owners today are thoroughly baffled and frustrated by the many undesirable choices. But as always, information (the right kind, dependable) is power. So if you want more, you know where to go – the more information you have, the more informed your choices will be and perhaps you can at least successfully choose the lesser of evils.

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