Foreclosure is a nightmare for every homeowner. Yet, it's sometimes an inevitable outcome of homeownership. In the first six months of 2024, 130,369 properties in the U.S. started the foreclosure process, according to ATTOM, a data solutions organization.
Buying a home in an HOA presents an even greater foreclosure risk than buying a non-HOA home. While non-HOA homes can only be foreclosed when the owner defaults on a loan that's secured against the property, HOA homes can be foreclosed for not just loans, but non-payment of HOA dues as well.
Read on for a detailed insight into HOA foreclosure.
Lender-Related Foreclosures
Buying a home in a gated or planned community gives you access to greater security. Only you and your family members can enter the home freely; everyone else will need authorization from the community's security team.
With this heightened sense of security, you might be wondering whether a lender can execute a foreclosure on your home. The simple answer is yes.
If you default on your mortgage or any other credit facility where the home has been attached as security, such as a home line of credit, the lender has the right to foreclose on the home.
Of course, they're not going to force their way into the property. If all your efforts to stop an imminent foreclosure have failed, your lender will get in touch with your community management team. Your community won't stand in the way since foreclosure is a legal process, and it can sometimes be executed with the help of law enforcement.
HOA-Sanctioned Foreclosure
Perhaps you bought your HOA home in cash, or you've paid off your mortgage. The threat of foreclosure is now alien to you, or so you think!
Well, as an HOA homeowner, you're required to pay HOA dues and other assessments your community might enforce. So, what's the worst that can happen if you default on these payments? Surely, nobody is going to come after your property simply because you're behind on your HOA fee payments.
Shock on you! Although rare, an HOA can begin foreclosure proceedings on owners who owe the community money. It's not an easy process, since the HOA will typically file a lien on the property. This restricts your ability to sell or transfer the home to another party.
If you have no plans to cease ownership of the home, you might not be bothered by the lien. If you do that, you'll be giving your HOA a stronger reason to begin the foreclosure process.
Prevent HOA Foreclosure
Your home is a big financial investment. You wouldn't want to lose it under any circumstances. Although HOA foreclosure is a risk, you can take steps to prevent it. Paying up what you owe is the surest way to keep it off, but in case you're unable to and have to face foreclosure, be proactive.
Reach out to your HOA and negotiate a payment plan. If things get out of hand, seek HOA legal advice. At PMI Village Alliance, we have the resources to help you make the most of your HOA property in Jessup, MD. We're dedicated to providing our clients with excellent customer service.
Schedule a consultation with our experts today.
