In Short Sales, HOA Liens Can Be Deal Killers

Have you ever actually talked until you were blue in the face? Have you ever typed so much that your fingers were bruised? Neither of those conditions has ever happened to me. However, I have said and typed the following phrase so many times in the last few years that I feel as if I am getting blue in the face and my fingers are a bit numb:

An HOA can be a short sale deal killer.

Why? This is because the fees associated with the HOA transfer to the new buyer (including unpaid HOA dues) may not be paid by the short sale lender. What Should You Do if the Fees Are Not Paid by the Short Sale Lender? Aah. The question should really be, “What did you do to prepare just in case the fees were not approved by the short sale lender?” When you take a short sale listing, you need to advise your seller that not all short sales are free (that is, completed at no cost to the seller). (Remember the lyrics to the Beatles song, Money?) There are often a few costs that the seller may still have to absorb in association with a short sale transaction. One of those such costs in the HOA.

First and foremost, a seller should always attempt to keep the HOA dues current, since there is no telling whether the bank will approve any proceeds towards unpaid HOA dues.

Second, it is possible that HOA docs will need to be ordered well before the transfer of title, and someone may have to pay for those documents at the time the order is placed.

Sellers and agents need to have a plan in place to pay for HOA docs, transfer fees, and unpaid dues. Of course, sellers and listing agents may need to engage the buyer and buyer’s agent in their plan. As you can see, when working on a short sale, it is important to plan ahead. It was the poet, Robert Burns (yes, that’s his statue in the photo) who wrote, “The best-laid schemes of mice and men / Go often askew, / And leave us nothing but grief and pain, / For promised joy!” If you do not want your closing to go askew, do your best to lay a scheme with respect to the HOA fees associated with your short sale transaction.   (photo credit)