It never ceases to amaze me that people don't know that their HOA can foreclose them out of their home even though they are paying their mortgage on time. A recent news story out of Colorado shed some light on this issue in an extreme way. In one neighborhood more than 60 resident s are being foreclosed by their homeowner's association for things as petty as lawn maintenance issues. The reality is that when you violate your HOA rules, such as failing to pay association dues, failing to maintain your lawn, parking too many cars in the street, etc. HOAs do not send certified mail, they will only warn you thru regular mail and most people either ignore or throw the mail away thinking it is junk. Unfortunately, once the case is turned over to an HOA lawyer you can usually expect to add a few thousand dollars to whatever they say you owe. To make matters worse, if you don't pay then the HOA can foreclose your home. The person buying the home is not buying your home free and clear. Instead, they are buying it while it still has a mortgage on it. Unfortunately, they will own the deed to your home, but you will still owe the money to the bank. You will have no interest in paying the mortgage to a home you no longer own so the loan will go into default, the house will fall into foreclosure, your credit will be ruined. To add insult to injury, you will lose any equity you have in your home to the person who bought your deed at the HOA foreclosure sale.
Yes, eventually the bank can foreclose if you stop paying and take the home, but most that are buying HOA foreclosures are investors looking to get some cash flow for a year or two before walking away. Otherwise, it is a new investor that doesn't understand that they didn't buy the house free and clear. Once the house is sold at the foreclosure auction it is gone forever. It is also important to understand that the reality is that most people that run HOAs are volunteers that are power hungry and get off on sticking it to their fellow neighbors. It sounds like a stereotype, but it has been proven true time and again. Moreover, each HOA law firm is different. There are many honorable HOA law firms that work with homeowner's and their attorneys to resolve cases. Unfortunately, there are a number of HOA law firms that have no interest in doing anything except kicking people out of their homes and getting their money. The bottom line is that if you receive a notice of lien or a letter from your HOA indicating that they are going to sue and foreclose your home you should take it very seriously and call us immediately.