Most people know that an association can foreclose a lien.\u00a0 However, most people do not understand how the association foreclosure works.\u00a0 This was brought to my attention when a client came into the office.\u00a0 He had just purchased two association foreclosure judgments and he wanted title insurance on his newly acquired property.\u00a0 He thought he had gotten a real bargain wanted to know what to do next.<\/p>\n
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I am always skeptical of judgments, so I asked a few simple questions:\u00a0 How much did he\u00a0pay for the judgments? He replied that he paid $10,000 for one and $15,000 for the other.\u00a0 I asked if anyone was bidding against him.\u00a0 He responded “no”.\u00a0 We decided to first to a title search on the property, this would determine if he had good title.\u00a0 However, I did not have a good feeling about his purchases.<\/p>\n
A few days later the client was back in the office for a follow up appointment.\u00a0 I had to break the bad news to him.\u00a0 Yes, he nows owned two condominium units, but both had superior mortgages on them that will be foreclosed.\u00a0 How is this possible?\u00a0 Very simple.\u00a0 The association has the right to place a lien on a property for unpaid assessments.\u00a0 Additionally, if the assessments do not get paid, they can then place a lien on the property.\u00a0 Next, they can foreclose the lien just as any other lender.<\/p>\n
The biggest concern from an investor’s point of view is priority of the lien.\u00a0 Associations liens are usually inferior to the interest of a first mortgage.\u00a0 Because they are inferior, an association can never wipe out a first place mortgage through a foreclosure.\u00a0 Unfortunately, my client spent $25,000 to learn this lesson.\u00a0 Most attorneys who are familiar with associations, would rather meet with a client who would like to learn how to correctly bid on judgments rather than letting them find out the hard way.<\/p>\n\n\n\n\n","protected":false},"excerpt":{"rendered":"
Most people know that an association can foreclose a lien.\u00a0 However, most people do not understand how the association foreclosure works.\u00a0 This was brought to my attention when a client came into the office.\u00a0 He had just purchased two association … Continue reading