Home Page

Subscribe to Email Updates

Latest Blog Post

Why Paying Your Homeowners Association Fees Beats Foreclosure?

Michael Nolen of Coldwell Banker Realty
by Michael Nolen of Coldwell Banker Realty on July 13, 2017 at 7:00 AM

If you are struggling to make your monthly mortgage payments on your home or condo, you may not want to stop paying your HOA fees. Your association could foreclose before the bank! Many homeowners are unaware of the legal and financial consequences of not paying their dues.

There’s a lot to know about owning a home or condo with a homeowners association. Understanding the consequences of not paying your homeowners association fees is critical.

Why Paying Your Homeowners Association Fees Beats a Foreclosure Sale?


Your Homeowners Association could file a lien and foreclose

The fact is, in most states the association can place a lien on a your home or condo unit for non-payment and force a foreclosure sale of the property. This could happen even if the owner has been making their mortgage payments.

After a foreclosure sale, the owner is then evicted and the property is transferred either to a third party or to the bank holding the mortgage if the home or condo unit is not purchased at auction.


Your HOA could evict you directly

In some states, other legal remedies exist for non-payment of Homeowners Association fees. The association can file a forcible lawsuit, take possession of your home or condo unit and evict the owner. They then can rent out the property to recover:

  • Unpaid Homeowners Association fees

  • Legal costs

  • Any other fees charged to the unit

If the owner is renting the unit, the tenants can be ordered to pay their rents to the association instead of the owner until the delinquent amounts are caught up.


You may be subject to wage garnishment

Even if the bank forecloses on a property, the prior owner’s responsibility to pay delinquent Homeowners Association fees may not end.

If the association has taken legal action to obtain a personal judgment against the owner, that order to pay stands even if they no longer own the unit. To recover what is owed on the judgment the association may be able to:

  • Lien on bank accounts

  • Lien on other assets, such as 401(k)s

  • Pursue wage garnishments from an employer


Legal fees can exceed the unpaid homeowners association fees

Associations hold a lot of legal power to collect their HOA fees that come with home and condo ownership, and the legal fees to enforce payment can be added to the balance. This can send the total amount due to skyrocket well above your past due fees. You may double or triple your debt to your HOA.


Delinquent HOA fees can derail selling your home

It’s always advisable for owners to continue paying their HOA fees (which are usually much less than a mortgage payment).

However, if you're behind on your association fees, you'll need to pay off the balance in the sale.


Buying a home or condo with a HOA? Read my blog article, 5 Common Reasons Buying a Condo May Fail Due to the Condo Association, which covers excessive delinquencies with an association.


You owe more on your home than the home value

If you have a mortgage, and the remaining mortgage balance is greater than your home value, you could be in a tricky situation.

This process for selling your home is called a "short sale". A short sale takes place when the seller owns more on the mortgage debt than than their current home value. To sell their home, the seller will need to get their lender to agree to the sale, and how the proceeds will be distributed.

If your HOA put a lien on your property, they'll most likely be subordinate to your mortgage(s). This means your mortgage will first be paid from the proceeds of the sale before your HOA fees.

You'll need to either pay off the past due balance, settle it, or have the buyer pay the balance. You may even need to comply with terms and conditions set by your mortgage lender's as a condition of allowing you to sell your home for less than the full pay-off.

Buyer's will sometimes agree to pay it. If you're selling your home as a short sale, it is possible the seller's lender may agree to pay something to the association settle their lien. However, every lender's short sale program guidelines are different, and the amount, if any, paid to an HOA varies.


Subscribe Now!

Leave a comment

Michael Nolen of Coldwell Banker Realty
Michael brings a diverse background of mortgage, loan servicing and housing experience. Michael offers his clients a variety of helpful resources, guides and services that helps make buying and selling coastal real estate in the Ocean City, Ocean Pines, and Coastal Delaware markets. Michael has over 11 years industry experience and invests and manages vacation rental properties in the Ocean City, MD area through Nolen Invest and Nolen Vacation Rentals.
Written by Author

Related posts

What is a Condo? Explained in 97 Words

A condominium, or “condo” for short, is an individual unit privately owned within a building of other units.

Condo buildings...

5 Tricks to Keep Condo Financing in Ocean City, MD on Track! [VIDEO]

Let’s face it, when you’re researching Ocean City, MD real estate for sale, financing may not seem like it’s a big issue. In...

5 Things to Know for Condo Financing in Ocean City, MD

Many buyers need a mortgage to buy a home or condo in the Ocean City, MD real estate market. For those that aren't able to buy...