It’s been front-page news, so everyone knows there are opportunities for investors to buy real estate below market value if the property is facing foreclosure. But have you considered homeowners association foreclosures?

As you know, when a lender initiates a conventional foreclosure, they are required by law to post a public notice. Wow, does that make it easy to find a distressed landlord’s name and address?

The problem is that it also means that you will have a lot of competition for that property. Every foreclosure investor in your area follows the foreclosure legal notices.

Home Owners Associations

The trick is to do something that others don’t. One area of ​​foreclosure buying that is not as well known is HOA foreclosures.

In most cases, long before a homeowner stops making mortgage payments, they stop paying their HOA assessment. That is your sign that the owner is in serious financial trouble and may be interested in getting out of the HOA and out of the mortgage payments.

That is a gigantic opportunity! Yes, it is an opportunity not only to buy a property, but also to help a homeowner out of a bind. .

It hasn’t been headline news, but many HOAs are experiencing increases in overdue assessments. In Arizona’s most populous counties, it has been reported that 20-35% of owed HOAs are delinquent. That’s a big jump from previous years.

HOA Assessments

Past due assessments are typically collected through past due notices, pre-lien letters, or HOA lien filing.

HOAs face an even bigger problem now with lenders foreclosing at record rates and some homeowners filing bankruptcy to pay off debt. The HOA faces collection through small claims court or judicial vs. non-judicial foreclosure.

Remember that fees are the only source of revenue for HOAs to finance community upkeep. When assessments are not paid, other owners in the development must make up the difference. That means their evaluations go up. Many of them are already on the brink of financial collapse and an increase in the HOA could be enough to push them over the edge.

HOA Regulations

It varies from state to state, but an HOA has the power to foreclose on the property if the HOA’s late payments reach a certain level. That foreclosure power is governed by the HOA bylaws and state law. As an example, this is how it works in California:

Before an HOA can foreclose, either judicially or non-judicially, on delinquent appraisals, one of two thresholds must be met

Number one: HOA assessment debt must be $1,800 or more, not including assessment fees; gold

Number two: the debt, regardless of the amount, must be more than 12 months past due.

Pre-Foreclosure Investment

This could be considered a pre-foreclosure investment, because you’ll be looking at published notices of default filed by homeowners’ associations. Just remember that any advertisement posted will attract anywhere from dozens to thousands of other bargain hunters.

Could I get information about the back assessment payment directly from the HOA before it becomes public? Probably not, but it doesn’t hurt to ask.

Another tactic might be to offer to pay the HOA for back assessments in exchange for the information. The average HOA fee probably ranges from $125-$250 per month. An evaluation of a few months can be a bargain price to pay for the information you would get before anyone else.

In my opinion, your best course of action may come through neighborhood marketing. You can target developments that have an HOA, and that is all that has been built in the last ten years.

Using door signs or direct mail, offer to pay a homeowner’s delinquent appraisal. This can give homeowners in financial distress access. Then it’s up to you to find a way to make a profitable home purchase.

You can offer a lease option, buy subject to existing financing, or negotiate an equity participation agreement. There are many ways to buy from those facing foreclosure that can benefit both you and the seller.

Investors in foreclosures are fighting each other trying to profit through conventional methods. You can reduce competition to near zero by understanding the opportunity offered to homeowners behind HOA assessments.