Sunday, August 11, 2013

Florida HOA & Mortgage payoff question

Q: I am dealing with a HOA situation and am looking for some advice. I live florida and the home I live in is about to be foreclosed on. I have a feeling that the HOA association might come back and go after me for the back assessments. Knowing that you are on the HOA board how often due you go after people in these situations and, if so, what percentage of the back hoa fees have you settled it for ? I appreciate your help. Dane's Answer--I won't kid you, I'm no lawyer. I am on an HOA board and I am a Realtor. But the state of Florida frowns on Realtors practicing law, and so be aware: advice--as they say--is only as valuable as what you paid for it--and in this case my advice is free. I am not clear on whether or not you had declared bankruptcy, your email indicated that you might have done this in 2009, so assuming you did, most of your debts will have either been settled for something less than they were originally, or they will have been written off all together by your creditors. I will assume you did have a personal bankruptcy, and because the house was your principle residence, it was excluded. Now you are having trouble with the mortgage and are about to lose the home to the bank. The bankruptcy would have cleared any HOA fees that had accrued up until that time (2009) but not any HOA fees due and payable since then. On a brighter side for you, banks rattle their swords for a number of months before they strike. Meaning that you can probably live in the house for maybe many months even after they start foreclosure proceedings. At some point there will be an auction, and generally the bank will buy the property back at that time. Legally right now the deed is in your name, but the mortgage and note allow the bank to take back your deed for cause, (and that includes lack of payment) and sell the deed--ownership of the property--to the highest bidder. At auction there are usually nosey neighbors, investors, some hopeful buyers and a representative of the bank. Unless the auctioneer is able to get the bids up into the current tax assessed value range, and therefore sell the property to a member of the public, the bank will normally buy the property. If a sale is made to a member of the public, you will be moving out ASAP. Sometimes within 24 hours, so be aware that a quick move may be required. But usually the bank becomes the owner, and then it's pretty much business as usual around the house. The bank will likely be in touch and give you some options, (they may demand you to vacate, they may offer to rent the place to you, or they may send over the sheriff and change the locks) at this point get some legal advice, you should be able to afford a lawyer since you have not paid a mortgage or any rent for some time. But once the bank owns the property, the HOA indebtedness will switch over to them. And the HOA will place a lien on the bank and get paid when the property is sold the next time. But all HOA's act differently. Some HOAs are actual professional companies run by lawyers who know their stuff, others are run by an elected board of residents, who are most likely retirees. Just to give you a sense of the varying quality of these boards, Florida has a new law that says board members are required to sign a document saying that they have read the bylaws and covenants. Doesn't that give you a warm fuzzy? Q: I am on a fixed income, and get monthly disability. A financial planner has reviewed my accounts and suggests I pay off my mortgage to become essentially debt free, but this will use up about half of my savings. Is this a good idea? Dane's Answer--Here's my wishy-washy answer: yes and no. It's a great idea to be debt free, but given that you are not being pressured to clear out the mortgage by your lender, why would you want to be without half of your savings? So years ago my father-in-law wanted to buy a condo for his second retirement--after the home on Cape Cod (his first retirement home) became too much for him and his wife, and the Hyannis hospital was almost an hour away. So he found a nice condo in New Hampshire, near the kids and the local hospital, and then was faced with a way to pay for the property. He was surprised that at 85 he qualified for a 30 year loan. But he went ahead with that concept and moved to NH. When the house on the Cape sold, he paid off the mortgage. But getting back to your question, you will need a few sheets of paper and a sharp pencil to make your decision. Of late, very low mortgage rates have been available, most of them were advertised, and you may have seen them in the high 2%s. My suggestion is to refinance into a low rate mortgage, maybe even a 10 year term, and forget paying off the existing mortgage now. But do the math. What does it cost you now, and what will it cost you if you refinance? Any money you save will be additional income for you. But cutting your savings in half to pay off a loan that is not in trouble will put you in a bind if you need the cash at a future time. Once you've closed the note, the only way to get emergency cash back back would be to remortgage the home, so if you can comfortably afford it, make the adjustments available to you in refinancing now, and stay the course. Dane Hahn is a real estate professional serving Sarasota and Charlotte counties. You can reach him at 941-681-0312 or at See him on the web at

1 comment:

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