What Happens to HOA Liens in a Short Sale?

HOA liens are one of the most misunderstood issues in short sales. Handled early, they're manageable. Ignored, they can kill a deal at the last minute.

Why HOA balances matter

If you're behind on your mortgage, you may also be behind on HOA dues. And HOA balances grow fast. Late fees, interest, collection charges and attorney fees can turn a few missed payments into several thousand dollars. HOAs across the country have become much more aggressive about filing liens and even foreclosing.

Does the HOA have to be paid?

The HOA balance has to be addressed before closing, but that doesn't always mean paid in full. What matters is state law, the HOA's own governing documents (the CC&Rs and bylaws) and what the title company requires to insure the sale.

Priority and state law

In some states, like Nevada, Colorado and Washington, part of an HOA balance can take priority over the mortgage. California isn't generally considered one of those "super-priority" states, but California HOAs can still record liens and, under certain conditions, foreclose. State law also limits what they can charge and when.

How we handle it

• Check HOA status on day one, not at the end.
• Order the full resale package and an itemized ledger showing every charge.
• Review the law and the CC&Rs. Both limit what an association can charge and collect.
• Challenge charges that don't belong, like questionable attorney fees or fines.
• Negotiate the payoff. The HOA wants to get paid and wants a paying owner in the unit. That gives everyone a reason to settle.

Title decides

If the title company won't insure the sale until the HOA lien is resolved, the deal doesn't close. We work with title early so there are no surprises.

The bottom line

HOA liens aren't deal-killers. Waiting is. The sooner we look at your HOA account, the more options you have.