Homeowners who short-sale do so because they can't afford their mortgage loan. They may have fallen behind on mortgage payments or are certain they will in the near future, so they ask their lenders to let them sell for less than the amount owed. Lender approval is voluntary, and various factors increase or hurt the odds of approval. Paying your homeowners association dues on time can help your cause.
You pay HOA dues in addition to your mortgage payment when you live in a condominium, a new subdivision or a planned unit development where the community shares services and enjoys common areas. Condo HOA fees usually pay for maintaining building exteriors, landscaping, HOA insurance and property management. Houses with HOAs usually pay for community pools, playgrounds, clubhouses, landscaping and employees for each of these. Each homeowner is responsible for paying dues, even when short-selling.
Lenders have no way of tracking the status of HOA payments, so they typically ask whether they are current when starting a short sale. You must transfer a clean title to the buyer, and an HOA delinquency hinders the transaction when the HOA places a lien on the title for unpaid dues plus the legal fees. The HOA can place a lien before or during a short sale, making it necessary to pay it in order to sell.
Responsibility for paying HOA dues or an HOA lien ultimately lies with the seller. In the event that the short sale fails and the home goes into foreclosure, the HOA can sue the former owners even after they no longer own the home. The parties to a short-sale transaction usually must find a way to pay the arrears or lien because the lender won't. The seller, buyer and agents may all foot the bill to make a short sale happen.
Having a lot of homeowners past due on their HOA fees poses a problem for other owners and buyers. It can this cause common areas to fall into disrepair, and the HOA may not qualify for financing, which hinders sales. Mortgage lenders have strict fiscal requirements for HOAs. They typically require the HOAs to maintain a certain amount of reserves and prohibit financing when more than 15 percent of homeowners are more than 30 days behind in dues. This can also prevent a buyer from buying your short sale.
K.C. Hernandez has covered real estate topics since 2009. She is a licensed real estate salesperson in San Diego since 2004. Her articles have appeared in community newspapers but her work is mostly online. Hernandez has a Bachelor of Arts in English from UCLA and works as the real estate expert for Demand Media Studios.