Is an HOA Right for You? Buyer Beware

NEVADA- Homeowners Associations: The Robin Hood of Foreclosure

DSNEWS:  Homeowners Associations: The Robin Hood of Foreclosure
By Joey Pizzolato
June 7, 2017

Nevada is just one of a number of states that is experiencing losses in property sale values as a result of homeowner association foreclosures, according to a recent report by the Nevada Association of Realtors. Statutes in Nevada allow HOAs to foreclose on homeowners for not paying their association dues.

HOA liens are given the higher priority over first mortgage holders, so their debt is first, paid off and then the lender and homeowner are taken out of the equation. As a result, many people are able to get foreclosed homes at auction for a fraction of the price by paying back HOA dues compared to what homes were initially worth. Further, all remaining debt is erased, and borrowers can be stuck paying back mortgages for houses they no longer possess.

Homeowners association foreclosures are a controversial subject in Nevada. According to a report by the Nevada Department of Business and Industry, 77 percent of Nevada residents surveyed oppose HOAs ability to foreclose on homes because of unpaid dues. Eighty-two percent believe that debt to lenders should be paid before debt to HOAs. Read more:

GEORGIA – HOA Secrets Exposed: How does your HOA spend the money collected?

11alive.com:  HOA Secrets Exposed:  How does your HOA spend the money collected?
By Rebecca Lindstrom, WXIA
June 22, 2017

DOUGLASVILLE, Ga. — Whether you love or hate your homeowner’s association (HOA), you know that when the dues are due, you have to pay. But how much do you know about how that money gets spent?

A group of homeowners in Douglasville, Ga. said they’ve been trying for years to answer that question. They said that for years their dues have been going up with little explanation why.  They asked to see their bank statements and receipts for spending but the board, through its attorney, repeatedly said no.

Four years ago, Iva Wilmott said he was hired by HOA treasurer Kevin Sanders to fix a fence for the neighborhood and paint some of Sander’s personal furniture.  He said both jobs were paid with one check from the HOA account.

“I didn’t feel too good about it but he paid me, so I said okay,” said Wilmott.

Wilmott reported it to a friend he knew in the neighborhood but didn’t tell law enforcement.  When concerns started to grow on other issues, the story of the “check” surfaced.

The Douglas County Sheriff’s Office agreed to look into it and subpoenaed 5 years of bank records to help in the case.  In his interview, Sanders told Detective Skinner he paid cash for the personal projects and adamantly denied doing anything wrong.

In the recorded interview, you can hear Skinner ask, “Has there ever been any time, any occasion with the HOA account, where you have siphoned money to, let’s say, $5 or more off the account?”  Sanders responds, “No.”  “No circumstances whatsoever?” the detective asks again.  Sanders repeats his answer, “No.”

Sanders goes on to tell the detective why he believes the allegation was made.  He claimed a homeowner, Sherry Adams, was disgruntled over her HOA dues and wanted to get him removed from the board, believing that would absolve her responsibility to pay.  Read more:

Nevada: NVAR Report Shows HOA Foreclosures Reduced Nevada Property Values by over $1 Billion

July 5, 2017 By Press Release Wire —Comments
A report from the Nevada Association of REALTORS (NVAR) found that foreclosures by local homeowner associations have reduced property values in the state’s two most populated counties by more than $1 billion.  This was just one of the findings in a report released this week by NVAR about issues surrounding foreclosures by homeowner associations and so-called super priority lien laws that allow HOAs to foreclose on homes in a way that places a higher priority on repaying late HOA fees than repaying the mortgage when these homes are sold following a foreclosure.
As part of its report, NVAR worked with the Lied Institute for Real Estate Studies at UNLV and with a research firm called SGS that surveyed more than 500 registered voters throughout Nevada to measure their views on HOAs, super priority liens and related issues. The report concluded that “HOA foreclosures in Nevada cause an enormous impact on home values.”
According to the report, HOA foreclosures in Washoe County sold for “a remarkable 90 percent discount” compared to comparable home sales in the area, accounting for a loss of nearly $254 million in property sales value. In Clark County, the hundreds of homes sold through an HOA foreclosure in recent years sold for an average discount of 42 percent, leading to a loss of about $840 million in property sales value.
“So, in our two most populated counties, these HOA foreclosures had a negative impact of more than $1 billion on local property values,” NVAR President Greg Martin said. “That’s a real eye-opener.”  Martin, a longtime REALTOR based in Elko, said NVAR spent months preparing “a comprehensive and revealing report on a fairly complex issue” that has had a significant impact on local homeowners and communities, as well as on Nevada’s economy.
The report explains that a super priority lien is a category of lien that, under Nevada law, is given a higher priority than all other types of liens. When it comes to HOA assessment liens, a super priority lien refers to that portion of a homeowner association lien that is given higher priority than even the holder of the first mortgage, placing the interest of the HOA in front of the first mortgage. When an HOA forecloses via a super priority lien, it may, in some cases, eliminate the first mortgage on the home.
For example, in Nevada, the state Supreme Court has ruled that an HOA super priority lien can extinguish a first deed of trust in a foreclosure. An example of this would be a scenario involving a homeowner who defaults on HOA dues, and instead of the lender initiating foreclosure proceedings, the HOA does so, and typically sells the property at auction as a bank would. Because the HOA has super priority status, the winning bidder for the home pays the HOA its back dues. Then, under Nevada law, all the remaining debts are extinguished. The lender who financed the mortgage on the home gets nothing, the report explains. Losses endured by the lender usually far exceed those of the HOA.
NVAR’s report found that 77 percent of all Nevadans surveyed oppose HOAs having the power to foreclose on homes over unpaid association dues. In addition, 82 percent of all respondents think that the mortgage lender should be paid first, not the HOA.
According to the survey, 44 percent of all Nevadans had an unfavorable view of HOAs, compared to 29 percent who had a favorable opinion.
The report examined 611 HOA foreclosures recorded in Clark County between Jan. 1, 2013 and June 30, 2016, plus another 71 HOA foreclosures recorded in Washoe County during this same time. It found that HOA foreclosures spiked following a landmark 2014 lawsuit between U.S. Bank and SFR Investments before starting to decline in December of 2014. Since then, the report said HOA foreclosures in Nevada “have settled at around 10 per month.”
Unlike past NVAR reports on issues important to the state and its homeowners – such as NVAR’s award-winning “Face of Foreclosure” series released to coincide with past sessions of the Nevada Legislature – Martin said this NVAR report is not recommending specific changes to state law. Instead, he said NVAR leaders hope this year’s report educates and informs state lawmakers, government leaders and others about this complex issue.
See also

7 Misunderstood Facts About Association-Governed Living

By:  Coalition for Community Housing Policy in the Public Interest

The typical homeowners or condominium association puts either a profit-motivated Developer or your neighboring property owners (people you may barely know, and who often lack relevant qualifications) in charge of governing your home, your lifestyle choices, AND your money.

Today, four out of five real estate sales are in condominium or Homeowners Association communities–a $90 billion a year industry representing five times the amount the federal government spends to run NASA.  An estimated 70 million Americans are living under the rule of an association.

 Association-governed real estate ownership (which includes condominiums, cooperatives and single family homes within a Homeowners Association) comes with considerable risks of which few are aware when they sign on the dotted line.  Click here to read more