In our current economy, it seems like you can’t go a day without hearing about the most recent foreclosures; in the news, in our conversations, and even in our own neighborhoods. Without stable jobs and steady incomes, a foreclosure is a sad reality for many homeowners. In fact, in Colorado alone, there were 31,914 foreclosure filings in 2011—the lowest figure since 2007!

While most homeowners have a decent understanding of the foreclosure process, most of them don’t realize that the banks aren’t the only ones who can come after their home. Homeowner’s Associations can foreclose on a home for missed HOA payments.

While each state has different laws, some associations can begin the foreclosure process only 75 days after a missed payment is first due, whereas a tax collector must wait up to five years and most banks take, on average, a year or two to foreclose on a property. Not only that, HOAs can foreclose for as little as a couple hundred dollars of missed payments. In California, HOAs are not even required to go to court to foreclose on a property.

So why the sudden rise in Homeowners’ Association foreclosures? One in five U.S. homeowners has a Homeowners’ Association. Of the 300,000 HOAs in the U.S., more than half are facing their own serious financial troubles. Associations are created not only to govern your property and maintain a cohesive image in communities, but HOAs help cover the costs that a municipal government would usually take care of, like road repair, street lights and sewage systems. With banks foreclosures taking up to three years, many properties have been sitting vacant. Vacancies increase the financial responsibility for the remaining homeowners, forcing many HOA’s fees and assessments to sharply increase.

So how, exactly, can a Homeowners’ Association foreclose on a property, when the first position lien holder is typically the bank?

Again, different states have different laws, and it’s important to consult a real estate attorney when dealing with a foreclosure, but usually an HOA can foreclose more quickly than a bank or lender can, which allows them the opportunity to collect additional fees, interest on the amount due or obtain a judgment against the homeowner. Once the first position lien holder finally forecloses on the property, they will typically be responsible for paying off the assessments that had been accruing since the HOA foreclosed. For information on Denver real estate, or to check out our Denver real estate for sale, please visit us at PorchLight Realty.

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