Do Lenders Pay HOA Fees in a Short Sale?
What is an HOA Fee?
Homeowners Association fees are collected from homeowners who are a part of a subdivision in order to pay towards different amenities within the community. Condominium complexes collect HOA fees for the purpose of raising funds that are normally required to pay the costs of master insurance, exterior and interior maintenance, landscaping, water, sewage, and garbage. The affairs of HOA are run by a board of directors who are annually elected by all homeowners. The board determines the monthly HOA fee in accordance with the amenities being provided to the homeowners. The more the amenities offered to homeowners, the higher the HOA fee.
HOA Fees and Short Sales:
Paying HOA fees is the personal obligation of a homeowner; therefore, he is legally bound to pay the fee regularly. If not paid, HOA dues can cause credit score loss, lawsuits, or relevant collection efforts.
If you are intending to short sale your home, it is advised not to delay the HOA fees. This is so because Fannie Mae, one of the leading mortgage lenders, does not pay the HOA dues in case you apply for a short sale. Along with Fannie Mae, a number of other lenders do not pay the HOA fee as well. Hence unpaid HOA dues may inhibit the short sale process until they are paid by one of the parties involved in the deal.
This scenario has led mortgage lenders to change their policies owing to an all time high number of foreclosure cases that cause far more damage to a mortgage. Many homeowners mistakenly think that because of unpaid HOA fees they are ineligible for a short sale. In fact, only HOA dues cannot put pain to the short sale process for lenders willingly pay such dues to close the short sale successfully.
Why Do Lenders Pay HOA Dues in a Short Sale?
Lenders know that a short sale nets them more money when compared to a foreclosure. For instance, a house worth $150,000 goes sells for $120,000 whereas the same house will net only $90,000 if it is foreclosed upon. Here, if a lender rejects a short sale he will lose a substantial amount of $30,000.
Usually, HOA fee does not go beyond $400 to $700 per month. This means unpaid home association fees, even though they have not been paid for the last six months, make up a very small percentage of the overall short sale value. Therefore, lenders come along to pay the HOA dues and endure less loss in the form of short sales while evading greater loss that would be incurred from a foreclosure.
If a lender wants to foreclose on a house, he will have to make sure that he will get more money from a foreclosure than a Baltimore short sale. While knowing the disadvantages of foreclosure such as hefty fees of attorney generals and a prolonged timeline for the completion of the process, they hardly prefer foreclosure over short sales.
All in all, a short sale does not cost the seller even a single penny for his HOA dues are paid by the lender whereas the fee of the short sale specialist listing agent is paid by his bank. If a person is really facing financial problems, he should not hesitate to choose a short sale which warranties long-term advantages.
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