We are all familiar with banks foreclosing on properties, but did you know that Homeowner Associations (HOAs) can also foreclose on homes? HOA Foreclosures have increased over the past year, and in doing so have created an excellent opportunity for investors to pick up discounted properties in the Las Vegas market, sometimes for a little as $.20 on the dollar!
As a Las Vegas Investor, I have personally taken advantage of this opportunity, and have had particular success buying HOA Foreclosure properties through auctions rather than receivables. Auctions take place as trustee sales or private attorney auctions where investors can purchase HOA delinquent receivables for homes, townhouses, and condos. These properties have already been foreclosed on, which makes it easier for the investor. The other option is to buy the delinquent properties directly through the HOA and foreclose on the properties yourselves, but this method is far more complicated, especially since HOA boards are extremely difficult to deal with in Las Vegas.
By purchasing at an HOA Foreclosure auction, the investor is essentially purchasing the foreclosure deed for the property. This deed is then recorded and grants the investor legal possession of the property. Due to the current Nevada super priority lien law, the investor who owns the foreclosure deed has ownership rights superior to those of the bank that holds a note on the property.
Once the property is purchased the investor has many options. If the home is vacant, the property can be renovated and rehabbed so that it can be rented out for a steady cash flow. While this is being done, the investor can hire an attorney to negotiate directly with the bank to go after Quiet Title of the property or to purchase the property from the bank for a discounted price of the current market value. If successful, the investor can own the property free and clear, having purchased what could be a $100,000+ property for $35,000 or less!
If the property is occupied with a renter at the time the foreclosure deed is purchased, the investor can take over the management of the property by having the tenant sign a new lease and have rent paid directly to the investor (now functioning as the new owner). If the tenant refuses to pay rent, the investor can proceed like with any other rental and evict the tenant.
Things are a little trickier if the property is occupied with the former owner at the time the foreclosure deed is purchased. There are three options the former owner can choose: stay in the property, sign a new lease, and pay rent as any other tenant would do; stay without paying rent and ultimately get evicted (unlawful detainer) by the new owner in about a two month period; or the former owner can move out voluntarily, in which case the new owner can rehab the home and get it rented with a new tenant as soon as possible.
Gaining possession of the home is very important as it allows the investor to control the rental and management aspect of the property; however, the investor does not possess a home with free and clear title, so he/she cannot sell the house with title insurance in place. This does not mean that the house could not be sold, but rather the new buyer would not receive free and clear title, and as such could not get title insurance on the home, just like the investor when the property was purchased at the HOA foreclosure auction.
So why would anybody purchase a property that did not have clear title and would be difficult to re-sell? Simply because the benefits outweigh the risks. Yes there may be more work involved than with a traditional property, but investors can purchase homes with great equity for staggering low prices, and if they are successful at winning free and clear title, they walk away with a great investment. Every investment comes with some amount of risk, and HOA Foreclosure properties are no exception. With a myriad of ways for the investor to procure free and clear title, the chances are in his/her favor of succeeding. Even if the investor is unable to achieve free and clear title, he/she can hire an attorney to negotiate a deal with the bank to recover as much of the investor's investment as possible. While this is happening, the investor can continue to hold on to the property and take in rental income which reduces the investor's risk every month.
Bottom line HOA Foreclosure properties present a new form of investing that provide investors an opportunity to purchase a great property with huge equity for incredibly low prices. This investment opportunity has a tremendous upside and very little downside based on the current legislation and history that I have witnessed as a Las Vegas Investor. I have personally purchased and sold about 70 of these HOA foreclosure properties and aided about 100 other investors in this process.
If you are interested in learning more about how to take advantage of the HOA foreclosure auctions, or if you would like to purchase an HOA foreclosure home, feel free to give me a call directly. I can answer any and all questions and describe in detail how I have been able to partner with investors to purchase the HOA foreclosure homes for 20-30 cents on the dollar and manage them effectively while getting the maximum return.