SHORT SALES are tricky for sellers and buyers, and working to resolve unpaid homeowner association assessments and liens can be challenging.
A "SHORT SALE" is when an owner of a property seeks to avoid foreclosure by selling the property for less than is owed on the home loans (mortgage). Because the lender (lienholder) would take a loss on sale of the property, a short sale requires the lender's approval.
In California, if the HOA fails to lien the property for the delinquent assessments, it will receive nothing from the sale. The HOA board can still pursue the delinquent owner in court for a money judgment. However, that judgment might be uncollectible.
If the HOA files its lien, then it has a chance of getting paid. However, the board can expect to be pressured to waive its delinquent assessments and release the lien on the short sale, because there would be no equity and no extra money in the short transaction to pay the HOA.
The HOA has no legal duty to release its lien in California until the association's claims have been satisfied.
It's better for the HOA to negotiate for proposed approval of a short sale. The HOA board could waive late fees, interest and collection costs, and the seller could move forward with the short sale.
This is information about short sales and homeowner association liens in California only. If you have a question about lien rights and responsibilities of HOA in your area, you should contact an attorney.
For homes and real estate at Orange County, California, please contact us. – Harrison K. Long – solutions for real estate and business – REALTOR® and broker associate, Coldwell Banker Residential Brokerage – 949-854-7747 (phone) – ExploreProperties@gmail.com (email) – CA DRE 01410855 – SFR short sale and foreclosure resource certified by the National Association of REALTORs®.