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Homeowners associations choose short sales over foreclosures p2

We are discussing homeowners associations and the problems they have faced since the financial meltdown and the foreclosure crisis. The pressure comes from a few different sides, but they all arrive at the same spot: loss of revenue that would normally be put toward common area maintenance.

Budget shortfalls can be the result of just bag financial management, of course. But they can also be collateral damage from a lousy economy. A condominium owner who is strapped for cash is more likely to forego paying his association dues before he allows his mortgage payments to fall behind. When a lender forecloses on the condo, that dues balance just continues to increase. If the unit is sold at auction, at best only a few months of past due association fees will be covered.

In a neighborhood, a house in foreclosure can affect the value of the other properties, but it does not necessarily mean that the entire neighborhood goes to seed. With a condo association, one foreclosure probably won't put the building or development on the road to ruin, but a handful can; and because the dues take care of common areas, everyone's property will feel the budget shortage.

And speaking of shortage .... When a condo owner is in danger of going into foreclosure, associations are realizing more and more that it's to everyone's benefit to go with a short sale. Lenders have traditionally been reluctant to agree to short sales, because, by definition, a short sale means that the sale price will not cover the outstanding mortgage balance. What associations realize is that getting a paying homeowner in there will save money for everyone in the long run.

For a long time, lenders seemed to live in hope that they would profit from selling foreclosed houses and condo units. As the realities of the residential real estate market have caught up with them, and the rosters of bank-owned properties have grown, lenders are viewing short sales more favorably.

Homeowners associations may be responsible for helping lenders embrace the upsides to short sales. As the market stabilizes, and the inventory of bank-owned houses, townhomes and condominium units ebbs, lenders may revert to their stubborn dismissal of short sales. Right now, though, these sales are expedient, and that's the most anyone can hope for.

Source: NorthJersey.com, "Homeowners associations find short sales an option to recoup losses," Kerry Singe (The Charlotte Observer), March 17, 2013

We help individuals and businesses in the Annapolis, Maryland, area with real estate matters like the ones above. Please visit our website's real estate page for more information about our law practice.

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