Mortgages Blog

Finance Blogs » Mortgages » $1.2 million mansion for $10K?

$1.2 million mansion for $10K?

By Jay MacDonald · Bankrate.com
Monday, July 4, 2011
Posted: 9 am ET

Here in Florida, the Foreclosure State, we thought we'd already cataloged every genus responsible for this plague on all our houses, from the predatory lenders to the oblivious robosigners and rocket dockets to the no-mod-for-you bank Nazis. That was, until we caught wind of the HOA chasers.

The St. Petersburg Times recently profiled an opportunistic little industry that discovered a loophole in the state's foreclosure laws and is milking it for all it's worth.

Florida law allows homeowners associations, or HOAs, to foreclose on properties when dues are in arrears and does not require the HOA to notify the primary mortgage lender. Florida has 40,000 homeowner and condo associations, many struggling to keep basic services going with so many owners behind in dues. The HOA's lawyers encourage them to foreclose because, if the bank beats them to it, they usually won't see a cent.

Here's where opportunity creeps in: Since most homeowners owe less than $15,000 in association dues, the HOAs can file their foreclosure cases in county court rather than in circuit court, where caseloads are backed up. This allows the associations to get final judgment on a foreclosure in as few as 270 days verses the 617 days it now takes for the average bank foreclosure.

Yes, a mortgage lender would gladly pay the back dues to protect their investment -- if they knew about it. But because the HOA doesn't have to notify the bank of its foreclosure actions, it could be months or even years before the primary lender forecloses.

Enter HOA chasers like Barry Haught and his associates. They acquire HOA foreclosures in private for pocket change, since they only have to pay off the delinquent HOA dues, not satisfy the mortgage. They then rent the property, and sometimes live there, for the months and even years it takes for the bank to foreclose.

This loophole has allowed Haught and his associates to acquire 71 properties in Tampa's Hillsborough County worth $8.2 million for a little more than $220,000. Among his deals: a $1.2 million home on Tampa Bay for $10,010; a 3,700-square-foot home for $8,090; and dozens of single-family homes for $4,000 apiece.

And no, they are under no obligation to inform their renters that the primary lender could unceremoniously kick them to the curb one day.

Did I mention that this is all perfectly legal?

We're kind of used to this stuff in the Foreclosure State, where the unofficial state motto is: Only in Florida!

But I'm wondering if this HOA play happens elsewhere?

Follow me on Twitter.

Subscribe to Bankrate newsletters today!

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
166 Comments
Howie
August 24, 2011 at 11:29 am

This is further reason why HOAs should be outlawed. Look, I own a property, I don't need some busybody telling me what color I can paint my porch. If there is a common area that needs maintenance, then perhaps a consideration should be included in the original purchase of the home. NEVER should some association have the ability to take possession of my property because I don't pay dues for substandard maintenance efforts. Typical Florida BS. Come to NH. I used to live on a private road with an association responsible for plowing and other maintenance. Certain residents refused to pay. The association took them to court, and the judge ruled that they didn't have to pay, and that the association still had to plow in front of their homes. Basically he ruled that covenants on property were a voluntary agreement and not enforceable. Live Free or Die.

Bob
August 23, 2011 at 9:33 pm

The HOA's in Nevada use exactly the same game that you have outlined. The only difference is that the HOA still gets paid in full plus legal fees of up to $1,900--when the bank finally forecloses. Nice racket.

atboasmercy
August 23, 2011 at 9:29 pm

wow so its a similar feat such as those who buy the tax liens and obtain homes for real cheap but in this case the poor renter is gonna be the one to suffer if/when they suddenly get booted since they had no disclosure (and yes i know - not required) of the consequence to what they were renting. I must say tho i wish i had the money to get in on it but my conscience and ethic would prevail and I would disclose to a renter that its a month to month only but they could rent a nice mansion cheaply for as long as it takes meanwhile i could rake in some dough while i have the renters lol :) and get my own mortgage back ahead instead of 28-30 days behind each month since boa's glitch in their auto pay system during a lack of work very tight budget period has me on pins and needles every month - budget still tight but manageable now and do you think they will let ya partial an online pmt each week to fix it or put that one month to end of note so we can restart the regular autopays? hell no.

Mike
August 23, 2011 at 7:47 pm

I wish I would have thought of this first.

Mr E
August 23, 2011 at 5:31 pm

The court system: lawyers and politically appointed judges run this country. No wonder banks are not makimg loans. They can't get deadbeats to repay what they owe and still live in these places for months.

tinypr100
August 23, 2011 at 4:57 pm

That's what happen when you raise a country based on lies,blood and theft...What else can you expect!!!

OYG
August 23, 2011 at 2:22 pm

The LOVE of money is the root of all evil. Opportunistic parties with money to pay should benefit instead of the crook homeowners who got into a $1.2 million property making $50k a year!

gary vanlandingham
August 23, 2011 at 1:54 pm

Come on, at least know what you are quoting. Money is NOT the root of evil, the LOVE of money is the root of all evil. People who love money more than people and are willing to throw them under the bus for a buck are rooted in evil. Get it straight.

OMG
August 23, 2011 at 8:43 am

Who's surprised? Its the root of all evil -- MONEY! Just a few more years (at decade at best) and this country is the Land of the broke and the HOME of the crooks! Federally protected no doubt..

OMG
August 23, 2011 at 8:43 am

Who's surprised? Its the root of all evil -- MONEY! Just a few more years (at decade at best) and this country is the Land of the broke and the HOME of the crooks!