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$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?

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166 Comments
bcool
August 30, 2011 at 2:08 pm

This article leaves a lot out. They buy the house for $10,000 and try to rent it until the bank actually kicks the occupiers out and sells the house (again). If they rent out the house for $2,000 a month to some "lucky" renters then they would see a return on their investment after 5 months. I'd like to see how much they're actually making doing all of this running around behind the back deals......There's still a lot of risk here. and that is if the occupiers leave the premises. Also, what gives them the right to rent it out? They don't have the deed to the property, right? That would be like me knowing my neighbor was out on vacation for a month and renting his house out...

Idea_Man
August 29, 2011 at 8:41 pm

Since they are giving it to the banks, it should be OK! But seriously, what is up with Florida? Too much questionable stuff happen in Florida!

Idea_Man
August 29, 2011 at 8:41 pm

Since they are giving it to the banks, it should be OK! But seriously, what is Florida? Too much questionable stuff happen in Florida!

Jay MacDonald
August 29, 2011 at 7:28 pm

Genus: A grouping of organisms having common characteristics distinct from those of other such groupings. The genus is a principal taxonomic category that ranks above species and below family.

Peter Brooks
August 29, 2011 at 5:51 pm

"Genus?" What do you mean by genus in the first sentence? Do you mean "genius?" Duuuuuh.

emmjay_is_stupid
August 29, 2011 at 10:07 am

So... in order to avoid paying $140... you decided to pay $5140... you are a dumbass.

Point
August 28, 2011 at 1:18 am

What about the banks do they get their money .are these people hand in glove with corrupt bank officials

evil
August 26, 2011 at 5:27 pm

NEVER, ever, ever buy any property with an HOA. They charge wayyy too much for very little. And when the power-hungry HOA Officers get a bit of power ... well, they just go nuts! Seen it way too many times. Your bank is more forgiving than most HOA's.
NEVER - EVER !!!!!!

TK
August 24, 2011 at 8:41 pm

Oh sure take up for the deadbeats who expect the other members of the condo association to pay for their electric, water, cable, and amenities, including insurance and landscaping. In my small Florida condo association, one unit owner has dumped over $60,000 in expenses on the other 20 unit owners over the last few years while not paying his mortgage company either. The Association has had to special asses the other owners for the unpaid assessments, since we can't let the community go uninsured or unmaintained just because this deadbeat refuses to pay and his mortgage company won't foreclose, because then THEY'd have to pay the assessments.

At least by using this so-called loophole the Association gets something for their operating budget.

Emmjay
August 24, 2011 at 1:12 pm

My HOA in Salem, MA, the Hamlet, sued me over $140.00 in late fees, ignoring all of my emails and letters requesting forgiveness of the debt due to my living here for 13 yrs, never being more than 3 mos late with monthly dues, paying extra $10,000 special assessment. Every state rep,consumer group, the mayor of Salem,reacted in disbelief at my story of their borderline criminal tactics, as by continuing legal action, this increased their lawyer's bill to $5000, for which I am responsible! There are NO STATE LAWS PROTECTING CONDO OWNERS; THE HOAS CAN DO WHATEVER THEY WANT, & GET AWAY WITH IT!! This one makes exceptions to the bylaws purely based on whim and there is no legal recourse! This was my first,and will be my last, condo.