I knew there was a reason I teamed up with Wendy for our upcoming “Short Sale Basics” webinar series. She’s sooooooo much smarter than I am. Check it out.
In Destin, Florida, and around the country, as time goes by with short sales, a new problem is growing– unpaid condo association dues. I currently have two short sales pending with with over $20,000 in unpaid association dues. Short sale mortgage holders are growing weary of paying these huge back-fees to facilitate a short sale. Sure, I’ve had $10,000 or $12,000 paid to satisfy associations in short sales before. But the longer the short sale or bank action takes, the more the dues will start piling up. Now I have Bank of America balking at paying the association dues on a $300,000 Destin short sale. They want my seller, with no income at all, to pay a promissory note of $40,000 or cash at closing of $20,000, because of the $20,000 past due amount. How am I tackling this problem?
Brainstorming solutions is one of my favorite parts of negotiations. Here is what I found:
The liability of a first mortgagee or its successor or assignees who acquire title to a unit by foreclosure or by deed in lieu of foreclosure for the unpaid assessments that became due prior to the mortgagee’s acquisition of title is limited to the lesser of:
1. The unit’s unpaid common expenses and regular periodic assessments which accrued or came due during the 6 months immediately preceding the acquisition of title and for which payment in full has not been received by the association; or
2. One percent of the original mortgage debt. The provisions of this paragraph apply only if the first mortgagee joined the association as a defendant in the foreclosure action. Joinder of the association is not required if, on the date the complaint is filed, the association was dissolved or did not maintain an office or agent for service of process at a location which was known to or reasonably discoverable by the mortgagee.
In my case, there are about two years past due in condo fees. I have asked the association to agree to a compromise to accomodate the short sale. Basically, if the condo goes to foreclosure, they will only be paid 6 months dues by the senior lienholder.
If they could reduce the balance owed in any amount to allow the short sale to occur, then the association will gain by:
1. Immediate income to fund a project already in financial need
2. More than the minimal 6 months past due that a foreclosure action will pay them – at some later date
3. A new owner who will certainly be paying his dues on an ongoing basis, providing immediate cash flow
By agreeing to a lesser amount to allow the short sale, that does not mean the association will not pursue the homeowner separately for the balance owed. But a compromise can allow the short sale process to take place,both benefitting the condo project’s financial position, and helping the homeowner solve his dilemma.
Wendy Rulnick, Broker, CRP, CRS, GRI, ABR Rulnick Realty, Inc.
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This site, Wendy Rulnick or Rulnick Realty, Inc. is not providing legal or tax advice. The information provided is for educational and informational purposes only. It is recommended that sellers considering a short sale should consult an independent legal and tax advisor for more information.