How to Deal With the Homeowners Association During a Short Sale
Today's question is, how do we deal with the homeowner's association or a condo association within the context of a short sale transaction?
Now, when working with your short sale negotiator, you want to make sure that you're employing effective strategies, to optimize results and bring about the desired outcome. Now, effective strategy can mean something different, depending on the situation. Today, we'll be discussing two types of scenarios that require a different tact, a different sort of approach when dealing with the association.
Specifically, what I mean, is dealing with an HOA that's represented by an attorney, versus dealing with an HOA that's not represented by counsel. You'll have to adopt a different strategy for each scenario. So, some of the key points that we'll be touching upon today include employing aggressive negotiation tactics, low ball offers, and what to do if the HOA goes radio silent, highlighting the most compelling element of the borrowers hardship narrative, and finally, effectively employing lien release strategy in order to get a full settlement.
Let's start with represented parties.
Condo associations or homeowner's associations that have already retained counsel, to aid them in negotiations. When dealing with a represented party, you want to make sure that you submit all of the documents included in the borrower financials. So, basically, a full short sale packet goes to the attorney. In this scenario, the attorney representing the association will absolutely insist that your side make the initial offer.
When the HOA is represented by counsel, you want to make absolutely certain that your initial offer, your initial settlement offer, makes it to the HOA board for their review, and ultimately, for their approval. So, you want to be in contact with that attorney, to make sure that that offer's been presented properly to the board.
In contrast, as it relates to unrepresented HOA's or condo associations,
It's typically the association that makes the initial offer, and it's on you to accept, counter or decline it altogether. Now, the goal when dealing with an unrepresented HOA, is to try to figure out what their bottom line is. Now, in this situation, you want to appeal to the HOA's sense of sympathy and compassion and really, sort of, emphasize and underscore the hardship of the borrower.
Now remember, if you have other parties that are willing to contribute to the HOA dues, you don't want to tip your hand too much. Right? You want to play it very close to the chest, and only use those funds when absolutely necessary. Now, ideally, you want to reach a settlement between the borrower and the HOA without the other parties having to contribute. And of course, because in this scenario, there is no attorney representing the HOA, you can communicate directly with the association.
So, what do you do when your HOA simply won't budge,
And they refuse to engage in any sort of meaningful negotiations with you? Well, in that case, what you want to do is, you want to use the lien release only strategy. You ask for a number from the HOA, to get them to simply release the lien from title, allowing the short sale to close. Now, at that point, what you've done is, at the very least, you've opened the door to negotiations. You have an open dialogue, an open line of communication, and you have some numbers to work with. Once you've opened that door, with that lien release only number, you've got something to work with, right? You can use that number, perhaps, to get you even closer to a full settlement number.
Now, once you've cracked that door open, using that lien release only number, you can sort of use that figure to muscle your way in, and get that much closer to a full settlement figure, by offering something above and beyond that lien release number. So, when dealing with a stubborn HOA that's really sort of dug it's heels in, or has presented some full settlement offer that just isn't feasible, you want to be sure to counter with a low ball offer, with an eye towards full settlement.
In theory, that should elicit a counter offer from the HOA. You want to make sure to present that offer to the borrower, even if you know that they can't afford it. And only then do you present the HOA with an offer for a lien release only.
Finally, you want to come up halfway between the lien release amount and the full settlement offer, to see if the HOA will accept that figure in full and final satisfaction. If you have any other questions or concerns about how to deal with your HOA's, please, don't hesitate to give me a shout.