What to do with foreclosed bank owned homes

If I had a dollar for every time I have spoken with a concerned homeowner or HOA board of directors about foreclosed homes within a community, I would be a very, very rich man. The resounding concern is this: “What do we do with all of these foreclosures? The homeowners aren’t paying their assessments and their yards are atrocious. Our good paying homeowners have to make up the difference. It just doesn’t seem fair.”

My answer to this concern may actually surprise folks. I mentioned this briefly in prior articles but will explain it further here. I believe foreclosed homes can actually benefit communities that have problems with assessment collection. Let me explain by using the following as an example. Mr. XYZ lives in an HOA and fails to pay both his HOA assessments and monthly mortgage payment. The bank forecloses and title transfers over to the bank. The HOA can now demand that the bank pay assessments and keep the yard clean. That is right.  Once the title transfers back to the bank, the bank has to pay the HOA assessments and keep the yard clean. So, this may be a benefit for an HOA, since the bank is most likely in a much better position to pay assessments because it has more money than Mr. XYZ.

CC&Rs place obligations on the current owner of the property. It does not matter if the owner is a person or entity. Some banks may ignore the HOA, just as Mr. XYZ did.  But the HOA can fine the bank for violations of the CC&Rs and it can demand payment of all assessments. Now for the best part: Many HOAs are increasing their dues to compensate for the Mr. XYZs who are not paying their assessments. Again, banks must pay assessments; so, if one finds his/herself in an Arizona Homeowners Association with bank-owned properties, one can persuade the board to place the burden on the banks to pay their assessments rather than on the homeowners.