Foreclosures and Outstanding Debt

I often work with buyers who are worried about picking up bad debt on a foreclosure. In other words, they fear that if they purchase one that is subject to a home owners association that they may be liable for the dues that were never paid by the prior owner. True?

The answer, as always, is “it depends.” You should contact a real estate attorney for legal advice on matters such as these however there are some basic rules of thumb that may help guide you.

You can check if the HOA/COA has a lien recorded against the property for outstanding dues, but just because you don’t find one, doesn’t mean there aren’t any dues outstanding.

The title company should also be able to help you in figuring this out. In general, condos listed on the MLS that have already been foreclosed upon don’t suffer from this issue. Foreclosure sales on the “court house steps” can be a different matter:

Joseph Adams of Becker & Poliakoff real estate attorneys posted in a recent blog: “Generally, the foreclosure of a first mortgage extinguishes all inferior interests in the property. Therefore, the purchaser at the foreclosure sale takes title only subject to any superior interest in the property which could not be foreclosed in the lawsuit, such as property taxes. However, if the property is subject to a homeowners’ association governed by Chapter 720, or a condominium association governed by Chapter 718, the purchaser at the foreclosure sale is liable by statute for all assessments that were due at the time that title transferred.

The only exception is that a first mortgagee only has to pay the “safe harbor” amount (generally 12 months of unpaid assessments or one percent of the original mortgage debt, whichever is less) when it takes title through its foreclosure. However, the safe harbor protections in the statute do not extend to bidders at a foreclosure sale.”

For more information on acquiring distressed Orlando condos, contact Condo Metropolis real estate brokerage on: 407-290-3408 or email:


  1. If you are an HOA.COA or management company having a hard time dealing with Banks on post foreclosed properties…I suggest checking out Sperlonga Data and their FREE services!! We have just signed on with them after they performed a test of their services..They were able to help us recoup close to $5K in 1 month on properties, that we had no luck in reaching the Banks..

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  2. There are a ton of variables that come into play that can effect the outcome of Foreclosure. The best advice I can give any homeowner is to do your research and take the time to find a well educated agent, securing a knowledgeable agent will help a lot, like Marcus of, simply due to the fact that they’re time consuming and they’re able to assist more homeowners this way. fromHomes in Ladera Ranch

  3. Facing a foreclosure is a daunting experience, but additional financial trouble looms in the future for some former homeowners. Just because the bank foreclosed on your property does not mean that the balance you owed on your home loan ceases to exist. When you signed your mortgage paperwork, you agreed to pay off the loan balance in a legally binding contract. If the bank does not recover the full outstanding amount through the foreclosure sale, you remain liable for the debt.

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