It is a rude news flash to many people to learn that their Home Owners’ Association may be able to foreclose on their home for unpaid dues and assessments.
Yes. It happens.

It is imperative that Home Buyers recognize this fact, that dues are usually not voluntary, and that the HOA Bylaws typically have teeth in them allowing foreclosure for unpaid dues.
With some townhome and condo dues in the Raleigh Cary NC area in the $200/month range, this is a significant ongoing expense that must be met routinely.

And, if you have a home loan, the bank or investor will also be watching and may press foreclosure to protect their interests. Your ultimate responsibility to maintain your dues payments is spelled out in your Deed of Trust.

This is not meant as a screed against HOAs, which are commonly required in new construction communities. Cary is replete with them, although I live in a neighborhood that does not have one.
This blog post is just a “Heads Up” to people who may not recognize the gravity of falling behind in paying dues and assessments.

More often than not, the questioner means they would like to hear about homes upon which the lender has foreclosed, that are entered into the Triangle MLS when the bank is ready to sell them.  They often are looking for foreclosures in hopes that they can gain more affordable housing around Cary, NC.

I always want to say, “Yes,” and I always catch myself and say, Well, kinda…”

See, there is no provision in our Triangle MLS rules that require a listing agent to identify a home as in the foreclosure process, or as a bank-owned foreclosure, “REO.”

Some try.  Some don’t try.  Some try to obscure the status so they can semi-pocket the listing and get the Buy side commission, I think.

Triangle MLS has taken a recent measure towards clarity.  A “Special Conditions” field will go live on the MLS on November 3, 2009.  And in that “Special Conditions” field, it will be required to indicate if a home is a short sale.   The field also offers listing agents the option to indicate if a home is in the foreclosure process, or if it is already bank-owned. 

Frankly, I don’t get it.  I understand the Short Sale, if the list price is inadequate to cover outstanding liens and pay costs of the transactions.  That is a material fact that will impact the Seller’s ability to convey title.

What I don’t understand is:  Who is served by providing confusion regarding “In Foreclosure Status,” or that fact that a property is an “REO?”  With these two options being, well Optional, we will be in the same circumstance.  Unable to build a search for one of our hottest commodities currently: REO’s.

The intrinsic value in an MLS is the data, and the integrity of the data.  Providing opportunity to obscure data, and to corrupt the integrity of the data diminishes the value of the Listing Service.  It makes that data unreliable.

I’m hoping that this is an incremental change that foreshadows a move by the Triangle MLS directors to at some point make these fields mandatory, so we can search by In Foreclosure Process and REO statuses and gain reliable information.

It is not a simple process or an easy loan to get, but it can be done.

This is the HMBI page that indexes all the cities where HUD is holding foreclosures in North Carolina. If your city is currently not in the index, there are currently no HUD homes available in your city. When one becomes available, your city will be back in the index.

It is an easy index to use. Check the boxes in front of the towns and cities where you have interest, scroll to the bottom, and click “Search.”

You will then see a page from HMBI listing HUD properties organized by town. Each property listing offers links where you can access information on bidding procedures, and more information about HUD Homes.

The site will also help you in finding a HUD-registered broker. I am registered with HUD, through Keller Williams in Cary, NC, and can access HUD homes and submit offers for buyers.

The HMB site will not give you the MLS number for the property. If you want the MLS number for a property, you can put the address into my website’s Address Search to get the MLS number.

I just spoke with Substitute Trustee David Pryzwansky who confirmed that news.

So, the drama continues and we will wait for later this month for a resolution.  And the community and neighbors will continue to hold their breath.

Thursday, the crowd was immediately apparent, even before I opened the Salisbury Street Entrance door of the Wake County Courthouse.  ACORN demonstrators were present with a couple of banner signs and their “Save Our Homes” message.  They had had the foresight to tip off the folks at Raleigh’s WRAL-TV, who responded by delegating a cameraman to tape the proceedings.

There were more ACORN folks there than there were bidders or observers, and I managed to stumble into camera range and show up on the WRAL-TV news video.  Briefly, on the left as the woman paralegal cried one of the auctions.  The tall guy with the red necktie tossed up over his shoulder.  Making my mark in current events.

Again, as is common, all properties that were auctioned went to the 1st lienholder, with several postponements.  I hope that the postponements are successful efforts for folks to keep their homes, or to succeed in short sales, and to avoid foreclosure.

Properties presented were in Raleigh, Wake County, and nearby North Carolina counties.
The Raleigh News and Observer article this morning indicated that,”Even some of the buyers who clear financing hurdles may see their winning bid rejected by the banks that hold the homes…”

“…Lee, the vice president, said about 80 percent of the winning bids that require the approval of the seller will get it.”

I wonder: was the auctioneer not given a reserve price?   What is the value of an auction where there is no reserve set, but the bidder cannot be assured a winning bid gets the goods?

I also wonder if bidders have done proper due diligence to assure that they are getting a property in good enough condition that will support even the reduced value they pay at auction.  Inspection contingencies?  I may have to make sure I go to the next auction in March.

 Wral-TV also aired a piece on the auction, without mention that one could win and not win.

Several attendees were adjacent property owners who were concerned about the possible impact on their homes, or other property nearby.

And, there were a few Realtors, including yours truly, of course.

How could the auction be canceled?  Trustee David Pryzwansky was not at liberty to say, but typically postponements occur when the lender and the property owner are trying to work things out and avoid foreclosure.

Rescheduled for February 3, 2009, 10:00AM.

It is a matter of paying your money and taking your chances.

We agreed that a Sheriff’s Deed does not really give the Buyer more than a claim with few assurances.  The property may have title issues, IRS liens, easements and encroachments, deteriorated structures, and serious environmental issues.  Unless one is very diligent, any of these problems may exist, without any recourse for the Buyer.

Another issue, often overlooked, is the possibility that the home may be occupied.  The original owner or a tenant may be living there, and the successful foreclosure auction Buyer will have to deal with that.  If the home is purchased as an investment, it may be easy to negotiate a suitable lease with a tenant, or even the former owner. 

But if the home is intended as a primary residence, the Buyer must be prepared to follow through with an eviction, if such action is required.  This may mean having the Sheriff remove a family or elderly people from the home under extreme duress.  It doesn’t happen all the time, but before buying a property at the courthouse, the smart Buyer will include occupancy status in his homework.

We have seen other Triangle subdivisions in trouble, either being offered for sale in entirety, or all the lots being offered for sale, or model homes on the market long before they had outlived their marketing usefulness to the builder.

The December 3, 2008 Cary News has legal notice that Hasentree properties will go on the foreclosure auction block at the Wake County Courthouse at 10:00AM on December 19, 2008.

This is also confirmed in the Triangle Business Journal this week and in today’s Raleigh News and Observer.

Hasentree was to be 650 luxury homes, from over $1,000,000 to over $4,000,000, and was kicked off with a multi-million dollar marketing campaign that included flying potential buyers over the development, including the Tom Fazio golf course, in complimentary helicopter tours.

34 homes remain for sale, and the luxury home market has been notoriously slow over the course of 2008 anywhere in Wake County.

The casual-to-grungy setting is the well-worn lobby of the courthouse entrance on Salisbury Street in downtown Raleigh.  On the south wall, there is a large bulletin board, in calendar days format, i.e., numbered from 1 through 31.

Each of the calendar “days” is a little larger than 8 1/2″ x 11″ as this allows posting of notices for that day’s auctions.  The notices are all clamped into one large binder clip, and hung on the “day” on a common thumbtack.  Obviously, the weekend day numbers are vacant.  If it is mid-month, the first half of the days are next month’s notices.  The binder clips are strained, thick with notices, reflective of current home foreclosure volume.

Since this arrangement is not actively moderated, and is wide open to the public, people wander in, pull off sheafs of notices and peruse them.  When done, the sheaf is again hung on the designated thumb tack.  Occasionally a notice will slip out of the binder clip, fall to the floor, and then be reinserted.

Meanwhile, the day to day operation of the courthouse is in full swing.

Twenty-five feet from the notice board, folks pass through metal detectors on their way to county offices and courtrooms.  The notice board is outside the metal detectors and ergo, basically unsecured from those with weapons.  People linger nearby waiting to meet up with others.  Yesterday, it was a couple waiting for their attorney in a case where the man apparently had been violently assaulted.  Clerical staff pass through another set of doors, and sometimes amend notices on the notice board.

The street level entry to Salisbury Street is only about 20 feet from the bulletin board.  Street noise infiltrates, and regularly becomes significant when the doors are opened.

 Foreclosure auctions are held right there, in front of the notice board.  It is not exactly the legendary “Courthouse Steps,” but still is just as public.  I guess the elements of weather pushed the auctions inside some time ago.

Onlookers and potential bidders hang out waiting for the Trustee to appear to start the auctions.  Usually there are a few postponements or cancellations.  Then the auctions commence.

The Trustee Representative reads the order allowing the foreclosure, and then proceeds to make the first bid, as authorized, by the lending institution.  If an onlooker wishes to bid, they must bid in increments that are defined by the auctioneer.  Typically that will be $200 to $400 increments.

Once the winning bid is entered, the property will enter an “Upset Period” of 10 days.  Within 10 days, another bidder can “upset” the winning bid with an increased bid.  That restarts the 10 day upset bid period clock.  A property sale can be upset any number of times, without any statuatory limit in North Carolina.

Yesterday saw several postponements and no bids by anyone other than the lenders.  No one saw enough value to raise the bank.  Actually, for the 10:00AM auctions, if I had not been there to observe, I believe the Trustee Representative would have had to announce the terms of sale and auction the properties to a non-existent audience.  She certainly did not acknowledge me, until I asked her a question.

In the afternoon auctions, I asked one Trustee if she ever got a bidder other than the bank.  “Not like we used to.  Not as many come out to the auction.”  I believe she has auctioned off more than a few homes, as I observed her reciting the foreclosure order.  It was a page and a half of legalisms, and she monotoned it without missing a stroke, while she looked around the courthouse foyer, observed the folks coming and going, and admired a lady’s infant when she started to cry a little.  Definitely, she had the patter down pat.

 All in all, I saw 13 properties auctioned.  All went to the lenders.  Several went for significant sums below the current Wake County Tax Values, for what that is worth. 

Surreal, yes, but very real to those who will lose their homes.