HOA Foreclosures in Las Vegas - Part 1

 

As many of you know, there has been very little bank foreclosure activity lately in the Las Vegas marketplace (an average of 270 homes per month over the last 3months-May, June, and July 2013.)   However, a new development in the Las Vegas real estate scene is HOA foreclosures. Home Owners Associations (HOA’s) are now foreclosing on homes within their jurisdiction for unpaid HOA fees.

We have been working hard to secure many of these foreclosures for our investor clients using two  paths:

1. Buy the HOA delinquent receivables for homes, townhomes, and condos at auction (Trustees sales, collection company auctions and/or private attorney auctions.
2. Approach HOAs directly and buy their receivables for these delinquent accounts, foreclose on the homes ourselves, and gain title to the homes through this method.

When we buy at one of the auctions, we usually end up paying between 10-15% of the property’s value for the home.  We get a foreclosure deed, we record it, and this gives us legal possession of the property.

If the home is vacant, we rehab it and rent it out for cash flow.  While we are collecting rent on the property, our attorney negotiates with the bank to obtain "quiet title" for free and clear ownership of the home, or our attorney negotiates with the bank to buy the property at a discount from current market value.

If the home is currently occupied with a renter, we place the home in our property management division and rent comes directly to us.  If rent is not paid, we treat the property as a normal rental and evict the current tenant.

If the house is occupied by the former owner, we give them three options. 

1. They stay, sign a lease, and pay rent as any other tenant would do. 
2. They stay unlawfully and we have them evicted (unlawful detainer.)This process takes approximately two months.
3. They move out voluntarily and we are able to rehab the home and get it rented. 

When we approach the HOAs directly and negotiate the purchase of their delinquent receivables, we pay off the collections costs, foreclose on the homes (with their assistance), and are able to acquire the homes by paying approximately 5% of their current market value.  We are able to acquire more homes at a cheaper price through this method, but the time frame is much longer.

Gaining possession of the home is very important. It allows us to control the rental and management of the home.  This control does not grant us free and clear title which is what we are ultimately seeking, but it does allow us to generate cash flow on the property while we pursue title.