I've recently encountered a number of individuals who have purchased
what they thought was a great deal at an HOA foreclosure auction only
to lose their entire investment when the banks foreclose on the property.
In one instance, a Ft. Lauderdale woman said she and her daughter recently
purchased a condo for $11,000 in cash, only to learn that they were responsible
for the $86,000 mortgage plus overdue homeowner-association fees.
In Florida, when a successful bidder buys a HOA lien at a foreclosure auction,
they get title subject to the existing mortgages and other junior encumbrances.
When you purchase a HOA lien at foreclosure, you are in a 2nd or even
3rd lien position. If the homeowner has neglected to pay his HOA fees,
you can bet your bottom dollar that they are not paying their mortgage
either and will be foreclosed upon. The bank's loan is ahead of your
lien. Basically, you received a title that is not free and clear and is
subject to other liens.
Whether or not your goal is to pursue ownership from the lender or evict
whoever is living in the unit and rent it out to recoup your "purchase
price' before the bank forecloses on the property, ultimately, you
just bought an extremely high risk investment and if not handled properly,
you will most likely lose whatever you paid.