Foreclosure Process for Condominiums
You can finance or refinance a condominium with a mortgage or equity loan. Lenders can foreclose on delinquent condominium loans by using the same procedures that lenders use to foreclose on other types of residential debts. However, you can also lose your condominium to foreclosure even if you have never secured a loan against it.
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Liens
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Property liens are arranged in order of seniority. This means that if you take out two or more loans against your condominium, the oldest loan occupies the first lien position. Any lienholder can foreclose if you default on the debt. Foreclosure laws vary between states, but in most instances the foreclosure proceedings begin no less than 30 days after you miss your loan payment. Thereafter, the foreclosure process often takes a few months to complete, although in other instances it can take several years if you contest the foreclosure filing in court.
Foreclosure
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Many condominium owners are required to pay condominium association dues, and in many states, including North Carolina and Texas, condominium associations can foreclose if you fail to pay these fees. While mortgage-related foreclosures are normally settled in court, some states, such as Texas, allow condominium associations and homeowners associations to conduct non-judicial foreclosures. This means that the association can foreclose on your home by activating a power of sale clause. You do not have an opportunity to fight the foreclosure in court when this occurs. Non-judicial foreclosures in Texas take just 27 days to complete
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Right of Redemption
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In many states, foreclosure sales are final and you must vacate your home after the new owner purchases it at auction. However, in other states you have the right to remain in a condominium or other type of property for a period of time after the sale occurs. Furthermore, the right of redemption in states such as Michigan provides you with the opportunity to buy back your home within a certain period of time after the foreclosure. If you do buy back the home, then any junior liens that were wiped out after the foreclosure sale are typically reinstated on the property.
Considerations
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While a secondary lienholder such as a home equity lender or HOA can foreclose on your condominium, junior lienholders cannot claim any of the foreclosure sale proceeds until the first lien has been paid in full. Furthermore, sale proceeds are also used to cover any back taxes that you owe. If your condominium sells for less than the combined total of the liens, then the junior lienholder ends up taking a loss. Consequently, junior lienholders are sometimes willing to negotiate settlement arrangements with delinquent borrowers since a foreclosure sale could result in a total loss.
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References
- RealtyTrac: Foreclosure Laws and Procedures By State
- HUd.gov: Are You at Risk of Foreclosure and Losing Your Home?
- "Washington Post"; Condo Board Can Foreclose for Delinquent Fees; Benny L Kass; February 2009
- State of Missouri: Mortgage Foreclosure Toolbox
- Foreclosure.com: How are Mortgage Liens Treated in Michigan?
