October 30, 2019

Clearing Up the Confusion Community Association Fees vs. Property Tax Liens

Clearing Up the Confusion: Community Association Fees vs. Property Tax Liens

Ask just about anyone who has ever owned a home in a neighborhood with a homeowners’ association (HOA), and they’ll tell you a horror story about the experience.

In fact, HOAs get such a bad rap these days many of them have started calling themselves “community associations” instead in order to avoid the negative nomenclature. Whether your HOA hated the color of your house (and fined you), disliked your swing set design (and fined you), or failed to maintain the pool and tennis courts (yet somehow fined you via a “special assessment”), these groups tend to get a lot of bad publicity.

Probably one of the biggest reasons homeowners dislike community associations is because these groups can, in most states, place a lien on your home if you fail to comply with their requests and then refuse to pay the subsequent fines associated with that failure.

Because you must sign an agreement to abide by the HOA covenants when you purchase a property in the neighborhood, homeowners usually have a very hard time fighting these groups as well. People who try tend to rack up very high fines and, in some cases, may even end up with liens on their homes or in foreclosure as a result.

Now, I know your ears probably perked up at the word “liens.”

You are probably wondering if you can invest in HOA liens the same way you can invest in property tax liens. In fact, right after the housing crash in the mid-2000s, a lot of people were thinking that way. So many people that some very unscrupulous “educators” actually started telling people that they could buy HOA liens instead of tax liens and acquire the same properties for less money.

That misconception persists to this day. Although you can, in some states, buy HOA liens at tax auctions and foreclosure auctions, when you invest in an HOA lien you also take responsibility for the remaining debt on the property. That means you might have a great deal if you are not now subject to a lot of other debt, but you also might have just completely wasted your money buying that HOA lien because the home has negative equity or thousands and thousands in construction liens on it. On the other hand, when you buy a tax lien, you can foreclose on the property if it remains unpaid and, in the states that are most favorable to investors, you will wipe out the rest of the debt on the property.

PIP Group spends a great deal of time monitoring how states run their tax auctions and making sure we are active in states most dedicating to protecting investor interest precisely so you can avoid potential pitfalls like the ones that people buying HOA liens so often fall into. You can learn more about tax liens, tax deeds, and how we invest in both (and where) at PIPGroup.com.

See these recent posts:

2 Actions You Must Take in Order to Collect on A Property Tax Lien on Time

What Happens When Renters Are Caught In A Tax Sale

About the author 

Charles Sells

Charles Sells is the founder and CEO of The PIP Group, a turnkey service provider that focuses on investments in distressed real estate assets including tax liens, tax deeds, traditional foreclosures, fix-and-flips and long-term cash flow acquisitions. He has been involved in tax lien investing for over 20 years, during which time The PIP Group has grown to become one of the largest agencies of its kind with nearly 1,000 individual and institutional investors worldwide.

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