HOA foreclosure questions (Texas)

[Maurice D.]

So it looks like these days, an HOA foreclosure may not be a bad deal, you bid enough to pay it off and then you have to pay the first mortgage. I am seeing several auctions and there is plenty of equity 50% or so) to make it a decent deal.

my question is, for example HOA lien is 10k, 1st mortgage balance 100k ARV 210k

This could get bid up to 110k or so, Does the trustee pay off the 1st (or applies excess above the 10k to the 1st)?  or do you only bid down in the HOA lien range? I am wondering if the excess goes to the homeowner or applied to the 1st mortgage.

Also, a more specific question, found one that has an OLD 120k IRS tax lien from 2010.  that is expired, easily removed.  but what happens when it is still there?  do excess funds above the HOA lien get sent to the IRS?  or does the HOA have a higher priority over IRS liens in Texas and extinguish it?  In this case there is also a 1st of about 100k.  who gets the excess? the 1st or the old IRS debt?

[Bruce Lynn]

@Maurice D.   Good questions... I don't think excess goes to pay 1st lien.  Might go to homeowner if they can find them or they respond, or might just get escheated to the state if they can't.  

I have seen these sold before, but I would think if there is equity 1st lien holder would go in and buy it....or they just let it go, knowing when they foreclose it will get wiped out.

Sometimes the trick can be getting the 1st lienholder to talk to you I would expect.

Also something to think about is with $10K HOA lien, how many years is that? If the owner did not pay IRS or HOA, did they pay the mortgage? If they owe 10 years of penalties and interest, force placed insurance, attorney fees, etc ...so not sure where that $100K loan balance would be today. Might not be as much spread in these as you would think.

The strategy I see on these is buy the HOA lien....then clean it up enough to get it rented, and then rent on month to month at discounted rate until #1 forecloses and evicts the tenant. You probably want to be up front and honest with the tenant that could happen, but MTM with 1/2price rent or something like that might work for someone. Can't really rehab probably as you will loose that when #1 forecloses.