In today’s post we talk about tax sale investing, HOAs and your credit! Believe it or not, the three tie together very closely! If you want to protect your credit score then you need to watch!
Transcript:
Hey folks! Casey Denman here with TaxSaleAcademy.com. In this video, we’re talking about tax sales, HOAs and your credit. Believe it or not, the three of these do tie rather closely together.
First off, let’s talk about an HOA. If you’re not familiar with an HOA, it stands for “Homeowner’s Association.” In some parts of the country, they call them POA for “Property Owner’s Association.” An HOA or a POA operates to enforce restrictive covenants of that subdivision. And also, to ensure that community amenities are maintained properly.
Now, of course maintenance does cost money. It costs money to maintain those gates for that swimming pool or that clubhouse. All those stuff cost money. So what they’ll do is they will bill you some sort of fees. Now, it might be a monthly fee or a quarterly fee or a yearly fee. It might just be a one-time fee when you join. Typically, it’s going to be an ongoing fee, however.
Now, you’ll notice that when it comes to tax sale investing, in certain counties you’ll see certain subdivisions that will pop up a lot. One subdivision for instance might make up 90% of every single property available at that county tax sale. A lot of times what happens here is subdivisions that were developed back in the ‘60s and the ‘70s that never really took off – you know, the ones that were really just promising a lot and they just never took off, more or less. They might have 96%, 97% vacant lots. They might have swimming pools, clubhouses and that kind of thing, but nobody really uses them.
Well, unfortunately, those clubhouses, those swimming pools still require maintenance whether anybody uses them or not, so a lot of times you’ll see these vacant lots that will come up for tax sale auction because the former owners don’t feel it’s worth paying the taxes because they not only have to pay the taxes, they also have to pay those monthly or those yearly membership fees. So sometimes you’ll just see loads and loads and loads of properties in one subdivision, and 9 times out of 10 that subdivision will have some sort of fee that goes along with it.
Now, here’s the important part for you as a tax sale investor. Obviously, when you buy these properties at tax sale auctions, the association is going to expect you to pay for these fees. Now you have three options here. You don’t pay and they don’t do anything, which is very, very rare nowadays. The second option, and this is where your credit kind of becomes involves, is you don’t pay and they issue a lien on the property. If you’re thinking, “A lien? Well, that’s not that bad, right?” Well, what about this? What about they foreclose that lien, and then suddenly, you have a foreclosure on your credit report. You have a judgment against you on your credit report. That’s going to take your credit score down substantially.
Then the third option – and this is becoming more and more common – the HOA will contract with a collection company. They’ll contract with a collection agency. You know, those nasty collection agencies that will call you at all hours of the night. The ones that will sometimes show up at your front doorsteps, the ones that will call your boss or other employees, trying to track you down for that money. Yup, that’s right. HOAs a lot of times will contract with those collection companies.
Now, it’s not that big of a deal, you’ll think. Well, what happens here is the HOAs can’t automatically or they can’t themselves put a ding on your credit for a negative credit report since you don’t pay the HOA fees. But when they contract with these collection agencies, not only can they go after you, not only do they have the manpower and the resource to go after you with all sorts of nastiness, more or less, but they also have the power to put a negative impact on your credit report.
So you have to be very, very careful here when it comes to buying tax sale properties. If it has an HOA or a POA due, you have to figure out your plan well ahead of time. Are you going to sell it immediately before you have to pay more than a month’s worth of due, or are you prepared to pay those dues for the long term until you sell that piece of property because believe me, the last thing you want to do is buy a piece of property with an HOA and not pay the HOA fees because then you’re either going to have a collection agency come after you or more than likely, you’re going to have a lien or a foreclosure on your credit report, and that’s the last thing you want, especially if you’re trying to keep your credit score high.
So, that’s all I got for you today, folks. If you’d like more information about the very lucrative tax sale investing business, head on over to my website at TaxSaleAcademy.com, which you can do by clicking the blue link right here next to my head. Again, it will take you to TaxSaleAcademy.com. Once you get there, download your free copy of my e-book, The Tax Sale Blueprint, and you’ll be on your way to a very successful tax sale investing career.
Take care, folks! Bye-bye.