At the Hillsborough County, Fla., courthouse bidders line up twice a day to buy distressed properties, including homeowner association foreclosures. HOAs foreclose on homes after the owner fails to pay association fees.
The HOA foreclosures are attracting investors who often take temporary ownership of the property and rent it out until the bank gets around to foreclosing on its mortgage.
One group of investors has purchased 71 properties valued at $8.2 million for $220,000, according to the St. Petersburg Times.
The group's big purchase this year: A four-bedroom bay-front home in Apollo Beach, Fla., valued at nearly $1.2 million sold for $10,010 to FYM Inc.
"We have a crowd of people that come in every day and it's usually the same crowd -- sometimes a couple more and a couple less," says Dana Caranante, director of the Circuit Court Division.
Investors purchase the deed or title to the property and are able to rent the property until the lender forecloses, which can take up to two to three years. In the meantime, investors are able to recoup the price paid to the HOA and make a profit, sometimes in a matter of months.
The story was first reported in the St. Petersburg Times.
In 2010, there more than 8,000 properties sold at auctions held by the Hillsborough Circuit Court. The number was a steady climb since 2006's low figure of 761, according to documents obtained from the Circuit Court. The number of sales scheduled may decline in 2011. In the last six months, 2,004 property sales are currently scheduled.
"They're not all homeowner association foreclosures ... most are not. We sell anything that the judge tells us to sell," Caranante says.
Florida isn't the only area that auctions off property for unpaid association fees. In 2009, the Consumerist reported about a community in San Antonio, Texas where 84 homes faced the auction block for unpaid dues, including a homeowner behind by $267.58.
A 2001 study by the Sentinel Fair Housing of foreclosures in Alameda, Contra Costa, San Mateo, Santa Clara and Sacramento counties found the median amount owed on properties experiencing homeowner association foreclosures was $2,557.
"Foreclosure should always be used as a last resort, applied only when a community association has exhausted all other collection options and only when a homeowner refuses to remedy a significant debt to the association," Frank Rathbun of Community Associations Institute said in written statement. "CAI does not support people losing their homes to foreclosure for insignificant sums of money. "
HOA foreclosures can happen because "association attorneys move a lot quicker than bank attorneys," says real estate attorney Gary Singer. An association "may foreclose in as little as four to six months, whereas a bank can take two to three years."
Placing a renter in the property is appealing to some because of the dangers of empty or abandoned property that can bring down the value of neighborhoods.
"It's a fairly good solution all around for everyone except the bank. The homeowner's losing the property they didn't pay for, which stinks, but they're going to get foreclosed by someone," Singer says.
"The HOA is receiving dues and the renter is getting a cheap price," Singer says. "The only person that is getting hurt is the home owner, but they're the ones that caused the problem by not paying HOA.
"There's always a victim in any situation," he says. "This isn't a predatory thing in the way it's supposed to work by the laws that allow it. I'm sure it gets predatory at times. "
New tenants can run into risk if they enter a rental blindly.