Unpaid HOA fees boost foreclosure risk

DEAR BENNY: I am three months behind in my homeowner's association payments. Can the condominium foreclose on my unit? My mortgage payments are up to date, and I called my lender who said no, they cannot foreclose. What do you say?

I wrote a letter to the board asking for a payment plan in January of this year, but no response as of yet. I know I owe the money, but I was sick for a period of time. I am planning to pay the back fees with my taxes. --P.S.

DEAR P.S.: Your lender is wrong. Review your legal documents carefully and you will see that the board has a number of remedies if an owner is delinquent in his/her condominium fees. The board can bring a lawsuit for collection; in many cases can restrict access to common areas, such as exercise rooms or swimming pools; and can ultimately, unless your state legislature has enacted restrictions, foreclose on your unit.

I am surprised that your board has ignored your request for a payment plan. Such a plan makes sense -- especially in today's economic situation. What does the board want to do: foreclose and then possibly be stuck with your unit if no one buys at the sale?

I suggest you keep pressing the board for a decision.

DEAR BENNY: After 25 years I'm tired of being a landlord and was thinking of selling my rental house and carrying back the loan. Where can I get more information on what's involved? --Gina

DEAR GINA: When you sell property and take back financing, you are no different from any other commercial lender. You want to be as sure as possible that your buyer is financially able to make the monthly payments (which include principal, interest, taxes and insurance -- which we call "PITI"), and you also want to make sure that the loan is properly secured with the house as collateral. This means that you record the mortgage document among the land records where the property is located.

There is a lot of information on the Internet -- just type in "seller take back financing" at your favorite search engine.

However, as helpful as the Internet will be, you will need specific assistance. Your buyer/borrower will have to sign a promissory note, and a deed of trust (called a mortgage in some parts of the country). Don't rely on the buyer's attorney or title (escrow) company to assist you. Retain your own attorney to draw up all of the necessary papers and to help you determine if your potential buyer is a good candidate for a seller take-back loan.

DEAR BENNY: My friends have a home they are allowing their daughter to live in rent-free. We were discussing selling the home, which they moved out of three years ago. Since they have gone past the three-year period, what is their capital gain amount or tax liability on this home? Is the entire amount that they sell it for taxable? Or does the IRS still deduct the amount paid for the property and call that part untaxable? --Patti

DEAR PATTI: If I understand your question, your friends moved out of their principal residence three years ago, and now want to sell it to their daughter. Since there is a time limit on their right to exclude up to $500,000 of their gain if they are married and file a joint income tax return (or up to $250,000 for single filers), what are their tax consequences? ...CONTINUED

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