The Role of HOA Dues in Short Sales: What Realtors Need to Know
When it comes to short sales, most agents focus on the lender approval process—and for good reason. Banks and servicers ultimately determine whether the deal can close. But there’s another player that often gets overlooked until it’s too late: the homeowner’s association (HOA).
Unpaid HOA dues, special assessments and even HOA legal fees can derail a short sale just as quickly as a slow lender. Understanding how to identify and handle these issues up front can make the difference between a smooth closing and a deal that falls apart at the eleventh hour.
Why HOA Dues Matter in a Short Sale
When a homeowner falls behind on their mortgage, chances are they’ve also fallen behind on their HOA dues. Those dues don’t just disappear – they become a lien against the property, sitting in line with the mortgage lender, county taxes and any other encumbrances. Unlike property taxes or mortgages, HOAs usually don’t foreclose quickly. But they do have legal rights to collect. And in many states, HOA liens can take priority over mortgages for a portion of the unpaid balance. That means lenders will require the HOA to be dealt with before approving the short sale.
Types of HOA Charges You Might See
HOA balances often include more than just the monthly dues. Watch for these categories:
- **Regular assessments** – the monthly or quarterly fees every homeowner pays.
- **Late fees & interest** – penalties that accumulate after missed payments.
- **Special assessments** – one‑time charges for major repairs such as roof replacements, pool renovations or structural upgrades.
- **Attorney’s fees & court costs** – if the HOA has hired a lawyer or filed suit, the costs can quickly balloon.
It’s not unusual to see a $2,000 unpaid balance snowball into $10,000 or more once legal fees and assessments are added.
How HOA Liens Impact the Approval Process
Mortgage lenders want to know their lien is being satisfied – or at least partially resolved – in the short sale. If the HOA lien isn’t addressed, title can’t transfer cleanly. That’s why most short sale approval letters specifically list HOA dues and assessments as part of the settlement. But here’s the tricky part: banks don’t always agree to pay the full HOA balance. Some lenders cap what they’ll allow at $1,500 or $2,500, regardless of what’s owed. If the HOA demands more, someone has to make up the difference – either the buyer, the seller or, in rare cases, the realtor’s commission.
The Realtor’s Role in Managing HOA Payoffs
This is where proactive communication comes in. As the agent, you’re often the one coordinating between the lender, HOA and closing attorney. Here’s how you can stay ahead of problems:
1. **Ask early about HOA dues.** At listing, find out if the property is in an HOA and whether dues are current. A quick call to the management company can prevent ugly surprises later.
2. **Request an HOA estoppel or statement of account.** In many states, HOAs are required to provide a payoff figure upon request. This document outlines exactly what’s owed—including late fees, assessments and attorney’s costs.
3. **Communicate with the lender.** Submit the HOA payoff request with your short sale package. This allows the lender to address it in their approval terms.
4. **Negotiate where needed.** Sometimes the HOA will agree to reduce fees if they know a foreclosure is the alternative. Other times, the buyer may need to cover part of the balance as a condition of sale.
Real-World Example: The $12,000 Roadblock
We once worked on a Florida condo short sale where the HOA balance had grown to nearly $12,000 due to a $7,000 special assessment plus years of unpaid dues. The bank was only willing to pay $2,500 toward it. At first glance, it looked like the deal was dead. But after presenting the HOA with the reality—that a foreclosure would likely leave them with nothing—we negotiated the balance down to $5,000. The buyer agreed to cover the difference at closing, and the sale went through. Without addressing the HOA head‑on, the deal would have collapsed.
State Variations and "Super Liens"
Realtors should also be aware of state‑specific laws. Some states, like Florida and Nevada, give HOAs “super lien” status—meaning they can claim priority over mortgages for up to six months (or more) of unpaid dues. In these states, banks are particularly motivated to resolve HOA claims, but the process can be strict. Always check your local laws or lean on your closing attorney for guidance.
Best Practices for Realtors Handling HOA Short Sales
- **Don’t wait until title review.** By then, it’s often too late to negotiate or adjust contracts.
- **Educate your seller.** Many homeowners assume the bank will pay everything. Be upfront that HOA balances can complicate the deal.
- **Prepare your buyer.** If HOA balances exceed lender limits, buyers may need to contribute. Set that expectation early.
- **Work with an experienced short sale expert.** Having a negotiator who knows the ins and outs of HOA payoffs can save weeks of stress.
Final Thoughts
HOA dues may not be the first thing you think of when listing a short sale, but they can absolutely make or break a deal. By identifying the issue early, securing payoff statements and setting proper expectations with all parties, you’ll prevent last‑minute surprises and keep your deals moving smoothly. As with most things in short sales, the key is communication—between seller, lender, buyer, HOA and closing attorney. When everyone understands the stakes, you’re far more likely to get that approval letter and see your short sale cross the finish line. And if you ever find yourself facing an HOA hurdle, remember: there are always options. Foreclosure benefits no one—so with the right approach, most HOAs are willing to compromise to ensure a deal gets done.
Explore More Resources
For additional tips on navigating short sales, check out our pages on **How We Help**, **Who We Serve** and **Start a Short Sale**. With the right guidance, you can turn seemingly complex HOA situations into smooth closings.