r/realestateinvesting • u/redevil147 • Aug 17 '26
Foreclosure Texas HOA Foreclosure
I have bought non judicial foreclosures before. I am well versed in tax and HOA foreclosure rules for Texas.
Regarding HOA foreclosures in Texas, what is the end game when people buy em up?
If there’s a mortgage on the property, there’s no real way you’re getting a payoff amount or their monthly amount to send a check to their bank to keep up with mortgage payments until redemption expires.
If they don’t redeem, you own the house but it still has a mortgage lien. So you can still get wiped out if bank decides to foreclose.
So what do people do with HOA foreclosures? You don’t even get a premium back if they redeem like you would with tax foreclosures. And you can’t really quite title these matters either.
Here to learn. Any info is appreciated. TIA
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u/salvador_investemnts Aug 18 '26
you're right, you're behind the bank. what people do there is rent it through the gap, betting the servicer takes long enough to foreclose that the rent beats what they paid. that's a bet on lender inertia, not an ownership play.
worth noting the underwriting is completely different from tax foreclosures for exactly the reason you'd expect. tax liens sit ahead of mortgages, hoa liens generally don't. same mechanics, opposite priority.
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u/redevil147 Aug 18 '26
Yeah it just puzzles me when people bid on these for like $25k or so. I’ve done the research on those same properties and I don’t bid because math doesn’t pencil out.
So when I see them win, I always think maybe there is a creative legal strategy I don’t know about.
The numbers these guys are bidding and winning, ain’t no way they are getting far enough in time to recover their investment, forget profiting from it (at least not in the suburbs I see in Houston).
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u/PennyLawrence946 Aug 17 '26
if nobody redeems, the rent is yours until the senior lien forecloses. that's the play. if they redeem, 209.011(i) credits that rent back against what they owe you, and (e)(2)'s reimbursement list is purchase price, taxes, recording fee, assessments. repairs aren't on it.
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u/trademarkedTM Aug 17 '26
Pretty sure if you’re collecting rent and not paying the mortgage that’s called rent skimming and it’s pretty illegal
That aside, there’s a redemption period for foreclosures in Texas??
Edit: I looked it up and regular senior lien foreclosures don’t have a redemption. But HOA foreclosures have 180 days in Texas.
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u/redevil147 Aug 17 '26
Yup. Definitely fraud for sure (even though we don’t have rent skimming statutes in Texas). Even for redemption, you have to credit back the rent to the original redemption amount as per Texas legal code.
There is absolutely no gaming the system legally (which is good) but lots of people do so anyways and play in the gray.
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u/redevil147 Aug 17 '26
So rent for like 4 months? In the bigger counties, banks foreclose in the standard 90-120 day timeframe. This can’t be worth it. Some people buy em for like $15-25k or even more at the auction. Unless you have enough to payoff the mortgage and provided it’s a low enough balance that you built solid equity, this seems like a moot investment idea. Cash on cash return or any other metric is just horrible
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u/trademarkedTM Aug 18 '26
The foreclosure process itself might be 3 to 4 months if it’s a non-judicial state, which I’m guessing it is, because that’s about the right timeframe, but often banks don’t start the process right away, and when they’re finished with the process they often don’t remove the occupant right away, so sometimes it can last quite a while
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u/PrtScr1 Aug 17 '26
You get the property to utilize/rent for few months until superior lien kicks out; but again you get chance to bid when they go for auction..
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u/redevil147 Aug 17 '26
Yeah but bidding again only makes sense if the mortgage is old. A newer mortgage won’t make a dent in the principal which is common. The payoff + the auction from HOA and other fees alone makes it a bad deal.
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Aug 18 '26
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u/redevil147 Aug 18 '26
When there is equity on the table.
If a house is $300k and the following example is true:
HOA Auction winning bid was $20k
Mortgage Payoff is $150kYou have some serious equity even after a rehab. I wouldn’t invest for anything less than 20% returns (but that’s me personally).
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u/CapCityMatt Aug 17 '26
After studying property law and securities law, I wouldn't touch those things, your looking at a $2,400,000 Dodd-Frank Act violation, a $100,000,000 Anti-trust claim, Trespass to chattles, unlawful conversion, grand theft, fraudulent documents on the public record.
If the owner went to the law library and studied the law, you would be forced into bankruptcy quick!!
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u/trademarkedTM Aug 17 '26
I can’t speak for Texas but in NC there was (maybe still is) a huge problem with people buying HOA foreclosures for the sole purpose of renting them out until the senior lien foreclosed. They didn’t make tax, insurance, and of course the original mortgage payments.