Nevada Supreme Court Makes Decision to Favor HOAs

Nevada Supreme Court Makes Decision to Favor HOAs


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Even with a decision from the Nevada Supreme Court, it didn’t really answer many questions that realtors, owners, and buyers had. The September ruling gave homeowner associations the power to wipe out a mortgage through foreclosure if dues to the association are left unpaid. This could have long time repercussions for the housing market in Southern Nevada.

Nevada Supreme Court Makes Decision to Favor HOAs

New Nevada Supreme Court rulings could have long term consequences.

Realtors Side

Realtors believe that it is unfair to let an HOA foreclose on a lender when the unpaid dues are so little compared to the value of a home. Some HOA’s have filed foreclosure for as little as $3000 or $4000 on a $300,000 first mortgage. This is “rank unfairness” a local realtor said. It will significantly affect the real estate market, as lenders may not be as willing to lend to Las Vegas buyers, as the power will not be in their hands and they could lose money.

It is a situation that can lead to mismanagement of funds, as many HOAs use it as a way to make money by charging exorbitant collection fees.

Lender’s Side

This is an issue that lenders are looking at as well, simply because many lenders will pull out of financing homes in the Las Vegas area, simply because foreclosure and trying to sell a home again often causes them to lose money.

HOA’s Side

The homeowner’s associations are happy with the decision, as it gives them a way to reinforce payment of dues. Homeowner’s who do not pay their regular dues cause issues that affect all members of the association, including having to skimp on upkeep and postpone improvement projects.  HOAs believe that this additional “power” will encourage homeowners to take care of their dues in a timely manner.

New Law on Horizon

A state law is scheduled to come into effect on October 1st that will add protections and clarifications to super-priority laws. The first thing that will happen is that the requirements for notification will be tougher. From HOAs to lenders, the communication will have to be open. A redemption period will allow a lender to reclaim a property within 60 days of an HOA foreclosure sale. All of this can help to make the process more open and can decrease the HOA foreclosure rate, but it will not be all good. HOAs will still be able to extinguish mortgages, which could make lenders take a pause in the real estate mortgage market.

Realtors and lenders are hopeful that the law will be changed in 2017, but the damage may already be done by that time.  The key is to ensure that buyers understand the homeowner’s association dues and what can happen if they do not keep current on the dues. By being transparent on every level, from realtor to lender to HOA, homeowners will understand what can happen and do everything possible to keep it from happening to them.

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