Simulation: a fictional property for practice.

A Nevada HOA sale where Fannie Mae owns the loan

A townhouse goes to an HOA sale with a $12,000 opening bid. The lender didn’t pay the HOA. Is the mortgage gone?

A fictional townhouse at an HOA foreclosure sale in Nevada.

• Sale: HOA (owners’ association) foreclosure, Nevada
• Opening bid: $12,000
• Value as-is: About $310,000
• First deed of trust: $228,000; recorded documents show Fannie Mae owns the loan

Mission 1: Does the first mortgage survive?

The lender didn’t pay the HOA’s priority amount. What happens to the $228,000 loan?

• It most likely survives: while Fannie Mae and Freddie Mac are under federal conservatorship, an HOA sale can’t wipe out a loan they own unless the FHFA consented
• It’s wiped out, because the lender didn’t pay the HOA

In Nevada, check two things before any HOA sale: whether the lender paid the priority amount, and whether Fannie Mae or Freddie Mac owns the loan.

Mission 2: The real price

• Your winning bid (example): $12,000
• The first mortgage that stays with the property: $228,000
• Past-due dues and costs after the sale (example): $3,000
• Repairs (example): $20,000
• Total: $263,000 for a $310,000 townhouse, before holding and selling costs
• Wait before you get a deed: 60 days: the former owner can redeem (NRS 116.31166)

With the loan surviving, the margin is about $47,000 before holding and selling costs, the 60-day wait, and the risk the lender forecloses if the loan isn’t paid off.

Would you bid?

Buy, investigate or pass? Work through the drill to see what an experienced investor would weigh.