Wholesaling HOA Foreclosure Properties in Massachusetts

The short answer

Is wholesaling HOA foreclosure properties in Massachusetts legal?

Generally yes when you contract for yourself. We found no rule written for wholesalers in Massachusetts, though the broker license law in c. 112 can still apply to paid brokering. For a Cambridge unit, read the association papers and check current text with an attorney before you sign. Association rules vary, so read the governing documents first.

An association foreclosure starts when an owner stops paying common charges or fees. Whether the association can record a lien, and how that lien ranks against the first mortgage, depends on state law and on the condo or association documents. We do not cover those statutes here. Confirm current rules with a Massachusetts attorney, and read our HOA foreclosure guide for the general picture.

A mortgage lender, by contrast, can foreclose by power of sale under M.G.L. c. 244, s. 14, and that sale is made subject to prior encumbrances, tax titles, public taxes and liens. So a buyer must know which claims survive. Order a title search, and see our title search guide before you sign anything.

The opportunity

Why Cambridge condo owners get stuck

Cambridge is in Middlesex County and is condo-heavy, with homes in Cambridgeport, East Cambridge, Mid-Cambridge, North Cambridge and near Porter Square. Prices run among the highest in the state, and wholesale inventory is thin. That makes each distressed unit worth a careful look. An owner who is behind on monthly charges may also be behind on a mortgage, and monthly fees that rise can turn a small shortfall into a real problem.

Lead sources

Where to find association-delinquent owners in Cambridge

• Registry of Deeds. Recorded liens and notices appear at the Middlesex registry. See lis pendens basics.
• Property managers. Managers know which owners are behind, though they may not share names. Ask politely what they can disclose.
• Foreclosure notices. Newspaper notices of sale are public. Read how foreclosure auctions work.
• Assessor data. City records list owners and mailing addresses for each unit.
• Absentee owners. Investor-owned units are often behind first. Our absentee owner guide shows how to reach them.

Your exit

Who buys condo distress in Cambridge

Local investors, small landlords and owner-occupant buyers are the likely audience. A buyer will want to see the association’s estoppel-style payoff and the budget before closing. Our estoppel letter guide explains that document.

Because the buyer inherits the building’s rules, give them the bylaws early. Close through a closing attorney, and ask the attorney how any association charges will be settled in the closing statement.

Step by step

How to start wholesaling HOA foreclosure properties in Massachusetts

1. Get the payoff. Ask the owner for the association’s statement of charges and any lien notice.
2. Check the mortgage. Learn whether a lender has started foreclosure. See pre-foreclosure leads.
3. Read the documents. The master deed and bylaws may limit leasing, sales or transfers.
4. Run the numbers. Use the ARV calculator and the MAO calculator, with arrears subtracted.
5. Sign with disclosure. Put your right to assign in writing and tell the seller plainly.
6. Place the unit. Offer it to a vetted buyer. See buyer buy boxes.
7. Close with an attorney. Settle association charges, the mortgage and the deed excise tax at the table.

Here is a worked example near Porter Square. An owner of a two-bedroom condo had lost a tenant and fallen behind on monthly charges. A special assessment landed right after. He wanted out before the arrears grew.

You contracted at $585,000 with a 30-day closing and the arrears paid from proceeds. You assigned the contract to an investor for an $11,000 fee, and the seller signed a clear disclosure of your role.

At closing, the attorney paid the association’s balance of about $9,800 and the mortgage, and the owner left with cash. The numbers are illustrations only, not market data.

Massachusetts rules to know

Massachusetts association, foreclosure and broker rules

Mortgage foreclosures by power of sale are governed by M.G.L. c. 244, s. 14. Notice must be published once a week for three successive weeks, with the first publication at least 21 days before the sale, and sent by registered mail to owners and junior holders at least 14 days before. The foreclosing mortgagee must hold the mortgage by a recorded chain of assignments. How an association’s claim fits in is a question for a Massachusetts attorney.

For your own role, read c. 112, s. 87PP, whose definition of a broker covers anyone who lists, negotiates or helps procure prospects for another person’s property in return for a fee. Section 87RR adds that a license is required. Closing costs include the deed excise tax of c. 64D, s. 1, which is $2.00 per $500. See our attorney guide and check current text.

Learn it with a mentor

Read a condo deal with a mentor

Association paperwork hides small details that decide a deal. Mentorship students show us their payoff letters and we help them see what the buyer will see.

FAQ

HOA Foreclosure Properties in Massachusetts: common questions

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