I borrowed from 401(k) to buy the home of my dreams – within months it was sold to someone else for $115k
A NORTH Carolina man was shocked to find his house was foreclosed on after falling behind in homeowner association dues.
Despite attempts to negotiate a repayment plan, Todd Harris hit a dead end after a losing battle with his local homeowners association.
The 59-year-old maintenance mechanic is one of six homeowners The Charlotte Observer interviewed about the loss of their properties to HOA foreclosures.
Funded by residents to ensure the community can function together, HOAs often keep properties visually appealing while keeping values high.
Dedicated to the preservation of roads, parks, and pools, HOAs provide residents with a rule book to live by.
This sounded appealing to Harris nearly 20 years ago when he put a down payment on a home, 15 minutes northeast of downtown Raleigh with money from his 401(k).
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The two-story, 3,200 square feet property had four bedrooms and was home to a two-car garage, reported The Charlotte Observer.
It's also where Harris planned to grow old and a place The Observer described as "tranquil" and "ethically mixed."
But a tranquil life wasn't in the cards for Harris, who fell behind on payments to his homeowner association, Pine Hall Plantation.
HOA’s management demanded $521 in the form of a letter from Harris for past dues, reported The Charlotte Observer.
As additional money was tacked on for attorney fees, Harris found himself in a bind and asked the HOA’s attorney if he could negotiate a repayment plan.
But the HOA wanted all of the money upfront and denied the idea, according to The Charlotte Observer.
It voted to foreclose on him on June 9, 2020, and by August of the following year, a notice of the foreclosure hearing was posted at Harris’ home.
Barely spending time away from his girlfriend's home, Harris told The Charlotte Observer he didn't see the foreclosure notices and reportedly did not receive calls or emails about the situation.
“I should never have let it get to that extent,” he told the outlet. “But I also think there should have been a better effort by the HOA to let me know how serious the situation was.”
By the time he contacted the HOA attorney, the situation was already too far gone.
FOLLOWING FORECLOSURE
The home was bought out of foreclosure in 2022 for $115,500 by real estate company YL, according to The Charlotte Observer.
What is an HOA?
One in five Americans live in an area with a Homeowners' Association - or HOA. But what exactly is it that they do?
- An HOA is a homeowner's association - an organization that aims to maintain a clean and cohesive place to live for its residents.
- Entire neighborhoods, subdivisions, condominiums, family homes, or townhouses within "a planned development" will often make up an HOA.
- They also act as a governing body for tenants, who run and fund the HOA through monthly fees.
- Their principal aims are to keep the community functioning and visually appealing and to maintain property values.
- They primarily focus on common areas of a neighborhood, such as roads, parks, and pools - but may also stipulate what residents can do with their properties, such as yards and driveways.
- Often these restrictions enforce uniformity on properties, for example, ensuring most houses look the same and all driveways are clear of weeds.
- An HOA rulebook of covenants, conditions, and restrictions (CC&R) is distributed to all residents, and an elected volunteer board of directors enforces these regulations.
- Breaking these rules can result in penalties such as fines and even litigation - as most HOAs are incorporated and subject to state law.
- HOAs are often the subject of controversy, with some members feeling that the rules are too punitive and restricting, or that the leadership has too much power.
- But others like that HOAs give communities the power of self-governance, and can ensure a degree of harmony between residents.
“To take everything I worked for the last 20 years …” Harris told the Charlotte Observer on being given two weeks to pack and leave, “It’s been rough.”
He believes more requirements should be needed before an HOA is allowed to foreclose on a home.
But he can still see why they exist, reported The Charlotte Observer.
He cited positivities like their ability to help keep neighborhoods attractive.
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Not all HOA cases end in foreclosure though.
Analysis by The Charlotte Observer found a quarter of the roughly 5,600 HOAs that filed liens, or public marks on a property, from 2018 to 2022, were later foreclosed.