Our HOA bought a home at its own foreclosure sale. What does the board do with it now?

By OurHOA · General information · Revised October 27, 2026

What an HOA board does after buying a home at its own foreclosure sale: redemption periods, the mortgage, insurance, renting or selling, and taxes.

Part of the HOA board handbook: treasurer and money.

The short answer

When nobody outbids the association at its own lien foreclosure, the association usually ends up holding title, often for little more than the debt it was owed. That makes the board a landlord or a seller, whether it planned to be or not. The job has four parts: find out what the association actually owns, respect any redemption period, carry the house safely while you wait, and then rent or sell it at a fair price with clean records. Do not treat the deed as a win. The association still may not have its money, it now pays the carrying costs, and in some states the former owner can buy the house back. Rules vary by state and by your declaration, and this guide is general education, not legal advice. Keep the collection attorney involved until the house is sold.

Step one: find out what the association bought

Order a title report the week of the sale. An assessment lien foreclosure usually does not wipe out a first mortgage recorded ahead of it, so the association may own a house that a bank can still foreclose. Florida: under section 720.3085(1), the association's lien takes priority over a first mortgage of record only from the date the claim of lien was recorded. A mortgage recorded before that survives the association's sale. Colorado: C.R.S. 38-33.3-316(2)(b) gives the association priority over a first mortgage for up to six months of regular assessments based on the budget. Anything beyond that slice sits behind the lender. Texas: chapter 209 has no priority rule, so the declaration controls, and many declarations put the assessment lien behind a first mortgage. From the title report, list every surviving lien, the mortgage balance if you can get it, unpaid property taxes and any code liens. If the mortgage is larger than the house is worth, ask the attorney whether to stop paying anything on the property and let the lender foreclose. The association's goal is to recover what it is owed, not to build equity in one lot.

Texas: the 180-day redemption window

Texas gives the former owner a way back, and the board has hard deadlines of its own. Within 30 days after the sale, Property Code section 209.010 requires the association to send the lot owner and each lienholder of record a written notice of the sale date and time and their right to redeem, by certified mail, return receipt requested. Within 30 days after sending it, the association records an affidavit stating the date the notice went out, with the lot's legal description. Under section 209.011(b), the owner may redeem until the 180th day after the association mails that notice. A lienholder may redeem only after day 90, and only if the owner has not. During that window the association may not transfer the house to anyone except a redeeming owner (209.011(c)). If the owner or lender sends a certified-mail request to redeem by the last day, the window stays open until 10 days after the association tells them the payoff amount (209.011(m)). The redemption payoff in 209.011(d) includes the debt at the time of sale, interest at the declaration's delinquency rate or 10 percent if none is stated, foreclosure and conveyance costs, later assessments, and reasonable costs of mortgage payments, repairs, maintenance and leasing. Keep receipts for every dollar. Any rent the association collects is credited against the payoff, and excess goes back to the owner (209.011(i)). When the window closes with no redemption, record the affidavit of non-redemption that 209.011(n) requires. A title company will look for it before insuring a buyer. If the house is occupied, section 209.011(a) requires an eviction suit under Property Code chapter 24 to get possession. Never change the locks on an occupied house without a court order.

Florida and Colorado rules for the association as owner

Florida: section 720.3085(1)(f) lets the association buy the parcel at its foreclosure sale and "hold, lease, mortgage, or convey" it. Florida has no redemption period after the sale. Under section 45.0315, the owner's right to redeem ends when the clerk files the certificate of sale, unless the judgment sets a later time. Section 720.3085(2)(b) also says the association does not count as a "previous owner" for joint liability, and a buyer from the association is not liable for assessments that came due while the association held title. Colorado: the bar to foreclose is high. For an owner-occupied home, 38-33.3-316(10.5) generally requires a personal judgment against the owner first, and 316(11)(a) requires a balance of at least six months of assessments plus a recorded board vote to sue that specific unit. After the sale, section 316(12) bars board members, the management company and its employees, employees of the association's law firm, and their immediate family members from buying the foreclosed unit, along with anyone in those roles during the prior five years and businesses tied to them. The text is not limited to the auction, so assume it covers a later sale by the association too. Section 316(13) keeps the covenants on the unit after foreclosure, so the association's own rules bind its buyer.

Carrying the house while you wait

Assign one director to the property and give that person a spending limit set by board vote. Then work through this list in the first two weeks after the association has possession. Insurance. Call the association's agent the day title transfers. The master or common area policy almost never covers a separately owned home. Ask in writing whether the house needs its own dwelling policy and how the policy treats a vacant house. Secure it. Once you have lawful possession, rekey the locks, photograph every room, shut off water at the main if the house will sit empty, and winterize in cold climates. Utilities and upkeep. Put power in the association's name so lights and a thermostat stay on. Hire the lawn crew that already serves the common areas. A neglected house drags down every neighbor's value and draws code complaints. Taxes. The county will bill the association as the owner. Pay on time; penalties are a cost the board chose. Books. Open a separate class or ledger for the property. Record the bid price, every cost and every dollar of rent. In Texas that ledger is the redemption payoff. Everywhere, it is the cost basis your CPA needs when the house sells.

Rent it or sell it

Most small associations should sell as soon as the law allows. Renting turns volunteers into landlords, with repairs, tenant screening, fair housing rules and late-night calls. Rent only if the sale market is poor and a licensed property manager will run the lease. If you rent in Texas during the redemption window, any lease is subject to the owner's right to redeem and move back in immediately (209.011(k)). Tell prospective tenants that in the lease. To sell, get a broker's opinion of value or an appraisal, list the house on the open market through a licensed broker, and approve the listing price and final contract by board vote. Do not sell to a director, a director's relative or the manager in a quiet side deal, even where the law allows it. In Colorado, section 316(12) forbids it. Elsewhere, an insider sale invites a lawsuit from every owner who wanted that house. A sample Texas timeline: Day 0: foreclosure sale; association is high bidder. Day 1 to 7: title report, insurance call, notice to occupants. By day 30: certified-mail redemption notice to owner and lienholders. By day 60: affidavit of notice recorded. Day 90 after notice: lienholder redemption opens. Day 180 after notice: owner redemption closes, unless extended under 209.011(m). Next week: record the affidavit of non-redemption, order the broker's opinion, list. A motion the board can adapt: "I move that the board accept the broker's recommendation, list the property at [address] for sale at $[price] through [brokerage], authorize the president to sign the listing agreement, and require board approval of any purchase contract."

Taxes on the rent and the sale

Rent and sale gains are not exempt function income. The IRS instructions for Form 1120-H define exempt function income as dues, fees and assessments from owners as owners. Gross rents go on line 3, and gain from selling property goes on line 5 or line 6 depending on the type of gain. The bigger risk is the 60 percent test. At least 60 percent of gross income must be exempt function income for the association to file Form 1120-H at all. Picture a 60-home association with $180,000 of dues and $4,000 of interest that sells its foreclosed house for a $130,000 gain after costs. Gross income is $314,000, and dues are 57.3 percent of it. The test fails that year, and the association files the regular corporate Form 1120 instead. Talk to the CPA before the closing, not after. The timing of the sale, how costs are recorded and which form fits that year all affect the bill. Our guide on preparing Form 1120-H walks through the tests line by line.

Mistakes boards make with a foreclosed house

Skipping the title report. The board learns about a $180,000 first mortgage when the bank's own foreclosure notice arrives. Missing the Texas notice. The 30-day certified-mail notice starts the redemption clock. Without it, the board cannot show when the window closed. Selling during the redemption window. Texas forbids it, and a buyer's title company will catch it. Letting the house sit. Every month adds taxes, insurance and utilities to a debt the association may never recover. Mixing the money. Rent deposited into operating with no separate record makes the Texas payoff and the CPA's basis calculation guesswork. An insider buyer. Even where it is legal, it looks like the board foreclosed to get a cheap house. For the step before this one, our guide on collecting dues after a foreclosure sale explains how the association's claim fares when a lender forecloses instead.

Sources

These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.

More on dues & money

Or browse all hoa dues, fees & money guides.