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Compact case
Published by: Allied Business Academies
Originally published in: "Journal of the International Academy for Case Studies", 2015
Revision date: 28-Sep-2018
Length: 4 pages
Data source: Published sources

Abstract

This case can be used to illustrate the ethical dilemma that may arise when an investor seizes on the opportunity to purchase a real estate interest from a Homeowners Association that has placed a lien on a neighborhood house for unpaid dues owed by the homeowners. Little known to many homeowners, who live in subdivisions that assess mandatory dues, is that failure to pay these dues can lead to a lien being placed on the family home, subjecting the property to a foreclosure auction. Following a foreclosure sale, the purchaser of the real estate interest can collect rental income on the property - either from the original homeowner or, in the event of the homeowner's eviction, new tenants. Judicial proceedings to aid the original homeowner, as well as any primary mortgage holder, typically get mired down in slow-moving court procedures. During this period, the purchaser at the foreclosure profits from the collection of rents, while the original homeowner can spiral into deeper debt. This case study is designed to prompt discussion on the topic of a real estate foreclosure and shrewd manoeuvring through the legal system by a sophisticated investor, who is an attorney. These issues can be covered in one class session and require one hour of preparation time from the students. This case can stand alone, or it may be used in conjunction with a related case - 'Homeownership Is Not Always a Blessing' - by the same authors.

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Abstract

This case can be used to illustrate the ethical dilemma that may arise when an investor seizes on the opportunity to purchase a real estate interest from a Homeowners Association that has placed a lien on a neighborhood house for unpaid dues owed by the homeowners. Little known to many homeowners, who live in subdivisions that assess mandatory dues, is that failure to pay these dues can lead to a lien being placed on the family home, subjecting the property to a foreclosure auction. Following a foreclosure sale, the purchaser of the real estate interest can collect rental income on the property - either from the original homeowner or, in the event of the homeowner's eviction, new tenants. Judicial proceedings to aid the original homeowner, as well as any primary mortgage holder, typically get mired down in slow-moving court procedures. During this period, the purchaser at the foreclosure profits from the collection of rents, while the original homeowner can spiral into deeper debt. This case study is designed to prompt discussion on the topic of a real estate foreclosure and shrewd manoeuvring through the legal system by a sophisticated investor, who is an attorney. These issues can be covered in one class session and require one hour of preparation time from the students. This case can stand alone, or it may be used in conjunction with a related case - 'Homeownership Is Not Always a Blessing' - by the same authors.

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