Devery and Tina Hale’s $128,000 Irmo home was sold for $3,000 at auction.

Their home was sold due to $250 in unpaid homeowners association fees.

“I get the sense from owners that perhaps they do not fully understand HOA workings and ability to foreclose after they purchase their home,” Lexington County Master-in-Equity James Spence told the Charleston Post and Courier.

“Greater education in this area would be helpful.”

South Carolina does not require mortgage companies to be included in lawsuits when HOAs foreclose over unpaid fees. Many states allow foreclosures to take 9 months to a year.

South Carolina does not.

A few real estate companies have taken advantage of this loophole to turn a quick profit, said Brian Boger, a Columbia attorney who specializes in fighting HOA foreclosures.

Buyers of HOA foreclosed homes can make money by renting the home to new tenants or the existing homeowners or selling the houses back to the original homeowners for thousands more than the auction price.

These foreclosures happen without the banks’ knowledge since buyers don’t take over the mortgage.

Boger said this leaves former homeowners with a tough choice: continue paying for a house they no longer own or stop paying and risk ruining their credit.

A bill at the Statehouse would prevent foreclosures by HOAs on homes that are primary residences.

A state Supreme Court ruling could slow the practice by asking judges to consider the amount of equity in a home when determining fairness in a sale price.

HOAs do not take foreclosure lightly, said MJS Management owner Jud Smith whose company managed the HOA in the Irmo sale.

Smith stresses his company and its lawyer send at least 5 notices in trying to collect before foreclosure.

He said at least 3 notices are sent after foreclosure is filed, but by that time attorney’s fees are tacked on to the cost.

“But it’s the only tool we have,” said Smith, whose company manages 175 homeowners associations in the Columbia and Charleston areas representing some 42,000 homeowners.

Smith, a member of the state HOA lobbying group Palmetto Alliance for Better Communities, calls the proposed law to stop foreclosures shortsighted.

He said it leaves homeowner groups no recourse for unpaid fees that affect entire neighborhoods.

Boger said outside real estate companies buy houses at a low price at public sale, evict the homeowners or offer to rent them their own homes or seek to sell them back their own home for a much higher price.

Boger represents about a dozen other clients who still owe a mortgage for a home they no longer own. He said, “That’s happened hundreds of times in this state.”