Selling a House in an HOA:

What You Need to Disclose

If you are responsible for a house in a home owner’s association, an HOA, you’re going to wanna watch this video, it’s all about home owner association rules and selling a probate house.

 

Hi, I’m Kim Ward, real estate broker in San Diego CA. if you’re planning on selling a loved one’s house that has an HOA, a homeowners association, there are some things that you’re going to need to disclose to your buyer. So, we’ll talk about selling a house in an HOA and what you need to disclose.

Let’s be honest, when you’re getting ready to sell a house that belong to your loved one, that’s in a probate or a trust, and it’s got an HOA attached to it, it can feel like a mountain of paperwork! Between the documentation that you need to go through in order to actually sell the property, that’s where I come in helping you, and then taking care of the documentation that the HOA wants completed, it’s a lot! Your real estate agent or broker, like me ,should help you through that process and make sure that those HOA documentation is all completed properly so that you and the estate are protected throughout the process.

 

So, this will give a little insight of what do you need to be aware of and what you need to disclose to that buyer so that you are protected. You wanna be well-informed so that you can keep this house sale, the home sale, on track. The first thing you wanna be clear on is what are the material facts that need to be included in the home owner’s association documents, what needs to be provided to that perspective buyer. Living inside an HOA, has some perks and some drawbacks. And we wanna make sure that we transfer the information of the CC&Rs to the buyer, those CC&Rs and the by-laws are available with the HOA.

 

CC&RS is short for Covenant, Conditions, and Restrictions that the HOA has in place. Your buyer will need to have the CC&Rs and the by-laws and be able to have time to review them. That’s why I always get those documents ordered prior to putting the house on the market. Once we have a buyer, we want to be able to transfer that documentation quickly to your buyer and experience shows it can take 10 to 14 days to get those documents from the HOA. So, that’s why I have learned not to wait until we’re in escrow to order those documents. The buyers will need to have them, just like your loved one did when they purchased the home, in order to have time to go through them completely and make sure that they feel comfortable with everything that is in the CC&Rs and the by-laws. They wanna be comfortable with that prior to closing escrow, and we want them to have them as quickly as possible, so that they can remove that contingency as quickly as possible. Those documents will tell them what the rules and regulations are, things like, you can only paint your property this color, or you cannot put a deck on the back, things like that. Things that are outside of the property are the rules and regulations. Typically with inside the property, you can do what you want, you want purple walls, you can have purple walls.

 

The other thing that the HOA does provide that’s super important, is they provide the financial information. All the financial information about the HOA… what they have in savings, how much do they charge, how much are they paying out for landscaping, painting, roofing, general maintenance of all the buildings, things like that. The buyer should be wanting to make sure that the HOA is solvent, that they have enough finances available for things in the future.

 

A few years back, probably over a decade ago (Its been a while I’ve been doing this), lots of HOAs did not have enough money for things that we’re going to be coming up, they call that reserves. They didn’t have reserves for things like fencing, roofing, painting of the exterior of the buildings, things like that, and owners of the properties within the HOA were getting caught with huge bills that they had to pay to keep the property up to the level it needed to be kept up as. So, now there are rules about reserves.

 

The other thing that the HOA documentation should include is the past 12 months minutes of any meetings that have been held. And I say should, because I can’t tell you how many times I’ve reviewed those documents for buyers that I represent, and there weren’t all 12 months minutes. Now, what’s important about that is, one, we want the buyer to have that information, so that down the line they can’t come back and say, Hey, we didn’t know there was gonna be a special assessment, typically because there weren’t enough reserves, and we want them to have seen all of those 12 months minutes, because that’s what the board for the HOA discusses during their meetings.

 

So, back to the documentation and the minutes, I’ve actually seen them come over where they’re a mirror image (like, no one notice that you’d have to hold a mirror to actually read the documents!) I noticed and I made sure that got corrected, so that my buyer could actually read the documents.

 

When I’m helping a seller, like you, I never touch the HOA documents, the CC&Rs, the minutes, the by-laws, nothing! That gets ordered through the escrow company. You as the estate representative, we’ll pay for those documents to come and they go directly to the escrow company. And once we have a buyer, they go from the escrow company directly to the buyer. The reason that you, and I don’t touch them is because we don’t want any liability having to do with anything that’s missing or incorrect in the documentation. So, we keep our hands off of those documents!

 

Once the buyer has had an opportunity to read through all the documents they will sign off actively that they receive the documents and they approve them. We’re looking for that, its really important so as to protect you and the estate. The buyer’s agent should be reviewing those documents with their buyer, but I have to tell you, I don’t think it happens very often from my experience… remember when I talked about the mirror image documents that had been going out for a while, and no one had said anything about it, I find that very odd.

 

So I’m going to be here to make sure that your buyer receives all the facts and documentation, via the HOA and the escrow, so that they can make a good decision and get to that signing off that they approved all the documentation.

 

Now, I’ve had some clients say that “Hey, we have the HOA documents right here in the house, and we can just give those to the buyer and save the charge from the HOA” but that is not possible. You want that buyer to receive everything directly from the HOA, brand new, never been touched by us last 12 months minutes, to protect the estate.

 

Now, occasionally a lean will pop up from the HOA, especially if the HOA has not been paid in the past few months. If it’s been three months experience shows that the HOA is going to transfer that debt over to an attorney. So you can expect that if a HOA fees have not been paid, the monthly fees, you can expect attorney fees, fines, things like that. So, we wanna make sure if the estate has the funds that you make sure you keep up on those HOA fees on a monthly basis, to avoid those penalties and attorney’s fees. Because, all those fees will need to be paid through the escrow if you haven’t paid them upfront. We must give the buyer clear title and clear of leans, any kind of leans on the property, to your new buyer.

 

And finally, the last thing you need to know is that the fee is typically, for those HOA documentations, between 250 and 600 dollars, it just depends on the various HOAs. I’ve been shocked when we get the $600 bill, but sometimes HOAs do charge a ridiculous amount of money, in my opinion, for documents that they simply have to push a button to send over to the escrow, but that’s how it is. And that cost for the HOA documents should not be a surprise to you. My team and I will figure out how much it’s going to be, so you know way before you need to be paying for those documents. Our goal is to provide you with all the facts, so that you can make good decisions from the beginning all the way through the close of escrow on your loved one’s house. I hope you found this of value! If you did go ahead and head over to my youtube channel to give me a thumbs up, hit that bell button to get my weekly videos ’cause you wouldn’t wanna miss any of them!