Planning to sell your home? Make sure to check with the Homeowner’s Association

April 23, 2015

Planning to sell your home? Make sure to check with the Homeowner’s Association

While some homeowners do not necessarily find this as a topnotch priority, everyone should be aware of its advantages and how it can affect the future sale of your home.

HOA or otherwise called as Homeowner’s Association is a legal entity that manages a shared housing complex, whether it is a condominium building, townhouses or a residential housing development. HOA fees can be paid either monthly or annually and usually ranges within the price of $200 to $400 depending on how upscale the building is. These fees are used to maintain the common areas of the building and if in case there are major improvements needed, the association may charge an extra assessment. Rules and regulations are also implemented to ensure protection and enhancement of the community.

Upon purchase of the home, buyers should be made aware in advance by the association management of the rules and restrictions that may affect their purchase. Most associations set their own parking rules, exterior paint palettes, design requirements and traffic laws within the community.

There is also a master insurance policy that covers common areas and community amenities for liability issues. If there is no master insurance policy in place, it would be difficult to apply for a mortgage as lenders would require a proof of adequate coverage before approving a loan.

When selling your property and they are managed by a Homeowner’s Association, it is important to disclose pertinent information about the HOA such as its monthly or annual dues, rules and regulations and other restrictions and responsibilities of the association as well as the homeowners’ responsibility to the community. So better be prepared with the documents pertaining to HOA as well as provide contact information of the property manager so that buyers will be able to have easy access to this information and have transparency about the property they are planning on purchasing.

Factors that could affect your home sale due to HOA issues:

· Delinquencies on association dues – a certain percentage of delinquency is allowed however, if it is beyond the threshold then it could cause issues with lenders

· Lawsuits

· Limited cash reserves

· Too little insurance

· Too many renters

As a seller, it is best to check with the following to ensure that this will not derail the sale of your property:

Check the financial health status of HOA – this could sometimes be the make or break of closing the sale. Lawsuits between a homeowner and HOA is not unusual, however, if the association has been involved over a series of several lawsuits, that could be deemed as red flag.

Check HOA reserves – reserves are the funds that HOA have in hand. The association should have enough funds to cover regular expenses and as well as emergencies and intermittent maintenance costs. Maintenance are scheduled and HOA should be able to have it planned thus they should have enough funds to cover it.

Fair amount for HOA dues – what you pay is what you should get. If your building has a doorman, boasts of great facilities such as swimming pool and a well-maintained landscape and public/ common areas, then expect your dues to be high. On the other hand, if there is only shared front yard or common hallways, then homeowners should only be paying much lower.

As a seller, it is recommended to check the records of the association and attend board meetings or if not, read meeting minutes, review the budget and ask for financial records to check for any delinquencies. A financially healthy HOA status could be one of major selling point for your property.

If there are any delinquencies and everybody seems to be having difficulty obtaining financing. For example, if the number of delinquencies is right on the threshold, as a seller you can work with the management association to put pressure on the homeowners and members to pay their dues since it is for everyone’s interest in the community. This way, it can help leverage and help decrease the delinquency rate of the association.

So if you are planning to sell your home, you should check with your HOA to ensure smooth process of your home sale.

Sources:

https://www.redfin.com/blog/2014/11/how-does-an-hoa-affect-your-home-purchase.html#.VSJRTfmUdqU

http://www.bankrate.com/finance/real-estate/issues-selling-condo-hoa-home.aspx