Homebuyers often fail to give homeowner association documents the full consideration they deserve. As Jann Swanson points out in her story, HOAs have a lot of power, not just over your prospective community’s money, but potentially over the color you paint your front door, where your kids can put a basketball hoop and when you can put your garbage can on the curb.
So it pays to understand how the HOA rules come into play as you head toward settlement.
Either after a contract is ratified, or when the home is listed for sale, the seller or agent orders a disclosure packet from the HOA. The cost can run upwards of $100 and it can take a couple of weeks, maybe more, for the packet to arrive. During periods when houses sit on the market for long periods, an HOA packet may need to be updated. It shouldn’t be more than six months old.
The HOA, upon receiving a seller’s request, may conduct an outside visual inspection of the home and note deficiencies or violations of HOA rules. The packet will consist of their resulting statement, information on HOA governing bylaws, incorporation and finances, details on whether the current owners are up-to-date on their fees, and other community information.
Once a sale offer has been accepted and the contract ratified, the seller’s agent delivers the HOA documents to the buyers’ agent or to the buyers themselves. Either way, at the point a buyer takes physical possession of the documents, he signs a receipt form noting the time and date, and the clock starts ticking.
Contracts vary by jurisdiction but buyers generally have three to five days to review the documents. During this period, if the buyers want to get out of the contract to buy the house for any reason, all they have to do is reject the HOA documents. They don’t even have to say why — and the deal is off.
Or, if the buyers want to proceed but find the HOA has noted some defects, they can negotiate with the seller to have things fixed or perhaps adjust the sales price accordingly. It’s one thing to have to repaint a front door to bring the home into compliance but it’s another consideration entirely if you have to replace a non-conforming door or do costly exterior maintenance, such as replace shutters or windows. If violations or deficiencies are not corrected prior to sale they become the responsibility of the new owners.
The time to negotiate HOA issues back and forth also is fixed by the sales contract and usually goes in three-day increments.
Finally, if the seller fails entirely to provide HOA documents to buyers before closing, it could affect whether the deal goes through at all.
