So you’ve found the perfect home and are ready to write an offer. Fabulous!
Is there a Homeowner’s Association that governs the property? If so, we’ll have to add a little bit more documentation to our offer.
The HOA/Planned Community Addendum helps a Buyer and Seller negotiate terms and costs that may occur when buying or selling a house with an HOA. Using this addendum, we’ll spell out who pays for what, what the expected fees will be, and who will be providing the required HOA information to the Buyer.
Let’s take this one item at a time.
First, the addendum discusses costs.
- The regular association dues amount is specified, and in what interval those dues are paid. This lets the Buyer and Seller acknowledge and disclose what those fees are currently.
- If there are any additional HOA fees, those fees are specified here. Again, to disclose and acknowledge any fees, so that the Buyer and Seller are on the same page.
- If there are any HOA assessments that are a lien on the property, this form indicates who will pay for that: if the Seller will pay off those liens in full or if the Buyer will prorate and assume those liens. Typically, the Seller will pay off their own liens (debts), but in some communities, there are large assessment liens on each property to pay for major improvements. In this case, the Buyer may elect to prorate and assume the lien.
- If there is a fee to transfer the HOA records into the new owner’s name, then this document specifies who will pay that fee, the Buyer or the Seller. This fee ranges widely, from $50 to $300 and beyond.
Next, the HOA addendum discusses who will provide the HOA information to the Buyer, and defines what information the Buyer must receive, by law.
- If the HOA has less than 50 units, then the Seller is responsible for providing the HOA information, which we’ll list below.
- If the HOA has 50 units or more, then the Seller must tell the HOA to provide the proper information to the Buyer, and the HOA is obligated to provide the information.
By law, the Buyer must receive:
- Copy of the bylaws and rules
- Copy of the CC&R’s (Covenants, Conditions, and Restrictions)
- Dated Statement containing:
- principal contact information for the association
- amount of regular dues and any other assessments or fees
- what portion of the unit is covered by association insurance, if any
- total amount of money held as reserves by the association
- case names and numbers for any pending litigation
- If provided by Seller, a statement saying whether the Seller has any information regarding violations of the rules for their unit
- If provided by the HOA manager, a statement saying whether the records of the HOA show any violations of the HOA rules for that unit.
- Copy of the current operating budget
- Copy of the most recent annual financial report
- Copy of the most recent reserve study, if any
- and a statement that the Buyer has acknowledged and received that information, with a place for the Buyer to sign.
Every home and HOA is different. For more specific information regarding a home you like, or the association it sits in, just send me an email and we’ll get some answers.
