HOA violations

Hello everyone! I am representing the buyer in a short sale transaction in SoCal. After five months of waiting we finally have both approvals, but I just found out that there are numerous HOA violatios at the property. Upon further investigation I found out the seller has a writen agreement with HOA to remove the shed prior to sale. Shouldn't this have been disclosed upfront? I am really frustratde as we are a week away from closing and everything else (loan,inspections) are done and ready to go. Who's responsability is to cure these violations? Thanks so much for your help!

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  • It is completely up to the seller and yes, his agent should have investigated the status of the HOA when the contract was accepted or before. Of course, if the seller has no motivation all parties may need to pitch in to remedy the problems.

  • Is the seller also behind on their HOA dues?  At this pont I doubt whether the seller will do anything to cure the violations.  Find out once the HOA signs off on the deal ( and they must) whether those violations will go away with a new buyer.  If the seller lets the property go to forclosure then the HOA will totally lose out, maybe they will work with the new buyer to get these items resolved.  If your buyer truely wants the property then let them cure the violations.  Condos and townhomes are always tougher as a short sale due to the HOA having to be a party to the transaction.  Let us know if you resolve this issue.

  • List Agent's responsibility to pull Prelims and check HOA amounts due.  Many of my Lenders (I am in SoCal) will not pay the HOA fines/dues.  You need to know what this amount is going in, disclose it, and work with the number.

  • Does the seller refuse to do his part in removing the shed?  I think you should talk to the seller and explain to them that the lender has approved the short sale and will forgive a big amount owed- the least they can do is do some elbow work and remove the shed.  As far as any amount owed from the HOA ( if there's any ) my experience is the lender will pay all the arrears as long as you disclose it in the HUD 1.

  • Why wasn't an HOA Cert pulled a while ago - that would have told everyone there were violations pending.

     

    It's the seller's responsibility.  If the seller didn't disclose, that's a problem and the sale should be postponed until the Seller corrects the issues.  In CA, most HOA's will give the new owner 60 days to resolve the violations after they take possession BUT, the new owner will also inherent any fines.

     

    Good luck,

  • Seller's responsibility.  Hopefully there is an agreement between you and the seller in writing about the shed removal.  I can't speak for HOA rules and regs in CA but here in AZ if the Seller does not cure the HOA violations upon leaving your buyer will be responsible for them once he takes possession.  If there are any liens by the HOA that are not cleared (here in Arizona) they must be cleared by the Seller before title can pass and the HOA can hold up the sale.  If the property forecloses the lien follows the previous owner.  This is all of course in Arizona. 

     

    Help us out California Realtors ....how does it work in your state?

    • If there is an actual lien filed against the proeprty by the HOA and it is on the Title it will need to be cleared up (paid) in order to close.  If there is a balance due and not filed on Title, it is likely the new owner will get stuck with it.

       

      If the amount of the problem was known in advance (HOA dues issue), and since the majority of short sale lenders will not pay past due HOA fees, transfer fees, or HOA doc fees, here in CA I typically write the offer with enough seller-credit to buyer so they can use that money to pay the HOA fees.

       

      I had one last year with more than $20,000 in past due HOA dues, legal fees, late fees and penalties.  We got that much in Seller credit to Buyer for "closing costs" and the Buyer paid the HOA problem through escrow.  This was a BofA / Chase transaction.  BofA would not pay the HOA fee but they would pay a Seller Credit to Buyer knowing it was to settle the HOA fee (just slicing the pizza a different way) and it got done.

       

       

       

       

    • Thanks Deidre. My buyer actually likes the shed ( looks more like a little cottage) and was never advised that it will need to be removed till yesterday! I hate little surprises like this. Thanks again for your answer.

  • I'm not in California, but in my state HOA fees are paid before or at the time of sale.  The list agent should have pulled title up front AND called the association to see what was due before she even submitted it to the lender.  I usually give a payout right out of the proceeds to pay off HOA.  If the lender denies, I prep my seller they have to pay.  If the seller doesn't pay, then the last person is your buyer and they'll have to ask how bad they want the property. 

    • Thanks for your answer, Smitty.

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