Once you “win” a condo or a home located in a home owners association, you will be given a short deadline to review the condominium documents or home owners association documents. Although it would be helpful to buyers to review this packet of documents before making the decision to purchase the home, these documents are purchased by the seller and often take a few weeks for the management company to prepare and deliver.
Once the documents are received, the purchaser has a period of time to review the HOA or Condo Docs and void the contract without giving a specific reason. This is called the Purchaser’s Right of Rescission.
There are several sections to the documents or “docs” and your exclusive buyer’s agent will review them to make sure all sections are included. Sometimes the docs are just a few pages, while other times they fill several binders. Regardless of the size of the package, your right of rescission period remains the same. Here is a copy of a little cheat sheet I use to remember the deadlines in the states where I help clients buy homes.
Once you have the docs and are ready to sit down and review them, be warned. HOA and Condo Docs are a great cure for insomnia. The language is not always very interesting, but try and focus because you don’t want to miss anything that would make you want to get out of the deal.
Not sure where to focus your attention? Here are the most important sections for buyers to focus on when reviewing the documents.
Special Assessments – If there are any special assessments that are coming up, the buyer and seller should spell out who is paying these fees and when. You want to be prepared if you will need extra money at closing that may not have been included in your good faith estimate from your lender.
Budget and Reserve Funds – Taking a good look at the budget and reserve fund gives you some insight into the management style of the Condo or HOA Board. In a new building or development you will want to see if the budget looks realistic. In an older building you want to be sure the reserves will cover the repair or replacement of older systems, elevators or pools.
Lawsuits or Judgments – When there is a lawsuit pending, there is very little way to predict what kinds of costs may be passed to home owners either as assessments or as monthly fees.
Current Violations by the Seller – When the seller orders the HOA or Condo documents, that usually triggers an inspection of the property by the HOA or Condo Association. You want to be sure that the seller fixes any violations before settlement.
By-Laws – The by-laws are the rules and regulations that you will be required to follow as a resident in this association. They include architectural guidelines, renting policies, quiet times, etc. This section is one section that you have to read for yourself. Only you can decide if you can live with the rules of the association.
Finally, ask your agent about any concerns that may be of concern in the local area, but may not have been addressed by the board and entered into the HOA or Condo Documents. If you have other concerns, you can always speak with a real estate attorney.
If you are looIf you, or someone you know is thinking about buying or selling a home in the DC Metropolitan Area, give me a call to Get Started.