Many things can dampen the deal when you wish to sell your home, but the most damage can come from a poorly managed Homeowners Association. Ensuring that you keep a good relationship and up-to-date finances with your estate’s management team can go a long way when it’s time to sell.
Selling or buying within an HOA (Homeowners Association) is slightly more demanding due to the extra paperwork required and the obligation for HOA clearance certificates to be issued.
The HOA docs alone can cause steam to flow from your ears: CC&Rs (Covenants, Codes & Restrictions), the budget, meeting minutes and all the rest of the documents that make up the huge stack supplied by the HOA. Getting any prospective buyer to read and understand these documents is potentially even more challenging.
Below are more ways on how HOAs can lose you a sale, just to help you know what not to do and what to look out for when selling within an HOA.
4 Ways Poor Property Management Can jeopardise a Sale:
- Lousy Liens
A lien is a right to retain physical control over another’s property as a means of securing payment of a claim until the claim has been satisfied. The lien holder obtains rights of possession over property, but only so far as to provide the holder with security for a claim.
Cause for a lien can arise when homeowners refuse to pay outstanding levies, legal fees and other debts to the HOA; it’s a drastic attempt to prevent quick sale and transfer of a property. If your HOA has the right and applies for a lien to be attached to your property, it creates a hefty cloud on the title deed that will repel all lenders (and buyers) until the lien has been cleared and a Clearance Certificate can be provided.
You never know what lies beneath the surface, which is sometimes the case when you try to buy or sell within an HOA with a couple of court cases in the closet. Normally legal problems arise from lenders who see construction defects that violate local building regulations, bringing the entire transaction to a stop until the defects have been amended.
- Loan Limits
If current members within the HOA refuse to pay levies or other outstanding debts, then not only will basic maintenance services come to a halt, but the entire HOA will be declared bankrupt, putting a big red stain on the entire estate. No lender will approve a home loan for a property within a bankrupt or deeply indebted HOA. It would be like buying a broken car…idiotic.
- Loathed Bylaws
Often an HOA can cost you a sale in the simplest way; by enforcing ridiculous rules and guidelines. Even if the current members of the HOA have agreed to these strict rules, that doesn’t mean that the next potential buyer may be so keen to follow them.
Over-strict HOAs with merciless penalty fees will ensure that your potential buyers are easily repelled from the deal. However, remember to explain to your buyers that the strict rules are what keep the property values high and inform them if the HOA is friendly and open to discussing or altering the rules (as this may win you some points).
It is advised to always keep a strict eye on your finances, ensure that all your bills are paid, and consult specialist legal and realty advice when selling (or buying) a property within a Homeowners Association. Many homeowners forget that HOAs need levies to continue the spectacular upkeep and growth in property values, but often HOAs can act unfair and biased when imposing demands and penalty fees on homeowners for small or unreasonable infractions.
Realising and weighing the pros and cons of investing within an HOA, understanding how the estate’s management works and what rules would need to be followed, will help you to play safe when buying and selling within HOAs.