Buyer and Seller Beware of old HOA Addendum
Be Safe when buying or selling a home!
Buyers and Sellers need to be informed to be safe, protect their assets and make wise decisions when buying or selling a home. If you haven’t heard the about the new Home Owner’s Association addendum, we will shed some light on the this for you. Most real estate agents aren’t aware of this new document either and will attempt to use the outdated version. This will inevitably put their clients in harms way. They may think they are keeping it simple with the previous short version, but the old version had potential for surprises and disputes at close of escrow. The document encourages both buyer and seller to contact the homeowners association to verify financial information including fees and assessments before the purchase contract is written. If you have questions about the new document or would like to discuss ways to keep yourself safe when buying or selling a home, Contact an Agent here or call us at 602-352-3600.
H.O.A. Condominium / Planned Community Addendum – Frequently Asked Questions
As of February 2, 2015, the Risk Management Committee released an updated H.O.A. Condominium / Planned Community Addendum. For more information on the form see ou r introduction here or our best practices here.
Q: Why did the Risk Management Committee believe it necessary to revise the H.O.A. Condominium /
Planned Community Addendum (the “HOA Addendum”)?
In the eyes of the Risk Management Committee, it was becoming increasingly common for parties to be surprised at close of escrow by previously undisclosed HOA fees that were due and payable upon close of escrow and which neither the buyer nor seller had previously agreed to pay. In an effort to avoid this scenario, the Committee wanted to create a form that promotes a greater level of disclosure of the various fees that are payable upon close of escrow.
Q: Who takes the initial steps in completing this Addendum and what exactly are they supposed to do?
Upon listing a property for sale, the Seller is instructed to contact the Association(s)/Management Company(ies) that govern the Premises to obtain an understanding of the HOA fees payable upon close of escrow. Once that information has been obtained, the Seller is to complete page one of the Addendum and place their signature on line 34. Thereafter, the entire three-page Addendum is to be uploaded to the Multiple Listing Service, if available, or delivered to prospective buyers upon request.
Q: Why does page one of the Addendum not ask for the identity of the Buyer?
At the time page one is being completed by the Seller, the identity of the Buyer will not yet be known.
Q: What steps does the Buyer take in regard to this Addendum when submitting a purchase offer?
Prior to submitting their purchase offer, the Buyer should secure a copy of the Addendum in which page one has been completed by the Seller. The Buyer should review the fees disclosed on page one and should then contact the Association(s)/Management Company(ies) to obtain verbal verification of the Fees Payable Upon Close of Escrow. Once the Buyer feels that they understand the Fees Payable Upon Close of Escrow, they are to complete page three of the Addendum, thereby identifying which party pays for which fees. Finally, the Buyer signs the Addendum at line 100 and conveys all three pages of the Addendum to the Seller upon submission of their purchase offer.
Q: Why do lines 82-83 of the form request that the prospective Buyer contact the Association(s)/ManagementCompany(ies) to obtain verbal verification of the Fees Payable Upon Close of Escrow?
Although the Seller has used best efforts to identify the Fees Payable Upon Close of Escrow, the Seller is not guaranteeing the accuracy of the fees. It would therefore benefit a prudent buyer to independently investigate the
amount of these fees, including before a purchase offer is submitted. And while prospective buyers would presumably prefer to receive written verification of the fees from the HOA/Management Company, it is unlikely that such will be provided at this very early stage of the transaction. Specifically, the HOA/Management Company will most likely not provide written confirmation of the fees to the Buyer unless a fee has been paid as permitted by A.R.S. § 33-1260 and A.R.S. § 33-1806. The workgroup was concerned that if the word “verbal” was omitted from line 82, buyers would insist upon receiving written documentation to which they are not yet entitled.
Q: In some instances, the CC&Rs that govern the property may dictate which party pays for a specific fee(s). How does this impact the Buyer and Seller?
Even if the CC&Rs designate the payor of a specific fee(s), the parties can, nonetheless, negotiate which party will pay that fee at close of escrow.
Q: If the Fees Payable Upon Close of Escrow as identified on page one of the Addendum are incorrect, is the Seller or the Seller’s broker subject to liability?
No. Lines 94 through 98, titled Buyer Acknowledgement, explain that the parties may not know the exact amount of the fees until written disclosure documents are paid for, and furnished by, the Association(s)/Management Company(ies). As a result, the Buyer agrees to “hold Seller and Broker(s) harmless should the Fees Payable Upon Close of Escrow prove incorrect or incomplete.”
Q: What is the purpose of uploading the HOA Addendum into the MLS?
Once page one of the Addendum is completed by the Seller, the entire three-page form is to be uploaded to the MLS, assuming that the local MLS permits such action. The reason for uploading the Addendum is so that prospective buyers will be able to easily access the Addendum and take note of the Fees Payable Upon Close of Escrow. With this knowledge, the Buyer can make an informed decision as to which fees they are offering to pay as part of their purchase offer.
Q: What if the HOA Addendum is not uploaded into the MLS?
In the event that the local MLS does not permit the Addendum to be uploaded, or in the event that the listing agent fails to do so, the Buyer’s agent should directly contact the listing agent and request that the HOA Addendum be promptly conveyed.
Q: What if, despite all of their efforts, the listing agent is unable to obtain a copy of an HOA Addendum completed by the Seller?
If unable to obtain a completed HOA Addendum from the Seller, the Buyer should try to contact the Association(s)/Management Company(ies) for verbal verification of the Fees Payable Upon Close of Escrow. If the
Buyer cannot reach the Association(s)/Management Company(ies), the Buyer has two options. First, the Buyer can elect to complete page three of the Addendum without knowledge of the amount of the fees, and then submit all three pages of the addendum with their purchase offer. (Note – Under this fact scenario, page one of the Addendum would be blank.) Alternatively, the Buyer can submit their purchase offer without submission of the HOA Addendum, noting on the Purchase Contract that their offer is contingent upon the parties’ execution of the HOA Addendum once the Fees Payable Upon Close of Escrow have been successfully negotiated.
Q: If the property is governed by an HOA, does that mean that it is also governed by a Master Association?
No. While some communities may be governed by more than one association, most are governed by only a single association.
Q: Upon payment of the fee authorized under A.R.S. § 33-1260 and A.R.S. § 33-1806, the Association(s)/Management Company(ies) will provide written resale disclosure documents that state with certainty the Fees Payable Upon Close of Escrow. If the Buyer does not approve of the fees, can the Buyer cancel the contract?
Yes. The Purchase Contract provides the Buyer five (5) days after receipt of exceptions to Buyer’s policy of Title
Insurance (which includes CC&Rs and other association documents) to provide written notice to the Seller of any
items
At 10X Homes we have always contacted the homeowners association in advance to gather this information and eliminate potential challenges. Apparently not every real estate agent has the same practice as we do and the governing bodies have created the new HOA addendum to help buyers and sellers to be protected. If you have questions about the new document, would like a copy, or to discuss ways to keep yourself safe when buying or selling a home, Contact an Agent here or call us at 602-352-3600.
