Buying Or Selling In A Homeowners Association Or A Condo Association

Homes in Property Owners’ Associations are special.  The more common terms that may be familiar to us are “Homeowners Association” and “Condo Association”.

These communities have some legally protected self-management and self-policing authorities.  This can include rules and requirements for home design, yard configuration and maintenance, fencing, use and activity, buying and selling and renting, parking, and much more.  There are also state-level laws regarding buying and selling that are important to know.

Here are many points for buyers and sellers to know:

  • State law requires sellers to provide buyers a Disclosure Packet prepared by the Association that provides details about the Association and the status of the owner’s account.  If the Disclosure Packet is not available is otherwise not provided to buyers, buyers can void the contract without penalty.
  • Buyers have three days to review the Disclosure Packet during which they can back out of the sales contract with no penalty.
  • Sellers provide buyers a report from the Association of any liens against the property, violations that need resolving, and other potentially problematic circumstances.  Sellers must resolve any issues or they may be unable to sell.  The buyer may also risk inheriting the issues.
  • Buyers should thoroughly review the Disclosure Packet to learn what they can and cannot do with the property.  After review, buyers could decide they do not want to live in the community.
  • There are Association dues that owners pay.  These may be required monthly, quarterly, or at some other periodicity.  Buyers should understand what they receive for these dues.
  • The amount of the Association dues is considered by lenders in determining eligibility for a home loan.  The dues are a recurring expense that adds to the borrower’s future debt.
  • Buyers (investors) who intend to rent the home to others should verify they can do so.  Some Associations place restrictions on the renting of homes.
  • Condo properties must be approved by the Veterans Administration in order for a buyer to receive a VA-guaranteed home loan.
  • Condo properties must be approved by the Federal Housing Authority (FHA) in order for a buyer to receive an FHA home loan.

This is not an inclusive list.  Consult in detail with a Realtor to ensure compliance with legal requirements and protection of your rights.