Top-3 Takeaway: HOA Judgements Finances Etc

Home Owners Associations and Property Owners Associations have rules and regulations that residents must live by. When purchasing a property in an HOA, it is critical that purchasers understand the aspects of their future association. The FOCUS on NoVA Real Estate team explores what to look for in the HOA Resale Package. Contact the FOCUS on NoVA Real Estate team.

In the Commonwealth of Virginia there is actually a statute with the Property Owners Association Act that is very complex, but this post will hit it at a high level and talk about three things.

When you have a contract the seller must disclose to the purchaser that that house, that property, resides in a property owner’s association or a homeowners association. It is also the seller’s obligation to purchase and provide the purchaser, prior to closing, with the documents, called a Resale Package, which is going to have a ton of information in it. In general those tend to be about 300 to 375 pages long. The purchaser has three days after they have receive these documents to review them and either accept or void the contract. They purchaser may void for any reason whatsoever. Review of these documents is important. Not only are they buying the house and the land, but they are also buying into the way of life, so they must have the opportunity to understand what it is that they are buying into. Recently in 2020 the laws were changed a little bit and allowed for an extension, if both parties agree to it, to the three-day review period for a total of seven days. But again that must be mutually agreed upon by all parties.

What to look for in the HOA resale package?

1. The financials: Is there enough money in the reserve to pay for the day to day expenses? Are they collecting enough funds? Are the residents in the property association actually paying their bills on time? If there’s a financial crisis will the dues go up? Also look at the reserve study part of the financials because if there are any big expenses like paving, pool renovations, roof replacement on community buildings, that could be something that is scheduled and should be adequately provided for in the budget.
2. Look for are violations and any unpaid dues. It is the seller’s responsibility to deliver clear title to the purchaser, therefore there should be no violations and, if there are, work with that seller to make sure they understand that it needs to be cured prior to closing.
3. Looking at the bylaws. It’s really important that you understand the rules the community agrees to live by. For a property that is not governed by an HOA, outside of county and state regulations, an owner can do whatever they want. They can park whatever cars there are and build whatever structure there is as long as they comply with state and county codes. Some HOAs prohibit things. The FOCUS on NoVA team once had a client that had to cancel a contract because he could not park his wrapped contractor’s truck in his own driveway because the HOA prohibited that. Therefore his family could not purchase a property within that community. So make sure you understand the rules that you are playing by.

BONUS!  Check the master insurance policy. Make sure the HOA has good strong liability coverage so that if anybody is injured or a lawsuit is filed against the HOA, the HOA residents are protected

If you have any questions about real estate some questions about “HOA and Judgments” contact the FOCUS on NoVA team today.