Before You Close on a Home in an HOA
You’ll likely encounter at least one property that falls within an association during the homebuying process. After you’ve taken time to consider the pros and cons of a home within an association and decide to make an offer, you should work with your title company or title agent to order an HOA estoppel or resale certificate.
An estoppel is essential for understanding the fees and state of a home regarding those fees. Delinquency on the fees could end up being your responsibility as the new homeowner. This is because those fees are tied to the home and if left unpaid for long enough, the association can place a lien on the property.
Additionally, annual dues don’t always cover larger projects that occur less frequently than general upkeep and landscaping, so a special assessment is required. A whopping $96 billion was collected for special assessments in 2019, and they are not something to take lightly.
An estoppel will typically outline any future plans for improvement to the community along with their costs, giving a better idea of the financial burden an association home might bear. If it doesn’t, ask the association if they’ve conducted a reserve study to determine any upcoming special assessments that may occur.
Tracking down the information isn’t always as easy as it seems; you need to know how many associations govern a property and order estoppels or resale certificates from the ones that require dues. It’s not always clear how many levels of governance there are on a single property. This is where the legal description of a property can help define those associations.
The origins of associations were the result of high demand for a sense of community in newer neighborhoods as people moved further from downtown areas. For many, it still provides this today.
Although polarizing, HOAs and COAs offer unique benefits and can help maintain property values for members. It’s important to look at all the facts before closing on a property in an association, and ordering an estoppel or resale certificate is an essential part of that process.