How to Sell a House with a HOA

Selling a House with a HOA Contract

Homeowners Associations are neighborhood organizations that collect dues and enforce common area rules to support the other homeowners. It’s very common, especially in the suburbs outside major metros. When someone purchases a home that’s under an HOA contract, they don’t also do so while thinking about what it takes to sell.

Luckily, things aren’t that different. Listing, showings, and negotiations work pretty much the same, but there are also some minor changes in the process to make sure the sale follows the HOA’s contract, and adequately informs potential buyers of what that contract stipulates. We’ll walk you through why these extra steps are necessary, and how you as a homeowner can work with the HOA for an easier sale.

Why HOA Sales Take Longer

When you sell a regular house, buyers can do a walkthrough, get a home inspection, and have a clear idea of the property they’re thinking about buying. An HOA is different, since buyers don’t know if the HOA is efficiently run or not. If the HOA was in legal trouble, or considering restrictive new rules, buyers would have no way of knowing. One of the main differences in selling a house with a HOA is that the seller provides paperwork disclosing the HOA contract and what it entails.

The disclosures are how buyers understand the full scope of purchasing a HOA property. They’ll learn about paying dues, the HOA’s rules, and the board that enforces those rules and resolves conflict between homeowners. If they find something they don’t agree with, they can pass on the home and continue their search elsewhere without a hassle. Without these disclosures, many buyers would be blindsided by their HOA’s rules and fees.

Selling Your HOA Home: Step by Step

Step 1 – Request your resale certificate early

Before you can close, many HOAs require a resale certificate, sometimes called an estoppel letter. It will confirm that your dues are paid and your account is in good standing. If there is violation tied to the home, it will probably need to be resolved before the HOA board will approve the sale.

You want to do this ASAP because there’s not a standardized length of time they have to respond by. Some HOAs are run by management companies, and may take weeks to respond to requests for resale certificates.

Step 2 – Provide the HOA disclosure packet

The HOA will provide the seller with their disclosure packet, bringing buyers up to speed on things like:

• The current rules, known as the CC&Rs or Covenants, Conditions, and Restrictions.
• A copy of the HOA’s budget, with financial statements
• Information about the reserve fund, something HOAs collect for future repairs
• Notes/Minutes from board meetings
• Information about pending lawsuits

Step 3 – Confirm and pay the HOA’s transfer / move out fees

Transfer fees are one-time costs whenever someone sells the home. They’re used by HOAs to help the buyer with move-out logistics, and can go towards things like reserving an available moving truck or dedicated elevator.

Step 4 – Complete the buyer review period

Once a buyer gets the HOA documents, they have a set window of time to review the contract and decide to agree or walk away. Think of it like an inspection period where someone can consider all the pros and cons. Buyers can usually cancel the contract without a penalty if they don’t like the HOA’s finances or rules, protecting them from getting trapped in a contract before they know what to expect.

Step 5 – Clear up any unpaid dues, fees, or violations

The most common violations of an HOA contract are back dues, unpaid fines, or a violation like unpermitted renovation work. These may not sound serious, but HOAs can have powerful enforcement tools that can derail a sale, and even land the seller in major financial trouble. All violations will stay in your resale certificate until they’re satisfied, so sorting things out sooner rather than later minimizes the risk these violations scare off buyers. Otherwise, they can be settled at closing, along with any other fees or special assessments.

7 Ways an HOA Sale Can Be Delayed, and How to Avoid Them

Most HOA sales go smoothly, but financial or legal trouble can cause delays or frustrate potential buyers. The sale may be more complicated if there’s:

1. A slow management company. When the company that runs your HOA takes weeks to send you the resale certificate, the buyer may decide to just walk away.
   
2. Weak HOA finances. If the reserve fund is low, or a lot of neighbors are behind on their dues, the HOA might be in real trouble soon. Poor finances also make it harder for a buyer to get approved for their next mortgage, especially with condos.
   
3. Active lawsuits. If the HOA is being sued, or suing someone else, this has to be disclosed. Legal costs may deplete the reserve fund or spur new fees, neither of which are wanted by buyers.
   
4. A special assessment. Special assessments involve big repairs to shares spaces, like a new roof for the main office or repaving the roads. These come as large, one time charges to homeowners, which can ruin a buyer’s budget. If you don’t want to walk away just yet, you often has the option to ask for a credit at closing.
   
5. Big changes to rental rules. Say the HOA recently restricted renting or selling to families with pets. These lock out entire groups of buyers, making it harder to find someone interested in your home.
   
6. Right of first refusal. Uncommon, but worth checking. Some HOAs, especially those managing condo complexes, have the right to buy the home themselves or approve a buyer before a sale proceeds.

The good news is that these concerns can be avoided if you plan ahead. Request all the disclosure documents and the resale certificate before you even list the home, including information about the HOA’s reserve fund or active/past litigation. If you find a history of disputes or slow response times, it might be a good idea to contact your realtor or attorney and discuss options for speeding up the timeline. And when the time comes to start meeting with buyers, be upfront with them about potential surprises that could discourage them, like a special assessment.

Follow the Rules, and HOA Sales Are Hassle-Free

Unless you owe huge amounts in unpaid dues or waited until the last minute, selling a house with an HOA means just a few extra steps designed to keep everyone informed. If you start early and stay organized, your HOA sale should proceed just as smoothly as any other.