Nothing is more maddening than snags that arise when you apply for an HOA Estoppel Certificate.
And you thought this was the simple part of putting together the closing package for a real estate transaction!
It’s easy to get complacent about HOA estoppels when things have gone smoothly. But never let your guard down, because there are plenty of opportunities for an HOA issue to upend a transaction.
Recalcitrant Sellers
Sellers have a responsibility in handling HOA issues. Those who are slow to make information available to the title company or provide faulty or inadequate information, fail to provide the upfront fee, or find themselves in a dispute with the HOA over violations or fees owed can soon bring the closing engine to a halt.
Slow HOA Response Times
HOAs generally take 10 to 15 days to reply to a request, but it can be longer if the organization is simply unresponsive. This most often occurs with HOAs that are run by a volunteer board or are self-managed, so be aware of who what type of organization you are reaching out to.
Faulty Paperwork
Missing information or forms, submitting the incorrect fee or failing to identify a sub-HOA that operates in conjunction with a Master HOA can all muddy the waters when trying to procure an HOA estoppel certificate.
Unexpected Financial Demands
The financial side of the HOA estoppel letter may bring up issues for the seller who may be unaware of unpaid HOA dues or special assessments. In addition to the usual document fees, there may be transfer or resale fees and other administrative costs. Most problematic are legal or collection costs if the HOA had to file a formal lien or collection action in the past as well as fines or penalties for previous rules violations.
Unresolved Violations
If the seller is in violation of HOA rules in regard to maintenance neglect, landscaping non-compliance or exterior architectural changes, such as the addition of a fence or deck that does not follow the guidelines, this report also becomes part of the HOA estoppel review and can impact the closing if unresolved.
Speed Is the Key
Application for an HOA estoppel must be top of mind when opening a new title order. The sooner the request is made, the more time the real estate agent and seller have to resolve issues and ensure that proper instructions are provided to the escrow officer should complicated HOA fees, assessments and fines become part of the escrow requirements.
