Is the buyer responsible for past HOA dues?

Asked by Menocollege, Maple Leaf, Seattle, WA Wed Jul 3, 2013

We received our resale certificate on the condo we are trying to purchase. The document is 2 months old, and states that there are about $2k in past dues. My agent is trying to tell me not to worry about it, but I don't want to sign something without knowing if I'll be responsible.

What should we do?

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9
Laportia Pau…, Agent, Huntsville, AL
Wed Jul 3, 2013
BEST ANSWER
HOA dues are like any other debt that can be attached to a home. Your agent may be saying to worry because there is likely going to be a lien against the house which means that the bill will be attached to the deed and it has to then be paid prior to the home selling.

Then what that means is that it may tie up the purchase for a little while but essentially the sellers will have it come out of their cut unless its a foreclosure or something like that which then means that the owners (HUD or whomever) will negotiate a settlement that they will pay based off the time-frame they took ownership and pay that amount.

Also, be sure you buy title insurance. The closing office should make sure that your title is free and clear before you purchase it and then you'll have title insurance that will keep anything else from being able to "come out the blue and bite you".

Hope all goes well. Come back and tell us how it goes.
1 vote
Yes always get everything in writing. He who has the paperwork will always win. But I suggest asking the agent the questions. If she/he is saying not to worry she may already know how to solve it and just hasn't communicated it with you. So have them to explain how they intend to solve the issue. Then if you aren't satisfied with the answer insist that you see something in writing. However, it should be taken care of with the title. And if not there on you HUD once its prepared. You'll get a copy of that before the closing.

**bottom line always have things in writing somewhere**
Flag Thu Jul 4, 2013
Do I need to get it in writing that the seller/escrow will pay for it?
Flag Wed Jul 3, 2013
Basically ask more questions first. Make your agent tell you what will happen before taking ownership - don't EVER let somebody tell you don't worry without having all the details. His/Her job is to explain things to you that you don't understand and make you feel at ease.
Flag Wed Jul 3, 2013
Kary Krismer, Agent, Renton, WA
Thu Jul 4, 2013
There really is not enough information to answer the question. As someone below noted, it's not clear even whether the 2k is owed against this unit or the entire delinquency for the association. If the latter, that would be very good news! Some condos have huge total delinquencies, and those will can come back to bite all the owners in some way (either deferred maintenance or increased dues).

Assuming that the 2k is just for this unit and a lien item, then it would typically have to be paid prior to closing. I'm not aware of any method of collecting against new owners for items which are not a lien item, but that would be a question for a real estate attorney.

Assuming this is a short sale, the non-payment of the dues could make the short sale possibly fail. That's because only part of the dues might have priority over the deed of trust holder(s), and they might not be wiling to allow any additional amount to be paid, while the association might not be willing to release without payment.

Talk to your agent, the escrow agent and if you're still not comfortable, an attorney (although note that for only 2k owing, the attorney cannot get too heavily involved).
1 vote
Karen Mcknig…, Agent, Kirkland, WA
Wed Jul 3, 2013
Hi Menocollege,

It's good to know whether or not there are past due HOA dues. Your agent can call the homeowners association and find out what is currently owed. Escrow also gets the amount due up to the date of closing and prorates to the day of closing. if there is equity and there are Homeowner's dues due at closing, the amount due will be taken out of Seller's proceeds.

Even though it is the seller's responsibility, if this is a short sale and the homeowner doesn't have the money, the lender will not pay homeowner's dues. Unfortunately, in the practical world, to get your sale closed, you and the seller may end up having to pay percentages.

A homeowners association has the right to lien the property, so most escrow officers won't be able to fund and record until that debt is handled.

Warm Regards,
Karen
Web Reference:  http://www.karenmcknight.com
1 vote
John Stewart, Agent, Seattle, WA
Wed Jul 3, 2013
If I were a home buyer and read all of these comments I'd be really confused.

1. Signing the Resale Certificate only records that you have received it. Sign it if you have received it.
2. There is a review period in your agreement that specifies how long you have to raise any concerns. Document your concerns in an email to your agent and to the escrow company.
3. A Resale Certificate expires after 45 days unless the seller has purchase an update. If it is more than 45 days old, require that the seller get an updated version. Is the certificate completely executed? Does it have the buyer's name identified? does it have both the preparers and the seller's signature?
4. Every time you receive new information about the HOA (dues, assessments, new minutes etc) that review period extends for that information. For example; if you noted that there were past due dues and that situation was not acceptable for you and you got to the closing table and the closing agent could not tell you that they were going to be paid by the seller, you should be able to terminate the agreement and not sign the closing documents. That is the place to hold your position, not receiving the certificate.

If you have any other questions take the Certificate to your agent's managing broker and have that person review the Certificate.
1 vote
Robert Basin, Agent, Sun City Center, FL
Wed Jul 3, 2013
Is this a short sale? I would assume, not being from Wash. St, that the seller is responsible for the past dues, unless there is something in the contract stating otherwise. I'd simply call the Title Company to play it safe. Everything is negotiable.
1 vote
It is a standard sale. Thanks for your help, I'm starting to understand it better...
Flag Wed Jul 3, 2013
Ron Thomas, Agent, Fresno, CA
Wed Jul 3, 2013
It really sounds like you didn't do your due diligence:
You didn't look into the HOA to see if that was a good place to live.
You didn't talk to the residence about the HOA.
You don't know if the HOA is well-run or financially sound.
And you did not ask about the previous owners.

I get real worried when someone tells me not to worry; especially when it's not thier worry.
Just saying.
1 vote
At what point in shopping for a condo was I supposed to find out if the seller had delinquent dues? I have all the information I need, and am looking for advice before I pay for escrow/inspection/assessment. Do you have any advice?
Flag Wed Jul 3, 2013
Ryland Tanig…, Agent, Seattle, WA
Tue Sep 3, 2013
Click the web reference for an article about this subject.
Web Reference:  http://goo.gl/3BUb3v
0 votes
Johan Tong, Agent, Seattle, WA
Wed Jul 3, 2013
Hi Menocollege,

I specialized in condominium sales in North Seattle. The situation you described is similar to one of my transactions that I am dealing with now. I can give you more insight on this issue.

First of all, what does it say exactly on the resale certificate? Take a close look. Does it say the $2K past due is owed by the units of the entire HOA or the particular unit that you are buying? You don't have to worry about the former, but you do want to know about the latter. If it is the former, you can stop reading here because you don't have control of how other units pay their dues. If it is the latter, please read on...

HOA past due and HOA special assessments are a lien again the property. Typically, good listing agents will provide the information in the listing details if the lien was accumulated before the listing date. However, if the lien is accumulated during the period of transaction, it will not be available in the listing details. This is very typical in a short sale transaction where you wait for 4 to 8 months for the lien holder's approval. Sellers moved out during the waiting period and stopped paying for the HOA or special assessment. If this is your situation, the HOA lien should be taken care of in the escrow with a mutual acceptance. If the lien holder or the seller wants you to pay the HOA past dues, they need to get your signature stating that before closing.

The bottom line is ... TRUST your real estate agent. It is tough to be in this business. To stay in the business, an agent must know well what prevents a deal from closing. If you decided to use this agent, then trust him or her. This agent will work for the best of your interest and avoid unnecessary risks in your transaction.

To find properties for sale, please visit: Seattle Sweet Home Search (click link below)
0 votes
Ray Akers, Agent, Seattle, WA
Wed Jul 3, 2013
Don't worry? Too late for that advice, you're already worried. Stop. Don't waive the Resale Certificate contingency until you have an answer on the HOA dues question. The seller should be responsible for paying the dues. But, Home Owner's Associations have the authority to place a lien on the condo to recover unpaid dues. How the unpaid dues are handled may depend on whether or not this is a short sale. Ask your agent to have a conversation with the HOA President. I would also suggest you request an updated financial statement from the company that prepared the Resale Certificate, and an updated title report. You want to ensure the lien does not survive closing of the transaction.
0 votes
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