HOA disclosures a case of bad timing

Home Sale Hindsight

The real estate event of the summer
Connect with other top producing agents at Connect SF, Aug 7-11, 2017

Q: I’m buying a condo in California, and have already removed all my contingencies. I have just realized that there were some documents that weren’t provided to me before and they point to a possible litigation being pursued against the builder by the homeowners association (HOA). How is this even possible, and what is my position?

A: This situation has arisen due to at least two separate problems. First of all, some California HOAs take 15 or 20 days (or more) to produce their disclosure packages, after they are ordered by an agent or title/escrow officer.

These packages are extremely lengthy, by necessity, as they must include all newsletters, covenants, codes & restrictions (CC&Rs), board meeting minutes for the last 12 months, financials, insurance documentation, and other rules and regulations for living and owning a unit. It’s not at all bizarre for these packets to run upwards of 250 pages!

But back to timing. If it takes the HOA 20 days to produce its packet for your inspection, this is a major disconnect with the seven- to 17-day contingency periods governing most California purchase transactions on today’s market.

(Seventeen days is the default contingency period provided for in the California Association of Realtors’ purchase contract, but bank-owned properties and homes on which there were multiple offers often mandate or negotiate a shorter contingency period.)

Given that the contingency period runs from the day the seller accepts your offer, and the HOA disclosures might not even be ordered for several days after that time, many homebuyers end up with a timeline dilemma wherein they are ready to remove all their contingencies except the contingency for their inspection of the HOA documents on time, but they don’t even have their HOA disclosures yet.

Assuming you need financing for your purchase, you should also be aware that without the HOA documents and disclosures, a buyer is not truly able to obtain a full, final loan approval that would warrant the removal of the loan contingency, as the HOA dues delinquency rate, rate of owner-occupancy and whether the HOA is involved in any litigation are all potential deal-killers for your lender that you likely won’t know with certainty until you receive your HOA disclosures.

Now, the timing problem is not one you or your agent had much control over, assuming the issue arose from the HOA’s tardy production of the documents. However, perhaps the bigger problem is that you removed all of your contingencies prior to receiving these important disclosures. …CONTINUED