When you own a condominium property, it’s likely that you belong to a Homeowners Association (HOA). You may also belong to an HOA if you live in a neighborhood. While there are many benefits to belonging to an HOA — such as rules that require neighbors to keep their houses beautiful so property values stay as high as possible — there are some disadvantages, too. These disadvantages become particularly apparent when a homeowners association is in a bad state of financial health.
When you sell a home or condo, the buyer will usually need to get approval for a loan from a lender. The lending bank will be very interested to investigate the financial condition and financial health of the HOA associated with the property being purchased. If the HOA has any pending problems, it could result in delays associated with loan approvals. The sale of your home could even be canceled.
Here are some potential problems that could derail a home sale related to an ailing HOA:
- Delinquent association dues
- Pending lawsuits
- Not enough title insurance
- Limited cash flow
- Limited cash reserves
- Too many renters and not enough owner residents
The above problems are even more important to think about if you are trying to sell a condo. This may be due to the fact that the well-being of condominium properties is highly dependent on a smoothly operating homeowners association.
As a seller of a property that belongs to an HOA, you’ll want to check in with the HOA officers to determine if the HOA has “FHA approval.” In other words, has the Federal Housing Administration approved your HOA to be viable and sound? Also, ask if the HOA is free of the above-listed issues. If there are serious issues relating to your HOA, you may want to speak with a Denver-area real estate attorney who can assist you to overcome these challenges.
Source: Bankrate, “Issues in selling a condo or HOA home,” Michele Lerner, accessed Oct. 12, 2017