Homeowner's Association Fee

Last month, I received a letter from a reader who is an agent. She had a client who specifically told her not to show them any properties that had a homeowner’s association fee, no matter how small.
 

The agent found a property that appeared not to have an HOA fee. After closing, it turned out that the property did require a monthly fee of $30. The agent wondered what she did wrong and what she could do to make it up to the clients, who were angry at her.

I said that the agent relied on others to do her due diligence, and that her clients had made a specific request and she failed them. I suggested this isn’t how one ought to run one’s business. Here’s a comment I received from a real estate agent.

Comment: Wow, [you] sure were hard on this agent! I would have relied on the information from the title company and listing agent, but would have put it in the contract. If there was financing evolved, typically, the lender has a PUD (planned unit development) rider to the mortgage and the association is usually disclosed in the appraisal as well.

Also, there is a small possibility that there is no HOA and the letter is a fraud or that the dues are not "mandatory". The agent needs to make sure she now has it in writing.

Response: I don’t care what business someone is in, customer service is the name of the game. In this case, the buyers had made a specific request.

In many parts of the country, attorneys are not used in real estate transactions. The only person the buyer effectively has to guide them through the purchase is the real estate agent. I think it was up to the agent to make sure she found a property that met their specific needs, and did the due diligence necessary rather than relying on what other people said about the property.

Putting these kinds of things into the contract is an excellent suggestion but having this information in the contract might not have prevented this outcome. If this buyer had put the information in the contract and didn’t get the right information before closing, this buyer might only be left with having to sue the seller.

Once the agent told his client that he would find out if there was an association fee, he set himself up to deliver the information. If the agent only relied on information given to him by the other agent and that information turned out wrong, the agent came out looking bad before his client. The agent should have referred the client to an attorney or told the client how she could have found out on her own how to get accurate and reliable information.

While title companies may have identified the existence of a homeowner’s association and a lender might have obtained requested documentation relating to an association, at a closing these documents sometimes become meaningless as they become part of the flow of documents during the closing.

The suggestion that the HOA might be bogus is interesting. If that’s correct, finding out accurate information on costs and fees might be harder and only a real estate agent who works regularly in that neighborhood would have known about the existence of the “bogus” association.

If the association is not real – that is to say, the homeowners banded together to create an association but there is no legal right for it to assess the homeowners – the homeowner can fight them and refuse to pay the assessment. But even this poses a challenge to the new homeowner.

If he didn’t know about the fee, he’d have a couple of options. One would be to sue the seller (if he has the right to sue the seller under the contract) and the other is to sue his new neighbors or refuse to pay the fees. Neither is a particularly palatable good option for a new homeowner entering a community.

If anyone else has other comments or suggestions, or if you would like to read the original letter, I’ll post it in my forum, at www.thinkglink.com/forum, under the “buying” category.

NOTE: Ilyce R. Glink's latest ebooks are "Credit Scoring Secrets" and "How to Find a Great Real Estate Agent," which are available at her website, www.thinkglink.com.If you have questions, you can call her radio show toll-free (800-972-8255) any Sunday, from 11a-1p EST. You can also write to Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact her through her website, www.thinkglink.com © 2007 by Ilyce R. Glink. Distributed by Tribune Media Services