Seller’s Obligations: Home Owner’s Association has Less than 50 Units

October 21, 2015 by Jon Griffith

The Arizona Association of Realtors Residential Purchase Contract is a legal document. When entering into any legally binding agreement, it is the party’s responsibility to read and understand each section of the contract, and know your obligations and how they affect the purchase or sale of a home.

If you are selling your home, and your home is within a homeowners association, you have additional contractual obligations to the buyer. If your HOA contains less than 50 units, you have more work to do than if it had 50 or more. You see, if there are 50 or more units, the Title company handling your escrow will ensure the HOA is notified of the contract and the HOA is required by law to provide the information below, which is a very important section of the HOA Addendum.

Line 36 of the H.O.A. Condomimium / Planned Community Addendum [download id=”56703″] clearly states that if your HOA has less than 50 units, no later than ten (10) days after Contract acceptance (a date that can be affected by various contingencies in the contract), the Seller shall provide in writing to the buyer the information described below as required by Arizona law.

So for example, if contract acceptance occurs on the 4th of a given month, the 5th would be day 1 and the end of the 10 day period would be 11:59PM on the 14th. This creates a contingency for the buyer which gives them an “out” if they don’t like what they see. They buyer has 5 days after you deliver the required information to them to make that decision.

As time is of the essence, it’s better to get this information to the buyer as quickly as possible once there is a signed contract. Every contingency that is met and lifted during escrow is one step closer to your success as a seller.

Information required to be provided to a Buyer by Arizona Law

A copy of the bylaws and the rules of the association.
A copy of the declaration of Covenants, Conditions and Restrictions (“CC&Rs”).
A dated statement containing:
1. (a) The telephone number and address of a principal contact for the association, which may be an association manager, an association management company, an officer of the association or any other person designated by the board of directors.
2. (b) The amount of the common expense assessment and the unpaid common expense assessment, special assessment or other assessment, fee or charge currently due and payable from the Seller.
3. (c) Astatementastowhetheraportionoftheunitiscoveredbyinsurancemaintainedbytheassociation.
4. (d) The total amount of money held by the association as reserves.
5. (e) If the statement is being furnished by the association, a statement as to whether the records of the association reflect any alterations or improvements to the unit that violate the declaration. The association is not obligated to provide information regarding alterations or improvements that occurred more than six years before the proposed sale. Seller remains obligated to disclose alterations or improvements to the Premises that violate the declaration. The association may take action against the Buyer for violations apparent at the time of purchase that are not reflected in the association’s records.
6. (f) If the statement is being furnished by the Seller, a statement as to whether the Seller has any knowledge of any alterations or improvements to the unit that violate the declaration.
7. (g) A statement of case names and case numbers for pending litigation with respect to the Premises or the association, including the amount of any money claimed.
A copy of the current operating budget of the association.
A copy of the most recent annual financial report of the association. If the report is more than ten pages, the association may provide a summary of the report in lieu of the entire report.
A copy of the most recent reserve study of the association, if any.
Any other information required by law.
A statement for Buyer acknowledgment and signature as required by Arizona law.

If this information is NOT provided by the required deadline, the seller will be in a sticky situation and will probably lose the deal, if not end up being sued by the buyer for specific performance. Please consult with your real estate attorney for any legal matters that may arise.

Price is Negotiated on the Front End

May 18, 2015 by admin

There are many points along the residential real estate transaction that are open for negotiation. One misconception that many buyers may have is that they can go in with a higher price than their competition to beat them, then use the inspection period to bring the sales price down by leveraging the repairs against the seller.

Here’s the thing. While the sales price can be modified at any point by agreement (i.e. on an addendum), your offer/counter-offer time-line expires when the seller signs the offer. All you have now are contingencies to let you back out of the purchase. So, you, as the buyer, have very little say over the price after you’ve inspected the home. What you do have is the right (depending upon the contract terms) to cancel the contract and walk away with your earnest deposit.

When a home needs repairs, you have one opportunity prior to the end of the inspection period to make the seller aware of what you disapprove of, both warranted, and non-warranted items (remember, some items are to be fixed per the Seller Warranty regardless.) This notification is done using a document called the [download id=”56411″].

Often a buyer might use language such as, “Seller to credit buyer $5000.00 in lieu of repairs.”

This is a red flag for lenders. Lenders don’t want to see anything about repairs, because they don’t want to lend on a property that may have liabilities. Credits are typically handled on the front end, prior to reaching an agreement on the sale price. But, if there is language added that says something to the effect of “Seller to credit Buyer $5000.00,” the BINSR is NOT the place to do it. This must be done on an addendum, and even that can pose problems, because the credits provided by the seller can only cover closing costs. So, if the seller is willing to provide a $5,000 credit, they might as well lower the price by $5,000.

Let’s use a buyer under contract at $200,000 with a seller who agreed to pay 3% towards closing costs as an example. The seller is allowing $6,000 to be allocated to the buyer’s closing costs. During the inspection period, the seller elects to credit the buyer $5000.00 instead of repairing the disapproved items that the Buyer points out. Now we have $11,000 in credits, but closing costs won’t be that high, so we have nowhere to put that money, except back into the seller’s pocket.

While the buyer may be attempting to use the BINSR to leverage a price reduction, the BINSR is designed to be used to notify the seller of disapproved items. Nothing more.

Until a buyer receives a response from the Seller regarding their intentions after being notified of disapproved items, they have only two options. 1. Either continue with closing without any repairs being completed, or 2. bail out and receive the earnest funds back from bondsman denver co and start searching again.

The outcome of the inspection contingency is going to vary depending on market conditions. If it’s a Seller’s market, there may be multiple offers on the property, in which case the buyer has less leverage throughout the entire transaction.

Don’t bank on repairs to lower the price of the home you intend to purchase. It can be done, but it’s the Seller who holds the ball. If the seller is desperate to sell, then they may simply lower the price, rather than go back on the market, but if they have multiple offers, then they may be willing to close at a higher price with another buyer without making concessions.

New HOA Rules Change The Way a House is Sold

January 28, 2015 by admin

On February 2nd, there will be new procedures when it comes to selling a home that is located within a Home Owner’s Association (HOA.)

Download the new HOA Form Here

Until then, we will continue to use the standard HOA Addendum that is part of the purchase contract when the property being transferred is part of an HOA.

In the past, this document was typically completed and submitted by the buyer as a part of the contract, defining such things as who would pay specific fees related to the transfer of property. The problem with this is that without investigating the HOA, it’s difficult for a prospective buyer to determine how much those fees will be.

Consequently, buyers frequently submit their offer without knowledge of facts that would enable them to make an informed decision.

– Holly Esligner, ABR, CRB, CRS; Chair – 2014 HOA Workgroup; 2010 President of Arizona Association of REALTORS®.

Any buyer should know, before they submit the offer, what the true costs to join an association would be, whether there is one association, two, or in rare occasions, three governing associations on the subdivision (Grayhawk would be an example of this.)

The new form will change this. The revised HOA Addendum will now be generated by the Seller, just like the Seller Property Disclosure Statement. When someone offering a home for sale lists their home, it will be their responsibility to provide information about the governing agencies of the HOA as well as the costs associated with selling the home and include it with the listing on the MLS. The buyer will still be able to propose which parties will be responsible for the fees, but now they’ll know what the true costs are before making the offer.

As a result of these changes, buyers will be informed in advance which will help alleviate the problem of unexpected fees prior to closing which often kill the sale of the home and cause headaches for everyone.

If you’d like to know more, a Frequently Asked Questions page has been posted as well as a Best Practices page.

Close Of Escrow in the Short Sale World Is A Squeaky Beast

April 23, 2010 by admin

When a normal real estate contract is written, the buyer requests a close of escrow date, which is typically dependent upon multiple conditions being met. There are a lot of people involved, a lot of documents involved, and contractual time lines to follow. Normally, that time frame is somewhere around 30 to 45 days. In the case of FHA financing, it’s on the longer end. In the case of a cash purchase, it can be as quickly as Title can complete their work, or simply a matter of days.

When a buyer writes an offer on a Short Sale, there is no close of escrow date. Instead, the close of escrow date typically reads, “See Short Sale Addendum.” In the Short Sale Addendum, you’ll see on line 38:

Close of Escrow: Close of Escrow shall occur thirty (30) days or _________ days after delivery of Agreement Notice.

The Agreement Notice is the letter that your lender(s) provide upon reaching an agreement to sell for less than you owe on the property. According to lines 22-23 of the Short Sale Addendum:

Agreement Notice: If Seller and Seller’s creditors enter into a short sale agreement, the Seller shall immediately deliver notice to buyer (“Agreement Notice”).

Once the letter(s) reach the buyer, even though there has been initial contract acceptance by the seller at the start of this process, for the purposes of the contract time lines, we consider this the date of contract acceptance. Technically, we have already had an executed contract during the entire negotiation period, with a Short Sale contingency.

In most of the short sales that I have listed, I make sure the buyer and seller understand that we are going to fast track this to closing within 21 days of the Agreement Letter receipt. I do this on line 38 of the Short Sale Addendum because 9 times out of 10, the agreement letter affords us only 30 days to close, and the last thing we want is to run up against the expiration of this letter, coupled with a potential impending Trustee Sale date. And, since we’ve had so much time for the buyer to sit around and basically do nothing, it’s assumed that the financing documents are already in order. This is why it is critical, buyers, to have all of your documents ready to rock at your lender so when the agreement letter arrives, your lender will be able to push forward.

The Squeakiest wheels are typically caused by buyers’ lenders not having everything they need to proceed. While most transactions outside of the short sale world are relatively smooth, even with all of the turbulence the transaction can experience, COE in a Short Sale is more of a balancing act and must be taken very seriously. Lenders don’t like to bend once they’ve made their decision.

What Does Escrow Mean?

August 1, 2008 by admin

Susan Gruenling in an article entitled Open Sesame, outlined what it means to “open escrow.” As I was reading it, I was thinking about what the word Escrow really means and where it comes from, so I did a little research.

If you ever learned Spanish, you probably remember that the verb to write is escribir. A desk is an escritorio. The word Escrow, according to The Online Etymology Dictionary is basically a scroll that is a deed delivered to a third person to hold until a future condition is satisfied.

In real estate transactions in Arizona, the escrow is the period during which the Title/Escrow company (the third person) holds the proceeds from the sale of a home until both the buyer and seller sign their documents at which point the funds are transferred from the buyer or buyer’s lender to the seller and/or lienholders of the property being sold.

In other businesses, escrow companies are responsible for securing the funds from the buyer and holding those funds until a future condition is satisfied. When the conditions are met, the escrow company releases the funds to the seller. An example would be the process of selling a vehicle or other high dollar luxury item, like a piano, over the internet. If you have a car to sell, and someone across the country whom you do not know wants to buy it, you would most likely involve an escrow company to ensure that you get your money, and they get their car.

Experience the Fourth Advantage

July 28, 2008 by admin

I know the market and our industry inside and out. After all that is what being an executive is all about. Realty Executives agents average more years in the real estate profession and typically represent more buyers and sellers than the average agent. The result? The knowledge of what it takes to achieve the best possible results for you in the shortest period of time — whether you’re buying or selling.