Many contracts today utilize homeowner review periods as a contingency for the buyer. Many times they are used as outs for a contract, but there appears to be little a home seller can do to keep a buyer committed if they want out. As a seller what are some things you can do, and what should you be aware of with regards to homeowner's associations and real estate contracts. (Of course not all properties are members of and subject to a Homeowner’s Association, so this may not apply to your purchase or sale).
As a buyer, if the property you have made an offer on is part of a structured community or condo association, with mutually agreed rules and regulations, you will have some paperwork to review. Built into this process (as agents we must include the paperwork in your offer) is the option to disapprove the purchase if you don’t like what you find out when you examine the documents from the Homeowner’s Association, including the rules and regulations, financial information, and some meeting minutes etc. Seller will have 5 days from mutual acceptance to deliver the Resale Certificate (in the case of condos, which includes the HOA info) or the HOA paperwork (in the case of single family residences that are part of a community with a Homeowner’s Association). One small note is that condo associations legally have 10 days to provide this information, so you may want to make the necessary adjustment to your contract. In addition, most resale certs are only good for 30 days, so you don't want to order this in advance of getting an offer. After receipt Buyer will have 5 days to review and send written notice of disapproval. If there is no written notice within the speicifed period, the HOA review period is over and the contingency is deemed waived. If the Buyer gives written notice of disapproval within the time period allowed, the contract is terminated and the earnest money is returned to the Buyer.
As a seller, how can you protect yourself from a buyer using this as an out of the real estate contract. First of all, have your agent review the contract and eliminate the neighborhood review from all but one of the addendums, to ensure you know exactly how long the buyer has to review this paperwork. There are neighborhood review contingencies in a couple different peices to the contract. Next, keep the review period as short as possible; ideally three days or less. That way if the buyer is going to walk, they do it sooner than later.
Lastly, you want to be aware of any fees your HOA may charge through escrow for clearing your property for sale. Most HOA's subcontract out the management peice and these third party companies can charge up to $200+ for documentation showing their are no HOA liens or incumberances on your property. This charge many time takes sellers by surprise and the fee must be paid whether or not your transaction closes.