7 HOA Problems That Can Wreck Your Closing [+ Solutions]

From hard-to-find HOA information to complex document requirements, the presence of an HOA can complicate the closing of a transaction. Careful HOA document due diligence is required. 

Some HOA problems can get on the nerves of everyone involved. But you can handle it.  By understanding and proactively addressing the biggest HOA challenges, you can better serve your clients and be more efficient.

HOA Problems and Solutions

HOA Problem 1: Hard-to-find HOA presence and contact information

HOAs are hard to find, and identifying the HOA contact can be difficult. It involves researching public records, contacting HOAs, reviewing documents, and verifying the accuracy and completeness of the information obtained. 

The Seller plays a crucial role in providing accurate and updated HOA contact information. Unfortunately, the Seller often doesn’t know all the details of their association, like who the property manager is, if there are one or more community associations tied to the property, and so on.

Every once in a while, you’ll have the Seller who “forgot” there is an HOA (because they “forgot” there is a balance owed). If it turns out that the Seller is not aware of these details, you might need to request additional documents, likely delaying the closing date. In any case, the responsibility of identifying the HOA falls on you.

This is a problem that is either going to appear near the closing date (when someone realizes that the HOA information is wrong or incomplete), or it will appear after closing when the new Buyer comes back to you steaming mad.

Solution 1

You can search online directories and resources, like Homewisedocs.com, public records, or government agencies. This typically takes an hour or two of your time; you really can’t leave any stones unturned. Sources vary by state, county, and municipality. 

OR you can save time and headaches by letting InspectHOA do it for you. InspectHOA searches all available sources because you never know when you’re going to find a sub-HOA or the HOA got acquired, or the Property Manager changed. We have the largest and most up-to-date HOA database in the world. Within a few hours, we find all the necessary HOA information for your property, such as the HOA name, HOA contact name(s), address, phone number, fee frequency and amount, and more. 

HOA Problem 2: Reliance on the Seller

Has a Seller ever been unresponsive?  In our experience, some Sellers send the information form back in one day, and others take 3-4 days or more. Sometimes, they forget altogether. There have also been cases of the Sellers providing inaccurate, missing, or outdated information. 

Relying on the Seller can result in additional costs for Rush orders. Think of it this way: Let’s say Mutual Acceptance happens on Monday evening, and the Agent sends the Sale Agreement to you on Tuesday morning. Your setup team inputs the information, alerts you to the new order, and sends out the Seller Info Form.

The Seller completes the Form on Wednesday but can’t find all the contact info. They send it back to you Wednesday night. On Thursday, you find that the HOA information provided is incomplete, so you have to investigate. This would be fine, except that you have 100 files in your pipeline that need attention, so you can’t get to it until Friday. You email and call, but you don’t get a response.

Now it’s Monday, a full week after Mutual Acceptance, and the closing date is two weeks away. When you finally get a hold of the HOA contact, they tell you the fee is $500, and their turnaround time is 10 business days, but you can pay an extra $250 Rush Fee to get the docs in 6 days. 

Now your Seller is mad, the Listing Agent is mad, and you are stressed. 

Solution 2

If the Seller responded instantly with the correct and complete HOA information, life would be a lot easier. In their defense, most Seller Info Forms are poorly designed and difficult to fill out. One solution is to design the Seller Information Form in such a way that compels urgency and the need for complete information. Then, hope for the best. Or, call every Seller every time. Neither of these solutions is optimal. 

OR, even better, you can send the property address to InspectHOA on Day 1. We search and identify the HOA (same day) and order the HOA documents without delay.  The information we can return to you in a few short hours will save you from facing the anxiety of relying on the Seller or having to explain Rush Fees. As we are ordering and tracking the HOA documents, the Seller Info Form comes in after a few days and acts as a double-check on what we already found. By then, the docs are on their way, you are at ease, the Seller is at ease, and the Listing Agent is at ease. 

HOA Problem 3: Delays in obtaining HOA Documents

On average, it takes 10 business days for the HOA to deliver the documentation needed to close a transaction.  But lots of things can go wrong. The back-and-forth with the HOA, errors, and missed documents can further delay the closing. 

Solution 3

Order the  HOA documents early in the process and proactively communicate with the HOA or management company. By initiating the request as soon as possible and staying on top of it, you can mitigate the risks of delays.

OR InspectHOA can take care of ordering the HOA documents for you. We get the right docs on time, every time. Our operations team employs 200+ highly trained HOA specialists working proactively, transparently, and urgently. We will save you hours, if not days, of time, chasing HOAs.

HOA Problem 4: Hundreds of pages of fine print and legal lingo

There is no standardization in the HOA industry, so the document package you receive can be wildly different from document packages you may have received for other transactions. It’s up to you to sort through all the documentation. Reviewing extensive HOA documents filled with legal lingo can be time-consuming and can make it hard to find crucial information, adding the risk of missing key details.

Solution 4

In an ideal world, you could develop a document scanning technology that can streamline the process and extract relevant information efficiently (if you do this type of thing on your own, InspectHOA has a good job waiting for you). Unfortunately, the solution here is to read the documents carefully and not miss anything. 

OR you could use InspectHOA. Our technology reads every single word in all documents – even copies of copies of copies – and provides you with a comprehensive summary of HOA Highlights and Closing Details. Nothing gets missed. You won’t even need to open the package, but in case you do, we save all documents in the convenient format of searchable PDFs, so that you can CTRL+F to find any text you need.

HOA Problem 5: Inaccurate HOA information

Sometimes, the information provided by the HOA is outdated and/or ambiguous. Often there are missing details, typos, or errors in the documents. Inaccurate HOA information poses the risks of not only delaying and complicating the transaction but also can result in costly legal disputes and financial risks.

Wendy Jeffery, VP of Title & Escrow of Homie Title, has shared her experience of the legal dispute their company had with an HOA:

“You have to remember that the human is still part of these transactions, and the HOA might type things incorrectly on their end. We had a case where the HOA typed their information incorrectly.

We had a payoff come over that stated 0.05% of the sales price was the reinvestment fee, and it should have been 0.5%. That’s a difference of over $3,000 based on your sales price. We argued back and forth, saying we were not going to pay it, and the HOA put a lien on the property.

So we had a property with a lien due to the HOA typing their fee incorrectly on their documents. It did go to court, the Buyer and Seller both went and fought it, and the HOA finally had to release their lien off the property because it was their error. But it was a year’s worth of work on everybody’s part and a long process.” 

Solution 5

You should confirm and verify the HOA information with the HOA or management company directly. This includes cross-referencing the information provided in the documents, contacting the HOA for clarification, and addressing any discrepancies promptly.

OR leave it to InspectHOA. We make sure all the information is accurate and up-to-date, and we (not you) chase the HOAs if an update is needed.

HOA Problem 6: Outstanding dues and assessments

If the Seller has outstanding dues or assessments, the HOA may place a lien on the property and complicate the transaction. You will need to ensure that the outstanding dues are paid before the closing can proceed. If the Seller needs to negotiate with the HOA, the process can take time and may involve additional documentation and communication between the parties, leading to closing delays.

Solution 6

Make it a priority to address outstanding dues and assessments WAY before the closing date. In cases where disputes arise, involving the Listing Agent can help facilitate a resolution.

OR let InspectHOA take care of it for you. InspectHOA summarizes all the outstanding dues and payments the Seller needs to ensure no fees are missed.

HOA Problem 7: Paying the HOA document fees upfront

Even though you are ordering the documents, the Seller has to pay for them. In rare cases, some Escrow teams pay for the documents on behalf of the Seller, but we don’t recommend this because it can put you into the role of bill collector. More often, you’ll have to contact the Seller and explain the charge for HOA docs and ask them for a credit card or ask them to order the docs themselves. Either case carries a great deal of risk to you. 

Solution 7

There is no solution to this problem unless your company is willing to front all the document costs for the Seller. Super risky. 

OR you can partner with InspectHOA. We offer two options: 1) we will contact the Seller to arrange the order and payment, or 2) we will simply pay the fees upfront and settle up at closing. This alleviates awkwardness with the Seller and streamlines the process, reducing friction for all parties.

HOA-related challenges can impact the closing process, creating complications for Escrow teams. By implementing proactive measures and working closely with InspectHOA, you can successfully mitigate negative outcomes.