If you're considering purchasing a home in a homeowners association (HOA), congratulations. Purchasing a home is one of the largest financial decisions most people will ever make, and it's important to gather as much information as possible before closing.
One thing we frequently encounter as an HOA management company is calls from prospective buyers—or even their Realtors—asking us questions about the community before a purchase.
While we understand the desire to learn more about the neighborhood, it's important to understand each party's role in the transaction.
The HOA Management Company Is Not a Party to the Sale
The HOA management company works for the homeowners association and its Board of Directors. We are not a party to the real estate transaction between the buyer and seller.
Unlike Realtors, lenders, inspectors, title companies, and attorneys involved in the transaction, we are not being compensated to assist with the purchase or provide guidance to prospective buyers.
Our responsibility is to manage the day-to-day operations of the association on behalf of the existing homeowners.
Your Realtor Is Being Paid to Guide You Through the Process
One of the primary responsibilities of a buyer's Realtor is to help their client perform due diligence before purchasing a home.
This includes:
- Obtaining and reviewing HOA governing documents
- Understanding assessment amounts and payment schedules
- Reviewing the associations financial health
- Reviewing the associations insurance coverage
- Reviewing the associations reserve study (if applicable)
- Reviewing resale certificate information
- Identifying restrictions that may affect the buyer's intended use of the property
- Gathering information regarding amenities, architectural requirements, parking restrictions, leasing limitations, and other community rules
- Explaining how HOA information may impact the buyer's decision to proceed with the purchase
Your Realtor is earning a commission for representing your interests and helping you navigate these issues and pointing out provisions that may impact you. A Realtor should urge you to contact an attorney when the association documents contain restrictions that affect your intended use (e.g., leasing limitations, home-based business limitations, etc.), when there is a pending lawsuit, or when there are unusual assessment or financial issues. The general rule is if the question you are asking requires interpretation of the governing documents vs. simply reading them, the buyer should consult an attorney.
Questions Should Typically Flow Through the Transaction Parties
In most transactions, information is exchanged through the parties directly involved in the sale.
A typical process looks like this:
- The buyer asks their Realtor questions.
- The buyer's Realtor contacts the listing agent.
- The listing agent obtains information from the seller or requests HOA documents through the proper channels.
- The buyer's Realtor reviews the information with the buyer and provides guidance, and/or refers the buyer to an attorney for help interpreting legal documents.
This process helps ensure that information is communicated accurately and in the proper context.
Why We Don't Provide Advice to Prospective Buyers
Even when we have information available, we are not in a position to advise buyers regarding whether a property is a good fit for their needs.
For example, a buyer may ask:
- "Can I park my RV in the driveway?"
- "Can I build a workshop in the backyard?"
- "Are short-term rentals allowed?"
- "Will the HOA approve the fence I want to build?"
The answer often depends on governing documents, architectural guidelines, local regulations, and the specific facts of the situation.
Providing advice to prospective buyers would be inappropriate because we do not represent them and are not involved in their transaction and we are not attorney's. Interpreting the governing documents is the unauthorized practice of law.
Instead, buyers should obtain the governing documents and discuss their plans with their Realtor, attorney, or other advisors as appropriate.
HOA Documents Are Part of Your Due Diligence
Before closing on any property located within an HOA, buyers should carefully review:
- Declaration of Covenants, Conditions, and Restrictions (CC&Rs)
- Bylaws
- Rules and Regulations
- Architectural Guidelines
- Resale Certificate Information
- Current Assessment Information
- Financial documents
- Any other documents provided during the resale process
These documents contain the information buyers need to understand their rights, obligations, and restrictions as future owners.
Our Recommendation
If you're purchasing a home in one of the communities we manage, start by directing your questions to your Realtor.
Your Realtor is your advocate throughout the transaction and should be helping you gather, review, and understand the information necessary to make an informed decision.
The HOA management company's role begins after you become an owner—not before.
A little diligence before closing can help ensure there are no surprises after move-in day.
