Helpful Tips for Selling a Colorado Home with an HOA Agreement

Are you looking to buy or sell a home in Colorado? Is the property subject to an HOA or similar agreement? Are you familiar with Section 7 of the Contract to Buy and Sell Real Estate (Residential) form (the “Contract”)? The Colorado Real Estate Commission (“CREC”) put this section in to explain the rights and obligations of Sellers and Buyers dealing with a transaction for real estate within a homeowner’s association (“HOA”). GLO specializes in consulting with home buyers and sellers to ensure they understand the complicated process.

Pros and Cons to HOAs

An HOA is meant to enhance a community and ensure that homes involved in the HOA are kept to a standard that makes all neighbors happy. Here is a list of some of the positives that stem from HOA communities.

·      Lawns, sidewalks, driveways maintenance are usually suspects in HOA agreements and keeps a neighborhood looking nice.

·      Research from the University of California at Irvine shows that single-family homes under HOAs sell for an average of 4% more compared to similar homes outside of HOAs.

·      Recreation and social opportunities tend to be more abundant in HOA communities. For example, golf courses, swimming pools, tennis courts, playgrounds, grills, and gyms can sometimes be found in HOA communities across Colorado.

·      Conflict resolution processes can be clearly laid out. So, if you have a troublesome neighbor, there is a structured way to approach them and resolve issues civilly.

Now, these all sound great, but what about the flip side. HOAs do have some faults that should be considered.

·      Fees. There is no way around them. If a property is part of an HOA there will be nice amenities and services, but remember, you will be paying for them.

·      Rules and restrictions can drive some homeowners nuts. Whether it is not painting your house the turquoise blue you always desired or not being allowed to wave the flag of your choosing, take note of the HOA restrictions before entering into a community governed by an agreement.

·      Community meetings and clean up responsibilities may be required. Some HOAs require residents to attend monthly meetings or take shift shoveling snow. Ensure that you are okay with the responsibilities of an HOA agreement before moving into a home.

Seller’s Obligations

Section 7 of the Contract spells out the obligations of a Seller of real estate located within a common interest community and subject to HOA Documents. The Seller’s obligations include: 

·      Telling the Buyer that the real estate for sale is part of an HOA and membership in the HOA is mandatory;

·      Paying all HOA fees to ensure no liens on the real estate;

·      Providing the Buyer with the HOA Documents at the Seller’s cost; and

·      Giving the Buyer HOA Documents before the HOA Documents Deadline (specified in the Contract).

Buyer’s Rights

Section 7 of the Contract also gives Buyers rights to consider before closing on a piece of real estate. The Buyer has the right to terminate the Contract at the Buyer’s sole discretion based on the HOA Documents. The Buyer must exercise the option to terminate on or before ten (10) days after receiving the HOA Documents from the Seller. If the Buyer does not receive the HOA Documents from the Seller, the Buyer may terminate at any time before closing. Note, if no notice of termination is given by the Buyer to the Seller, the Buyer accepts the provision of the HOA Documents and waives the right to terminate.

Helpful Tips and Questions

·      Sellers must provide the HOA Documents at their cost. Contact your association ahead of time and have these documents ready. If you want to save money obtaining these documents, ask a neighbor if they can provide copies of the required HOA Documents.

·      Buyers should keep HOA fees in mind when purchasing a home. Ask yourself if you can budget in not only the monthly fees, but the initiation fees as well?

·      Buyers should look to see if the HOA has capital reserves to cover common area damages.

·      Buyers should ask themselves if they are comfortable and willing to accept the rules and policies laid out in the HOA Documents. There is no shame to having a lawn full of garden gnomes, but it is best to find out if this is allowed in an HOA before closing on a home.

·      Buyers should take note of the restrictions on home improvements. If you plan to build a garage and extend the deck on a new home purchase, it is best to ensure that this is allowed under the HOA you will be joining.

·      Last, Buyers should check to see if there is a limit to how high the HOA fees can be raised.

How can GLO help?

If you are looking to buy or sell real estate in Colorado and have questions about the effects of an HOA or similar agreement, or the process generally, GLO has experience in navigating the details of real estate transactions in Colorado to ensure a smooth transfer.

Please fill out an Intake Form to inquire about working with GLO.

GLO has prepared this blog to provide general information on legal issues that may be of interest. This blog does not provide legal advice for any specific situation, and this does not create an attorney-client relationship between any reader and GLO or its attorneys. GLO engages clients only through specific fee arrangements and signed engagement letters. GLO does not guarantee any results.