Closing Escrow in an HOA
To highlight the added complexities of closing escrow in a Homeowners Association or HOA, let’s use this example.
You represent the Seller, and termites have caused enough damage in an attic to cause a roof leak. The Lender and/or buyer wants the damaged beam and leaky roof fixed in order to close escrow.
In a single family home, the seller would just order the necessary repairs. In an HOA, that is not the case. In HOAs there is roughly a 5 step process to get the repairs done.
5 Steps to Approve Repairs
#1 – First, it must be determined which repairs fall under the responsibility of the HOA, and which are the responsibility of the owner.
Every HOA is different with its own set of governing guidelines known as CC&Rs (Most of the time, attics are HOA responsibility, in some, they are the owners)
To keep this example simple we will pretend both the attic and roof are HOA responsibility
#2 – The managing agent, on behalf of the board coordinates with a termite company and a roofing company to go and bid the work.
Sharp HOA managers usually keep companies that are vetted and have proven that they have the necessary licensing and insurance requirements prior to doing work on the property.
#3 – The Board must provide approval for repairs and treatment needed.
Board members are prohibited by the Davis-Stirling Act from making some decisions without a disclosed executive meeting. These meetings are usually held once a month. It’s possible that you would have to wait until the next scheduled executive meeting to have the necessary repairs and treatment approved.
#4 – After the treatment and repairs are approved, the HOA’s manager sends approval to the vendors and orders repairs.
#5 – The work is completed and notice of completion is sent to the manager, who sends it to the proper contact to be included in the escrow documentation
The DO’s and DON’Ts When Closing Escrow in HOAs
- Identify management company and managing agent as soon as you list the property
- Identify preferred termite control companies approved for work
- Order inspections early
- Disclose needed repairs early
- Order necessary repairs through management co/managing agent ASAP
- Communicate expected close of escrow with a managing agent
- Request Letters of Intent for large ticket repairs in HOA common area
- Respect the line of communication and timeline attached
- Expect or promise a quick close of escrow-especially when the buyer is FHA or VA loan
- Order necessary repairs through resident or seller
- Wait until the last minute to order repairs
- Approve work yourself
- Expect immediate approval and scheduling of work