Helpful Tips for Selling a Colorado Home with an HOA Agreement

Selling a home in Colorado that is part of a homeowners' association (HOA) comes with its own set of considerations. You'll need to understand the rights and obligations outlined in Section 7 of the Contract to Buy and Sell Real Estate (Residential) form. This section, created by the Colorado Real Estate Commission (CREC), details the responsibilities for both buyers and sellers in HOA transactions. Navigating this process can be complex, but with the right guidance, you can ensure a smooth sale.

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. Lawns, sidewalks, driveways maintenance are usually suspects in HOA agreements and keeps a neighborhood looking nice. Community buildings and other social areas such as golf courses are maintained by the HOA as well. Along with this, 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. Conflict resolution between neighbors is usually seamless compared to other methods because it is typically handled by the HOA.

Now, these all sound great, but what about the flip side. HOAs do have some faults that should be considered. If a property is part of an HOA there will be nice amenities and services, but remember, you will be paying for them through fees that often rise year after year. Additionally, 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. Lastly, some 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 & Buyer’s Rights

Section 7 of the Contract outlines the responsibilities of a Seller of real estate situated within a common interest community and governed by HOA Documents. These obligations encompass informing the buyer that the property for sale is part of an HOA and that membership is mandatory. Furthermore, the seller is obligated to pay all HOA fees to prevent any liens on the real estate and to provide the Buyer with the HOA Documents before the deadline specified in the HOA Documents.

Section 7 of the Contract grants Buyers the right to consider the HOA Documents before closing on a piece of real estate. The Buyer has the sole discretion to terminate the Contract at any time before closing, based on the HOA Documents. However, the Buyer must exercise this option within ten (10) days of receiving the HOA Documents from the Seller. If the Buyer fails to receive the HOA Documents, they may terminate the Contract at any time before closing. Notably, if the Buyer does not provide any notice of termination to the Seller, they waive their right to terminate and accept the provisions of the HOA Documents.

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 consider the following before entering into HOA agreement. 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 GLO Can 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. See how GLO can help you by visiting HOA Document Review - Buying a Home in a HOA.

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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.

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