As a result of the slowdown in the housing market and the mortgage problems facing many home owners, I feel that the timing is right to educate buyers about what to look for when purchasing a home in a subdivision that has an active Home Owners Association (HOA).   Although the majority of associations are financially sound, problems could arise if the developer of the subdivision who started the HOA closes shop before turning the HOA over to its residents.  Most associations have been around for some time so it is doubtful that they will run into financial problems.

If you are preparing to purchase a home in an area with a homeowners association it is imperative that you find out the financial status of the association before you finalize a contract.  To do this your real estate agent will include with your purchase contract a form entitled H.O.A. Condominium/Planned Community Addendum.  The form which is approved by the Arizona Association of Realtors® provides a check list of information that you as a buyer need to obtain from both the seller of the property as well as the HOA prior to close of escrow.

As a buyer you should review the information closely.  You have to know how much your dues are, and if they are paid monthly or annually. Who manages the association?  Most associations are professionally managed by a company that is hired by the association's board of directors.   Are past dues owed by the seller and if so who is going to pay them?  If you are buying a distressed property (one that may be or is going into foreclosure) it is quite likely that dues are not paid and the HOA may have a lien against the property that must be paid prior to close of escrow.  In most cases there is a transfer fee that must be paid, and is generally split evenly between both parties.

By law the association's management is required to provide you with details of the association itself.  This includes the bylaws and rules of the association and a copy of the declaration of Covenants, Conditions and Restrictions (CC&Rs).  Also a dated statement which includes information about the financial health of the association, information about management of the association and information about any pending litigation with respect to the home you are contemplating buying or the association itself must be provided.