Thursday, July 3, 2008

Discount Agent Horror Story & Question

QUESTION:
Hi, I came across your website in search (googling) of information on how to get out of a sticky situation. Any advice you can provide would be greatly appreciated.

Two days ago (7/1) we closed on a REO home. We did not get the HOA resale packet at closing. It turns out it wasn’t even ordered…. (we used a discount agent…. He’s not very helpful,,, won’t even return my calls…Now we know….)

Yesterday I called the HOA mgmt company and found out that there’s ~ $1400 in fees/fines levied against the previous owner. If I understand it correctly, we inherited that obligation.

Questions I have are:

1) can we legally cancel the contract within 3 days (by tomorrow)? … there’s language in the VA Property Owners Act that states that within 3 days of receipt of HOA Resale Package buyer may cancel… but since we didn’t get one, can we?

2) If we can’t, can the owner’s title policy protect us?
Thank you.
Jacob

MY ANSWER

Hey Jacob,
Sorry to hear that you have a bad experience with a discount agent. They aren't all bad, but I do frequently get emails like this.

First off, I am not a lawyer, but I might be able to give you food for thought to ask your lawyer.

1) HOA packet at closing? Normally this is done within the first week of being under contract.
My understanding in Virginia is that you do have a right to cancel a contract for not getting the HOA docs... up until closing. I believe that closing ends that right. In other words, you could have stopped and NOT closed due to the lack of HOA docs, but since you DID close, that was your decision.


2) My understanding was that the HOA loses their rights to fees after a home is foreclosed on. Unlike taxes, the HOA dues do not attach to the house once it is foreclosed on. Now if the foreclosure was on Jan 1 2008, and the bank hasn't paid since then, then yes you might be responsible from taht day forward. But, I don't think, you would be responsible for years or months of HOA payments that were not made before the foreclosure. (this is NOT gospel, but my understanding, you need to verify it with a lawyer)

Correction: I asked a closing specialist. Here is my question and her reply:
Frank> HOA fines and fees do not survive after a foreclosure (bank steps) right? The tally starts over when the bank takes the property over.
Closing company> Unless they were a lien, HOA fees do survive. Bank should pay.


As for the title insurance, I don't know if that would cover it. My guess is that it would not.

Let me also guess... you used THEIR closing company? This is another reason NOT to use the bank's closing company. If you had your own company, this information should have been found BEFORE closing.

So ask the closing company:
1) Did you do a search for any liens on the property? Including the HOA. Why didn't this come up.
2) Does my Title Insurance cover this?
3) Then ask them if Virginia law allows the HOA liens to survive through/past a foreclosure.

Hope that helps,
Frank- Broker FranklyRealty.com

1 comment:

Diane Cipa said...

Interesting discussion, Frank. Are these condominium assessments or HOA fees in a PUD? That might make a difference. In PA we have a limited non-divestiture of condominium assessments.

In any case, this party should make an immediate title insurance claim on the owner policy. Let them sort things out. They can use the title insurance commitment and the HUD-1 form as evidence of insurance and go to the title underwriter directly.