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Why does the Condominium or Home Owners Association need to approve the sale of Property?

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This question came up recently as we (Realtors) all just seem to assume that if a house in a Home Owners Association or a Condominium Association that the Buyer MUST submit an application to be approved that association. This may or may not be the case.

So, if (IF) the recorded documents (or the non recorded rules IF the recorded documents are silent on the question of approval of a sale or lease or allow for the association to adopt rules) say that the association MUST approve a sale (or Lease) then this will be noted on the title insurance commitment but often times this is not received until well after the condo or HOA rider would require a Buyer to make application. IMHO it’s best to make an application. If the certificate of approval is not required by the Title Agent at Closing then no big deal.

What’s interesting is that places like Evergrene in Palm Beach Gardens still have not (as far as I can see) updated their recorded documents nor rules of the association to require sales and leases to be approved by the master association NOR for the condominium units at the Mansions at Evergrene.

Jupiter and Palm Beach Gardens Housing sales for March 2021

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The sales numbers for March were just released by the Realtors Association and once again, no big surprise. The market is going up at a rapid rate and disproportionately so in the high end communities. Places like Admiral’s Cove in Jupiter and Old Palm in Palm Beach Gardens which historically had a a low “velocity” of sales have seen years of inventory absorbed in just a few months.

Does the Seller need to disclose and/or remedy violations of a Home Owners Association?

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This came up recently. The Evergrene HOA in Palm Beach Gardens as soo as a Property goes under contract they send out a representative to inspect the Property. If they find any violations then they send out a notice to the Owner AND they may even note it on the estoppel letter requested from the Closing Agent. Now what?

Noting the language of the base Far Bar As-Is Contract:

SELLER DISCLOSURE: Seller knows of no facts materially affecting the value of the Real Property which are not readily observable and which have not been disclosed to Buyer. Except as provided for in the preceding sentence, Seller extends and intends no warranty and makes no representation of any type, either express or implied, as to the physical condition or history of the Property. Except as otherwise disclosed in writing Seller has received no written or verbal notice from any governmental entity or agency as to a currently uncorrected building, environmental or safety code violation.

Unless Buyer exercises the right to terminate granted herein, Buyer accepts the physical condition of the Property and any violation of governmental, building, environmental, and safety codes, restrictions, or requirements, but subject to Seller’s continuing AS IS Maintenance Requirement, and Buyer shall be responsible for any and all repairs and improvements required by Buyer’s lender.

PROPERTY MAINTENANCE: Except for ordinary wear and tear and Casualty Loss, Seller shall maintain the Property, including, but not limited to, lawn, shrubbery, and pool, in the condition existing as of Effective Date (“AS IS Maintenance Requirement”).

From what I have been told and in my research assuming that the violations were in place as of the effective date then neither the base As Is Contract nor the HOA rider would provide the Buyer any recourse against the Seller to remedy any HOA violations.

The HOA recorded documents may however not allow a certificate of approval of the sale to be issued until the Property is brought into compliance and a certificate of approval is typically required by the Title Agent to prove compliance with the verbiage of the recorded documents that all sales be approved by the association.

What is a GOOD NEIGHBOR NEXT DOOR MORTGAGE?

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This a new program that is aimed at placing eligible full-time law enforcement officers, teachers, and firefighters/emergency responders into a HUD owned home AT HALF THE APPRAISED VALUE. No, that is not a typo. What’s the catch?

Catch is the property must be an “Eligible Single Family homes located in

Remove the appraisal contingency from the FAR BAR As Is Contract

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As of November 1 2021 the new version (6) of the FAR BAR As-Is is in effect and the financing paragraph changed ALLOT. We are now back to the way it once was which is to say that, for the financing section, the appraisal MUST be completed within the Loan Approval Period.

OK, so here’s a question I never thought I would be asked. Can I have Contract subject to Loan Approval (so NOT cash) and remove the appraisal language?

Short answer is YES, but it’s VERY risky. Both parties can agree to strike that language from the financing paragraph and that would remove the ‘out’ for the Buyer should the Property fail to appraise. So, the Buyer is approved BUT the house is NOT because it did not appraise. THIS IS VERY RISKY AND ALMOST SURE TO CAUSE A FIGHT OVER RELEASE OF ANY ESCROW FUNDS. This is the new version of the appraisal language…

Or, one could use language similar to something like this ASSUMING that the loan product allows for the Buyer to ‘make up the difference’ on the Loan:Value.

“Should any appraisal of the Property (ordered either by the lender for the Buyer, by the Buyer themselves or any others) indicate that the value of the Property is less than the Purchase Price then the Buyer will proceed as if the appraised value of the Property is equal to or in excess of the Purchase Price.” And, again of course, the Lender must be OK with this. Be aware that this is NOT standard language and should be drafted by a lawyer to protect both parties.

So, if the Property fails to appraise BEFORE Loan Approval is given and the application fails to meet underwriting guidelines because of this, AND ONLY THIS, then the application could be denied by the Lender (they can do whatever they want) BUT the Buyer (IMO) could NOT withdraw from the Contract without penalty. Section 8(b)(1) was satisfied and 8(b)(2) was struck in this instance. That’s way too risky for most folks.

Read THIS POST to see why a Buyer would want a separate addendum to the Contract for an appraisal

Flood Insurance Risk Rating 2.0 What is it?

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So it looks like after years of kicking the can down the road congress is moving forward with BIG changes to the National Flood Insurance Program and it will affect Florida real estate. The new system is called “Risk Rating 2.0” and so far what I’ve heard I’m not a fan of it it for this reason: In a government subsidized program there should be transparency in how rates and premiums are calculated and this system is black magic that will be hidden behind the proprietary information veil of super secrecy.

The Congressional Research Service issued this report on Jan 2021.

Like it or not this IS being rolled out and is now set to take effect on 1 October 2021. They state from the web site for this program that…

“Risk Rating 2.0 will comply with existing statutory caps on premium increases. Risk Rating 2.0 will prevent significant premium increases by offering a glidepath discount to existing policyholders and new homeowners buying homes from existing policyholders.”

And the report linked to above notes a BIG thing for us…”Risk Rating 2.0 will not be able to increase rates faster than the existing limit for primary
residences of 5%-18% increase per year”.

WHAT DOES THIS TELL ME? IF YOU DO NOT ALREADY HAVE A FLOOD POLICY GET ONE. ONCE YOU HAVE THIS YOUR RATES CAN ONLY GO UP BY SO MUCH EACH YEAR.

RSS Florida Association Realtors

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