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4 ways an HOA can kill your next closing

Homeowners’ Associations are becoming the latest real estate deal killer – know what they’re doing and how to make sure your transaction isn’t dead on arrival.



The HOA and your real estate transaction

It doesn’t matter whether your next transaction is a short sale or an equity sale: if the subject property is part of a Homeowner’s Association, you may be in for a rude awakening. That’s right: Homeowners’ Associations are becoming the latest deal killer.

When the recession began several years ago, distressed borrowers had to make sacrifices when paying bills. And, many of those distressed borrowers with properties in Homeowners’ Associations started skipping their monthly HOA payments as a means of making ends meet. As a result, many Homeowners’ Associations across the nation are still facing high delinquency rates due to these defaulted payments.

Top 4 Ways that the HOA Can Kill Your Deal

It doesn’t matter whether you are involved in a short sale or a traditional transaction, here are the top 4 ways that an HOA can hamper your next closing:

  1. Some Homeowners Associations file liens against the property for the unpaid dues and legal fees in order to compel the distressed borrower to make good on their debt. These HOA liens (depending upon your state) could be upwards of $20,000, and usually must be satisfied at or prior to closing. (If you are involved in a short sale and the short sale lender does not agree to pay the HOA balance, you may not be able to close.)
  2. Some Homeowners Associations are filing Notices of Default (since homeowners have defaulted on their HOA dues) and even foreclosing on properties—leaving the mortgage lenders and homeowners behind.
  3. Buyers obtaining loans to purchase in certain condominium communities are faced with lots of challenges. High delinquency rates, bad HOA balance sheets, and low owner-occupancy are red flags for mortgagors. Many lenders do not approve mortgages because the underwriters cannot qualify the property due to the HOA situation.
  4. Buyers obtaining FHA loans may find that their complex is not on HUD’s list of approved condos any longer. The U.S. Department of Housing and Urban Development maintains a list (which is constantly being updated and changed) of FHA-approved condominium projects. If buyers are purchasing a short sale, the complex may be on the list one month and then three months later (when the short sale is finally approved), the property may not be on the FHA-approved list any longer.

If you are a listing agent or a buyer’s agent purchasing a property in an HOA community, it’s best to do a lot of research prior to putting a home on the market. It’s a good idea for listing agents to discuss the HOA issues with sellers, so that no unfortunate situations arise when you are approaching the closing date.

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Written By

Melissa Zavala is the Broker/Owner of Broadpoint Properties and Head Honcho of Short Sale Expeditor®, and Chief Executive Officer of Transaction 911. Before landing in real estate, she had careers in education and publishing. Most recently, she has been able to use her teaching and organizational skills while traveling the world over—dispelling myths about the distressed property market, engaging and motivating real estate agents, and sharing her passion for real estate. When she isn’t speaking or writing, Melissa enjoys practicing yoga, walking the dog, and vacationing at beach resorts.



  1. JoeLoomer

    May 1, 2013 at 1:45 pm

    Did not know about the HUD list – although I have encountered low owner-occupant ratings that have derailed FHA sales.

    Navy Chief, Navy Pride

  2. Yamilet Cabrera

    June 7, 2021 at 4:59 pm

    Thank you Melissa, I hoped to see the first way, when they arbitrarily choose to act in ROFR and then to kill deals.
    Thank you

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