The HOA Addendum
What does the HOA Addendum provide?
In April of 2021, the Texas Real Estate Commission amended the Addendum for Property Subject to Mandatory Membership in a Property Owners Association. The revised Addendum removes that part of the obligation from Paragraph D so that deposits and reserves are no longer automatically paid by the Buyer.
Paragraph C of the Addendum now combines the deposits and reserves paid by the Buyer with the transfer fee and limits the Buyer’s obligation to the amount entered in Paragraph C. The Seller is now required to pay any amount over the amount entered in Paragraph C, no matter how substantial the excess. These charges are in addition to any negotiated Seller expenses for the resale certificate and HOA documents that must be provided to the Buyer.
The relevant part of Paragraph C reads as follows:
- FEES AND DESPOITS FOR RESERVES: Buyer shall pay any and all Association fees, deposits, reserves, and other charges associated with the transfer of the Property not to exceed $ and Seller shall pay any excess.
What is the significance of the change?
This change is very important for agents to understand because it can have significant financial implications for their clients. Agents will want to have accurate information when working on buyer and seller net sheets.
What can agents do to reduce unwanted surprises associated with the HOA Addendum?
- Listing agents should encourage their clients to contact their HOA as soon as possible to obtain the costs associated with a transfer, including the amount of reserves and working capital. Having accurate information will help agents and clients know if the amount entered in Paragraph C is adequate when the offer is presented.
- Buyer agents should make sure their clients have sufficient information from the Sellers and HOA prior to closing to calculate the anticipated obligations.
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