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Welcome back to Go Gaddis Real Estate Radio, right here on AM nine 20. The answer in this segment of the show. Special assessments by HOAs. Wow. Can they cause some trouble? You? You bet they can. And if you live in a homeowner's association or a property owner's association, Orono Association, I'm gonna strongly suggest that you stay tuned, at least for this segment, and hear what we have to say.
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We would love for you to be a podcast subscriber. We're available on all major podcasting platforms. Without further ado, we have got a. Favorite expert advisors, Michael Crew, who is the president, founder, all kinds of, uh, big titles with Homeowner Management Services. You and I have known each other for a long time, uh, Michael, and the reason that I have you on the show is cuz you're honest, you're a straight shooter, uh, always trying to do the right things.
And so I appreciate you being here. We've got a big, big subject and that is special assessments for an hoa. So if you don't mind, I'd like to set up a scenario. We had clients recently buying a home in a very expensive gated community, and during their, they put it under contract. So they've negotiated the terms, the price.
There's nothing in the disclosure paperwork that says, Hey, the HOA is considering a special assessment. Uh, these two home buyers. The two most detailed people I've ever met in my life married to one another. They don't miss anything, and so they start doing a little reconnaissance, a little research in the neighborhood, and they get a sniff, sniff, uh, sniff sniff.
Maybe there's going to be a special assessment. It turns out that the homeowner's association knew that they did not have enough. To resurface the streets, and because it's a gated community, they're responsible for doing the resurfacing repaving of the streets. And so there was gonna be a significant special assessment and let's call it 15 or $17,000 per house.
It was a big deal. It was not a small deal. And so in our case, because the seller did not disclose and, and it. It makes sense that the seller did not know, cuz they weren't going to the HOA meeting, so they might not have had any idea. So I don't know that the seller was trying to hold anything from them.
They might have been, you're, for those who can't see Michael, he's pointing at me going, okay, you're getting somewhere now. But, but what happened is the buyers just lost trust for the situation and decided, they actually tried to do some negotiations to figure out how to work it out, but they just lost trust and eventually they terminated the sale and they moved on.
And so what I'd like to know is, Let's discuss the process of special assessments. Let's discuss how that can be a problem, and then let's discuss, uh, healthy ways that buyers and sellers deal with the potential for special assessments and real estate purchase agreements. You okay with that? Yep. I'm great with that.
So, I wanna point something out to you, though Yes. In the first 15 seconds of your, let's lay this out. Yes. You said. They got wind that the association was considering it. Yeah. And that, that's a key factor in how things work out. And I think that, that, who knew what when, right. And I think that they actually, it was some homeowners who were in the know, maybe close enough to the board.
And I think it had been a part of discussion at board meetings, uh, for multiple board meetings by the way. Meaning it had been going on, the discussion had been going on for, for four or five or six months. Mm-hmm. Among the board members. Among the board members, yeah. Yep. And that's, that's the key point.
Okay. So let's, let's cover the most basic thing, okay? Okay. Uh, which I mean, this is basic real estate. You know this Yep. Better than I do. Okay. Uh, a seller must disclose all material facts about, uh, a potential sale. Okay? Anything they know that materially impacts the property. And you can define what material facts are, but, Pretty much $17,000 come and due is gonna be a material fact.
Right. So sellers would have to disclose that if they knew it. Mm-hmm. Okay. And the way the real estate law looks at it, a, a normal homeowner is not aware of a special assessment until it's announced by the board. 4 million announced. So that's the important thing. Oh, oh. I don't like, I don't like the way this is going.
Keep going though. No, you're not gonna like, no, I'm like, dang. Fine. No, you're not. Okay. Okay. But I'm just saying a normal homeowner does not know about a special assessment. Okay. Until it's officially announced in writing. Somehow it's announced to the neighborhood by the board. Right? Not by somebody who's in the know, not by the budget committee.
Some, the board has to send out an announcement to make people aware of it. Okay. And even then, it's not. Guaranteed event until the special assessment is approved or passed. Right? Some associations have to vote on special assessments. Sometimes the board can just say, we're gonna levy a special assessment.
Got it. And when you say sometimes the association, everybody, all the members of the association, all the members. It has to have the majority or whatever it is. Okay. Yeah. It's separate from just eight or 10 board members or whatever it is making the decision. It it, I mean, it depends on what their bylaws say.
It could be a majority of the people that show up at a meeting. It could be the majority of everybody in the neighborhood. There's lots of different bylaw provisions. Right? Right. Can't be very specific, but there is a community vote. That's the important thing. Or the board has the authority to pass a special assessment.
Yeah. Unilaterally. Yeah. Okay. So, and when that happens, okay, now there's an obligation for the homeowner when, when that happens, there's a debt that's created. Mm-hmm. So then the next question is, who owes the debt? So, so Michael, let me, I wanna back up for one second. So Sure. I want to talk about, this is so very interesting and thank you so much for bringing this topic to us.
And I know the listeners are, are, are getting a lot out of this. The disclosure, um, the, basically the association, the community, uh, association disclosure, the c a d asked the seller to say whether or not there's any special assessments. And so if they say no, But those special assessments come into place before closing.
And this is a, a key thing. It, they gotta be disclosed and known by the HOA and, and, and put on an HOA cl uh, clearance letter, if you will, put on the closing state letter right Then ultimately, It would be the seller's responsibility to satisfy the entire special assessment at closing? Nope. We're gonna get to that.
Okay. Okay. Well, but that's the way I think that form works so well. I don't care how the form works. Okay. That's not what the law does. Okay. Oh, okay. Got it, got it. Okay. I don't care what the form does. Okay. There's regional custom and there's law. Okay. Okay. So the important thing is, is that until it becomes official, it's not a debt yet.
Agreed For the owner of the property. So the, the next important milestone is what is the due date for the assessment to be paid? Okay, so you have the date, let's say for example, that it was announced it was gonna be a special assessment. Let's just say it's July 1st, and maybe the assessment would not be due payable until October or November, something like that.
And those are two important dates. So let's talk to me about the difference in those. Like what, what's the significance between those? Absolutely. Okay. So the date it's announced, yes. That's when the obligation occurs for, the obligation occurs for the seller to tell the buyer about it. Okay. Because there's an official debt, there's an official, there's an, they know it's coming, it's there.
It's a material fact. Okay. Okay. The next important thing is that date, uh, is that due date? Okay. Yeah. So if the due date is October one and they sell the house on September, That special assessment becomes the debt of the new owner. Yes. So this is why you said, okay, Cleve, I don't care what your form says, this is the way it works in real life.
And what you're describing is exactly the way it would work. Because if it were not due, then the HOA could not put it on the, I'm gonna call it a payoff letter from the hoa, meaning a a contract settlement letter. Exactly. And it, oh man. So if it were not due, then that buyer. Three or four days after closing could figure out they owe a $10,000 special assessment.
Well, they'll know it. They'll know it at least in our shop. Okay. Because anything that's within 30 days of the closing date Yep. We tell 'em it's coming. Yeah. But if it's 32 days, we warn 'em. If it's 32 days, days, it's a surprise. So we we warn 'em. Yeah. Well if it's. Yep. Yeah, I got it. And, and just so everybody knows, homeowner Management Services is an HOA and a condo management company.
So your services are to manage the associations for condo property owner associations. Homeowner associations. Yep. If somebody wanted to reach you, they were thinking about maybe changing property managers or didn't even have one and wanted to get one, how would they reach you? The best thing to do is they can go online to our.
www.hs-theminuskindincinnc.net. Okay. Www Okay. Dos dash i nnc.net. Yep. Or they can call our office and talk to our receptionist. Uh, 7 7 0. Uh, Six oh nine, sixteen hundred. We never call our own numbers anymore. Yeah. Well, and we changed, we changed them all. Yes. Uh, and, and they can speak, they can speak to. Uh, a receptionist and she'll point him to the right person.
Uh, and I would, we have a mark. We have a marketing director. Yeah. And sometimes she's in the office, sometimes she's not. And I would assume that your marketing director's willing to have a conversation with anybody, even if it does lead to something, just having a conversation about how you might be different or what's wrong.
Something like that. So, Uh, that is, uh, homeowner Management Services and I suggest you reach out for them. We've got about a minute and 10 seconds left, and we have, you have pretty much scared the pants off of me when it comes to, uh, HOA special assessments and, and probably rightfully so. My, let me give you one other thing.
Yes. Okay. If a buyer looked at the financial statements Yep. They could have figured all that out themselves. Looked at the financial statements and maybe asked for a copy of the meeting minutes. And so that's what I wanted to address is if you're a buyer buying a home in metro Atlanta and, and you wanna make sure there is no special assessment that is gonna turn out to surprise you, that you're gonna be responsible for.
Then I would say ask for a copy of the meeting minutes, probably for the last 12 months, I would say. Uh, and that should be something they would be able to provide and then ask for the financials of the hoa. And I would put those, if I were a buyer, I'd put those in as a special stipulation, uh, in, in, in the contract.
Yeah. I actually had a personal experience where I was gonna buy an office condo. Yep. And found out that they had never set aside any money for replacement of the roof. Unbelievable. And that was a million dollar. Project. Unbelievable money aside for it. Michael, as always, thank you so much for being here.
Your wealth of information, we gotta take a break. When we come back, are we in an inventory crisis and is doing a prelisting home inspection? Really a good idea? And if you're gonna do one, how on earth do you choose the right home inspector? We've got those subjects and more stick with us. We'll be back.