HOA Fees and Home Sales: What You Need to Know

When selling a home, several financial aspects come into play, including utilities, taxes, and HOA fees. This article delves into understanding how HOA fees are handled during a home sale and the importance of due diligence.

Standard Procedures for HOA Fees

In Massachusetts, and indeed across the United States, there is a standard procedure for handling HOA fees when a property is sold. Similar to the division of all utility payments, HOA fees are traditionally covered in a few distinct phases:

The seller pays all HOA fees up to and including the closing day. The buyer is responsible for any HOA fees that occur after closing.

This process ensures a clear and fair transition. To confirm that the seller has paid all required HOA fees, a trustee of the HOA signs a form commonly referred to as a "6D". This form serves as proof that any outstanding dues have been settled, and it is necessary for the closing of the sale.

Responsibility and Due Diligence for Back Dues

When it comes to back HOA fees, the buyer takes on the responsibility of paying the new dues that become effective after closing. However, if there are unpaid dues prior to the sale, the HOA may have filed a lien on the home. In such cases, the sale proceeds may be used to settle the delinquent dues. This highlights the importance of conducting a thorough due diligence on the home, as it can reveal any liens and other financial obligations.

It is crucial for buyers to be aware that some homes come with more than just a mortgage. Over/under equities can exist, where the home's debt is greater than its available equity. This can lead to a negative equity, making the home transaction more complex. Therefore, buyers should be meticulous about the financial background of the property to avoid surprises after closing.

Steps for Effective Due Diligence

Performing due diligence is a critical step in ensuring a smooth closing of the home sale. Here are some key steps to follow:

Review the 6D Form: Ensure the 6D form issued by the HOA is up to date and signed by a trustee. This will confirm that all current dues are covered. Check for Liens: Thoroughly investigate any liens that may be attached to the home. This includes not just the mortgage but any potential HOA liens. Financial Assessment: Get a comprehensive understanding of any other financial obligations, such as over/under equities.

By adhering to these steps, buyers can protect themselves from unforeseen financial obligations post-closing.

Conclusion

The division of HOA fees during a home sale is a straightforward process. However, it is essential for buyers to be fully informed and proactive in conducting due diligence. This knowledge can help avoid any financial surprises and ensure a smooth transition to homeownership.

Remember, when you undertake a home sale, the key to success lies in understanding and addressing all aspects of the property's financial situation. With this guide, you are better equipped to navigate the process and make an informed decision.