Home Inspections when HOA docs are requested.

HOME INSPECTIONS FOR HOA DISCLOSURE PACKAGE WHEN SALES CONTRACT IS PENDING - At one time, before our P.M. was licensed by the State of Virginia to do home inspections, the Covenants Committee always did a quick exterior inspection of the home, when HOA docs are requested from the Seller after a new sales contract was pending. The inspections were done to identify any architectural changes that might have been done without HOA approvals and also to determine if there are any defects, or deficiencies that need to be corrected (IE - Pealing paint, rotten trim, broken windows, screens, etc). These items are all listed on the HOA DOC package that the seller provides to the Contract purchaser and the purchase may either accept these conditions, or the purchaser may ask the seller to correct the conditions or the purchaser may walk away from the contract without cause or reason. Recently, the P.M. took it upon him/herself to decide that he/she is going to do the inspections and leave the Board and Covenants committee completely out of the loop. It seems that they would at least fax or email the inspection report to the Covenants committee, but they have been totally obstinate about doing this. HERE'S THE PROBLEM - The person doing the inspections simply does not have the expertise necessary to do this job well (even thought they are licensed – It proves that anyone can get a license). When it comes to seeing things that need to be done on the home, they miss the big important stuff and then nickpick other things (IE - There might be a small ding in the front of the metal garage door about the size of a small door ding on your car and they are mandating that the garage door be replaced, and then maybe they will miss the fact that all the trim like rake boards, freeze boards, soffit, fascia might be rotten and paint's pealing. They also look at the unique roof lines and can’t tell whose rake board is whose). There has got to give and take here and since time is of the essence in this scenario, I'm not sure what the solution here is. We've had numerous complaints from the homeowners about the poor quality of inspections and although I have not pushed the Board to do something yet, they are aware of the problem and we're just not sure what to do. Since under the law in Virginia, the P.M. gets addition monies to reinspect the property if the seller corrects the problems and would like to have the deficiencies removed from their HOA doc package, you almost have to wonder if there are financial reasons that might be motivating the P.M. to be so picky and have the homes fail so many inspections. We just took over the covenants commitee and have not had time yet to due annual inspections, but in the meantime, I'm just wondering how to improve the inspection process and I'm wondering if I'm asking too much to ask the P.M to keep the covenants committee in the loop on inspections with either a fax or email. The P.M. is so disorganized, I’m sure if they would do this or if they would remember to do this. After all, if the purchaser accepts the property WITH the conditions, then we still need to pursue the problems with the purchaser after settlement. What I've found recently, is that the P.M. may list the conditions/deficiencies on the HOA Sales Package, but if the purchaser accepts the conditions and buys the property anyway, the P.M. doesn’t' have any kind of a follow up system in place where they can come back and work with the new owner and have the deficiencies corrected. DOES ANYONE ELSE HAVE PROBLEMS WITH HOME INSPECTIONS WHEN THE HOA SALES DISCLOSURE PACKAGE IS PROCESSED? ANY IDEAS?

Mike, I believe your HOA policy is ill advised. What if the sale falls through. Could your HOA be held liable? IMO if there is a violation of the restrictions the current owner should be promptly cited. Do not wait for a home sale. Then, if and when a sale is pending, and the violation has not yet been corrected, the HOA disclosure package should include a copy of the outstanding violation notice and all costs to date related to the violation.

Roger, you mentioned including a list of the violations, and the costs associated (to date) with the purchase disclosure agreement - who is responsible for those cost(s), and does the HOA have domain over seeking remedies from the new owner?

Paul, you mentioned that new owner should not be held responsible for a violation, or its cure/remedy, upon sale. Isn't part of the purchase process, identifying, and acceptance of a buyer, that they will purchase property in a deed restrictive community, complete with rules/regulations, etc?

Mike, strangely, I believe that having a PM or M/C doing home inspections as part of the disclosure packets "seems" to be conflict of interest - if they are being paid independent of the HOA, and not acting as agent/vendors of the community. I cannot quite put my finger on it, but something just jumped out at me, in the scenario - and I could very well be way off base on that.

I took interest in the post because as a new construction development, our M/C has "flagged" homes where amenities offered by the varying builders were not compared against the future CC&R's - and now there are violations which were not the result of owner's making unauthorized changes to plans, etc - but rather accepting of homes from the builders. Out of 500 homes we are looking at roughly 10% which are currently (in some shape or form) in violation of the CC&R's (decks, fences, and one - type of siding). I know that the "simple" way to address would be to reasonably "grandfather" in some of the homes, but that needs to be done with a full site inspection - so that when disclosure packets/inspections are done, it does not become a "recuring" problem.

The seller is responsible. The Buyer is only responsible if they accept that responsibility and it is listed by the title company. If we, as the MC, do not list it in our status letter we can be held liable. If the title company gets the info from us and fails to list it can be recovered under the title insurance.

Jadedone - The PM is inspecting the homes for the HOA and although he's licensed, I don't know that he is performing the other type of home inspection (exterior/interior, mechanical etc), the sellers sometimes request when purchasing a home. Good luck with your site inspection.

MikeS1: If the PM is inspecting the homes, you have stated it is not a normal 'Home Inspection' detailing county code enforcement/violations of interior and exterior.

What is the standard the PM is using to report violations vs. compliance?
Why would you request the PM perform this inspection when you are not happy with the way they are doing it, and you do have a Covenant Committee? Is the HOA or seller paying the PM to do Covenant Inspections?

Mike, I also live in Virginia.

Your post is so loaded with things that are disturbing --

1. Of course you have a right to the inspection report. It should be part of your records for each house and you might be responsible for the follow up to make sure that when the house is sold those repairs are made. If noted in the POAA packet they pass through to the new owner, so you need some sort of policy on how long you will let the new owner settle in before you try to enforce. Sometimes they get paid by the seller for these problems and are supposed to fix them themselves.

2. We had enormous difficulty trying to get a MC to do proper inspections, and finally gave up. Our experience was the same as yours. Some things were cited that we could not even see and others were missed that were quite obvious.

3. On the POAA packet if a real violation is missed the association has to live with it for all eternity -- thus the inspections are extremely important. IMO maintenance stuff (peeling paint, etc.) just gets worse as time goes by so you can always enforce that (maybe not instantly though), but wrong paint color, a greenhouse illegally built, etc. are the association's forever. Even if your association is having a hard time keeping up on ARC inspections in general make inspecting for POAA a top priority that will always be done in your community.

4. The way we did it was assign a particular person on the ARC committee that was responsible for inspections (there would be a backup for this person, but they were picked from a subset of people who were highly organized and often at home). Then whoever got the request contacted them for a last minute inspection. The person would send copies of letters concerning any outstanding ARC violations to the person making up the packet, and if a new violation was found, a letter was written for that and mailed to the owner and put in the packet. We have had heated arguments about how strict that final inspection should be. To me, it is courteous to pick up the phone and call the owner about the result of the inspection if something was found -- however many do not do this or agree. The ARC committee is fully involved in this process as you will see.

Good luck!

JudithC - Great Info - I really appreciate all this. Thanks again. It sounds like you've already been to this movie!!

Mike,

I have never heard that there has to be a licensed inspector at all. I would think that requirement would be in the POAA, and I sure don't see it, nor have I read about such a requirement. I think your MC is mistaken. The section where it talks about this in the POAA is
http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+55-512

I find this $325 an amazing little boondoggle, but they seem to be quite clear that in your contract with the MC it must be specified that they are providing the packet, and it must appear on either the MC's website or your website for it to be legal (heaven help us if no one has a website). They have to be able to justify the $325, so I imagine what your guy is doing is trying to jump on this gravy train and inspect to drive up the cost. That part of the Act says that if this is the arrangement that you have with your MC, that they are providing the packet, then the association pays the MC.

You got me going on the reading of the Act again and it seems very confusing the status of this extra fee. Is it only if the seller agrees to it? It sounds like it is on top of the $100, though surely they don't mean that.

Do you have an attorney separate from the MC? You should (IMO). You might want to ask him about this, it is important to get your compliance with the POAA correct.

Judith - Great stuff - Thanks again.

RE: the $325 - You're dead on about requiring that the MC contract being amended and the MC does in fact have the new few listed on their website. I'm wondering why they changed the rule about the way that the HOA docs are paid for. Why would anyone want the HOA to pay this up front and then have to collect this from the Seller?

I do think that the $100 fee has been this way for many, many year, so I'm not so hung up on the cost. Besides the exterior site inspection and production of the HOA documents, there are several other processes that have to be performed behind the scenes. Producing the HOA docs is just not as simple as we all would think.

We do have a pretty good Associaton attorney on retainer but he/she's in bed with the MC. We'll confer with the attorney anyway.. Thanks again.

Judith, I agree with you. The attorney should absolutely be independent of the MC. And the MC never should be allowed to audit the HOA's books if they do the bookkeepting and accouting. Likewise, I would not have the HOA's PM do inspections for home sales in an HOA they manage as this may result in a conflict of interests.

The procedures we use for home sales in HOA's we manage are:

1) All documents are provided to the seller or upon the seller's authorization to the seller's real estate broker before the home inspection by a state licensed inspector. We have previously created these documents in digital PDF format so they can be emailed. The controlling documents are also available on the HOA's website, if they have one. Information is not provided directly to a potential buyer nor their real estate broker. They may request information through the seller. If the potential buyer does not like something in the documents, which are required by Colorado statute, they have the legal right to terminate the contract.

2) A certificate of status of assessment is provided to a title company upon request prior to title transfer. This includes the assessment amount to collect at closing, whether or not they are in good standing (if not the violations outstanding are listed), our title transfer fee, insurance, water, sewer and other information.

3) A new owner's packet is personally delivered upon movein and the new owners welcomed to the community.

PaulM-Great advice! Thanks very much.

"Judith, I agree with you. The attorney should absolutely be independent of the MC. And the MC never should be allowed to audit the HOA's books if they do the bookkeeping and accounting."

Roger, thanks for picking up on my question in an answer and responding. Sometimes one never knows whether they are just being jaded, or it really should be separated. I hear of so many associations where these functions are not separate, and it does cause concern in my mind.