Is the TREC HOA Addendum costing Sellers more?

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The new TREC Addendum for Property Subject to Mandatory Membership in a Property
Owners Association combines two paragraphs in the previous version which can
potentially cost the Seller more money at closing.

  • Before April 1, 2021, Paragraph D of the Addendum required the BUYER to pay deposits for reserves/working capital required by the Association.
  • The revised Addendum, however, removes that paragraph entirely, and combines it with Paragraph C.
  • Since the Buyer’s responsibility is now capped at the amount entered in Paragraph C, we are seeing Sellers being responsible for payments of reserves/working capital which can be substantial.
  • Since the contract always governs, we cannot collect the reserves/working capital even when the Resale Certificate specifically says that.
  • Practice point: At the listing appointment, agents should ask Sellers to contact their HOA right away to obtain the costs associated with a transfer, including the amount of reserves and working capital. That way they will know if the amount entered in Paragraph C will be sufficient when an offer is presented.
  • Beware of this Addendum snare.

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Is the TREC HOA Addendum costing Sellers more?

The new TREC Addendum for Property Subject to Mandatory Membership in a PropertyOwners Association combines two paragraphs in the previous version which canpotentially cost the